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 : The Stock Market Bubble -- Ignore unavailable to you. Want to Upgrade?

To: Don Pueblo who wrote (2701)	3/15/1999 5:34:00 PM
From: Defrocked	Read Replies (2) \| Respond to of 3339

Hey, TLC, hope things are well with you. Here's another anecdote for "a top". By the way, the following is absolutely true, and the guy had glassy eyes as if hypnotized whenever I asked for factual support of his opinion. During a recent flight, I used the Airphone to check market activity in oil, gold, dollar, bonds and stock indexes. The unfortunate result of this conversation was that my eavesdropping fellow passenger in the next seat became quite animated and engaged me in a mostly one-way conversation about how much he knew about the stock market. As it turned out, this insurance salesman by trade already knew the day's high, low and close for the Dow. Moreover, he knew with strong conviction that 10,000 was going to fall soon. And not only would 10,000 be broken, but that I should then be prepared for a pullback to 8,500 that would be the buying opportunity of a lifetime since the Dow is "destined" to go to 15,000 in quick order. I was, of course, "impressed" with his market acumen and wanted to know why the market would expand another 50% after such a good run. "Was it unanticipated earnings or falling interest rates that would provide such a springboard?", I asked the guru. The fellow passenger gave me a blank stare. After a moment of reflective silence he responded that the market was going up because of technical factors. Curious as to these, I solicited more information which further flustered the gentleman. But he replied with absolute conviction that PE's were going to expand to 50 for US stocks in general. Now that surprised even me. And maybe my skepticism showed on my face. So I asked him again, why would stocks go from a current historically high 33 to 50??? Would the trigger be unanticipated permanent tax cuts?, falling interest rates in an economy exhibiting 4% real growth?, additional commodity deflation? Doesn't a PE of 50 imply a 2% return and extraordinarily high earnings growth rate for the overall market??? Even today's levels are high, I told him, with stocks implying a 17% earnings growth for the corporate sector when they barely grew at 2% in '98. Doesn't 2% EP seem low given 5.5% bond yields I inquired. Again I was given a blank stare. This time the response was that "stocks are going up because they can't go down." I reminded him that, although accounting standards are quite different, Japan averaged a 70 PE before it fell from 38,000 to 15,000 now. His final response to me was a chastening, "Oh, you just don't believe." The conversation ended with me telling him good luck and to be careful. So here ends my tale of the insurance salesman that has hope, conviction and prayer that US stocks will reflect a PE of 50. What do I know… he may be right. But this "long-term" investor who knows the daily range doesn't even consider the downside. Even my young son knows to look both ways before crossing a street. And the lack of humility this investor showed! Not only does he know when the market will break 10,000, he knows the timing and extent of the pullback before the next runup with absolute conviction! This market may end up teaching an entire generation an invaluable trading lesson: Humility, don't invest without it.

To: Don Pueblo who wrote (2701)	3/15/1999 5:55:00 PM
From: Roger A. Babb	Read Replies (1) \| Respond to of 3339

TLC, I agree with your thoughts.

To: Don Pueblo who wrote (2701)	3/15/1999 7:58:00 PM
From: Mama Bear	Respond to of 3339

"advertisements that imply that if you get your own account at a discount broker you will become a millionaire by trading the short term moves" TLC, you're grounded. No online trading for you for the next week. Now get your helicopter out of the front yard or it'll be two weeks! Barb

To: Don Pueblo who wrote (2701)	3/16/1999 7:08:00 AM
From: Mark Bartlett	Read Replies (1) \| Respond to of 3339

Tastes Like Chicken, Excellent comments ...... you have highlighted something that many seem not to realize or choose to ignore - tops can take a long time to form, and they tend to be fairly obvious. As you have said (and I agree) .. those with real dollars are no longer in the market in a big way - perhaps "special situations" but not in general. I too have a feeling that a lot of retirement dollars are about to evaporate in the next few years. I went on record a few weeks ago on the GPM thread, detailing how I thought this was going to end .... and it is going to be very ugly. Best to you, MB

To: Don Pueblo who wrote (2701)	3/16/1999 7:15:00 AM
From: Mark Bartlett	Respond to of 3339

TLC, Here is something you may find an interesting read. Message 8310676 MB

To: Don Pueblo who wrote (2701)	3/30/1999 5:42:00 PM
From: james ball	Read Replies (1) \| Respond to of 3339

Well put Tasts.. Tom

To: Don Pueblo who wrote (2701)	6/7/1999 5:57:00 PM
From: ig	Read Replies (1) \| Respond to of 3339

Just look at the small volume that underlined today's market advance. The volume does not support today's price gains. A serious correction seems imminent. As for the longer outlook, well, once we get safely into the year 2000, we are going to see a wild continuation of The Mother Of All Bull Markets. The public will swarm into the market in ever greater numbers, much as it did toward the end of the 1920s. The result? Probably not the same as in 1929-30 -- that is, there will be no sudden and calamitous dive into a protracted near-oblivion. Rather, the new kids will simply continue to pile in, sheep will be fleeced and sharks will be fed, and the old timers will continue to shake their heads and mutter, "How can this be?" And then, one fine day, there will finally be an extra-sharp and extra-hard correction, followed by a bear market of no longer than average length and intensity, and the old-timers will nod and say quietly, "I knew it." ig