Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (1334)	2/28/1999 4:07:00 PM
From: Peter Singleton	Respond to of 3536

dd, that's the big myth I see among the cognoscenti ... folks a lot smarter than myself, that the biggest, most inflated stock price mania in American economic history can somehow soft land after reverting to historic mean valuations. The Fed, which has IMO a pretty rosy model of stock valuation, seems to believe we're due for a 30-40% market correction, then they'll step in as they did in 1987, and, voila, correction over, bear market, averted. Most sober investors and investment professionals I know also consider this to be their maximum downside risk, and certainly no reason to sell now, just the buying opportunity of a lifetime when it bottoms. But the reality of the matter is, historic precedent is clear that manias of this character don't correct until they overshoot to trough values, not mean values, and if we revert to trough values, we're looking at a 75% or more decline in stock prices, and a 15 to 25 year period where you would have been better off holding near-cash t-bills rather than buying or holding at the peak (e.g., today). Them's the facts. <ng> Peter btw, if the Fed is able to step in and halt a market decline at say, 30-40% down from here, I suggest that whatever economic and capital market function a secular bear market performs will not take place ... postponing the reckoning to another day, one probably considerably more severe and less forgiving.