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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (6653)	4/9/1999 3:41:00 PM
From: Grommit	Read Replies (2) \| Respond to of 78567

Maybe there is no correction needed... Good post, Wayne. Let me paraphrase the options and add a few: 1. Prices correcting (your violent correction) 2. Earnings catching up to valuations over time (your 'over time' correction) 3. There could be a combination of the 2, of course. 4. However, a continuation of the overvaluation is also quite possible, and perhaps the most likely. For example, if GE earnings continue to grow at 14% and the price goes up by the same amount -- everyone is happy. The PE stays at 50. (Or maybe a mixture here also -- stock up 10% for a few years and PE eases a bit. Investors still happy.) As far as a violent correction. I think a large percentage correction would take some months to play out. And with that amount of time, and with the FED taking actions to ease overreaction, there will be no major correction. The risk of major correction was higher earlier with the international situation dark. But the risks of the minute being more controllable (inflation and interest rates, well, at least interest rates are more controllable) have lessened the risk of major correction. I agree with you on this and hope you are right. If however, the excesses get corrected by time and the values catch up to the prices, I think a portfolio of small caps will do great without interruption.