I don't post very often. I don't really have much to say. I enjoy reading all of the posts....good and bad. I think the world of you guys and your insights regardless if they proved right or wrong recently. OT - I did prepare and don't regret it.....nothing more honorable than insuring your family's well being....nuff said. Ahhh....where was I...oh yes...the stock market. I am by trade an investment analyst recently retired and now the CFO for a family owned business. What does that mean? Well, frankly and lately (last 18 months) it doesn't mean jack squat. I have always followed my analysis and haven't enjoyed the more stratospheric gains that many of you all have had. Without going into my reasoning and analysis of why I have been bullish for some 18 months and bore you all, I will offer you three items that make me state that the majority of all equites are inches, I repeat, inches from internal combustion. You may find these amusing....you may not. You may see them as outright bunk but in the course of my life and career, things like this have seemed to preceed catastrophy. First of all, my father in law is a local business man. He is relatively intelligent...but not very wise. I love him, but that is the truth. He knows how I feel about the state of our markets (I confided that in him some time ago). I have not mentioned them since. He is one of these guys who has seen wonderful returns in the last several years and is so euphoric about it all that he insists on DOW 20000. He knows of no market internals, technical, or fundamental factors. All he knows is that the market will never correct. It is going to the moon. Just today he called me and said that the DOW will return todays losses double tomorrow and the Nasdaq will catch the DOW (you heard right) the DOW by years end. I didn't question his statements....I knew what he was doing. He was rubbing salt in my predictive wounds and pumping his ego with prophetic statements that may come true. Hell, they probably will. In the last six months he has made better market calls than I have and he is a auto mechanic by trade. Now, upon returning home today, my neighbor ( a salvage yard worker ) came over to inform me (yes, he knows my background and feelings) that he was approved last week for the second mortgage on his home to "trade with". He said that he plans on taking the whole "fifty grand" and day trading himself into retirement. I offered him best wishes and came inside. After eating dinner and turning on the TV, I saw the latest ameritrade commercial that shows people in mass meditation over trading the stock market. I stopped, looked at my wife and said, " This cannot continue!!! It is madness....plain and simple." I refuse to jump aboard what I believe to be the Titanic based on the uninformed public and a speculative bubble the size of which we have never seen before. Based on what I saw 18 months ago made me retire for good about 9 months ago.....I couldn't do it anymore!!!! Imagine that....a financial planner/analyst with a conscience (did I spell that correctly?). You may say that I will then be condemned to small returns and watch the train go by. Yes, I will.....it's only money. I sleep very well thank you very much. The only investments I like now are Gold and CD's......what the hell is wrong with me????? Any input appreciated.

-- el snipor (faraway@distantlands.net), January 03, 2000

Answers

Correction: I have been bearish in the last eighteen months....I typed bullish in the first few sentences...sorry.

-- el snipor (faraway@distantlands.net), January 03, 2000.

To everything their is a season...

A time for capital growth, and a time for capital protection.

Mr. Snipor....considering that you may be alive for 40-50 more years...given advances in medical tech...and your discipline to lead a healthy retirement...

Good thing to "protect" what you have and buy when "blood is running in the streets again".

By the way...I bet your day trader junk man is using leverage...well that is like smoking crack.

Good Luck

-- +++ (comment@market.net), January 03, 2000.

An excellent post indeed, but perhaps I missed it, but you didn't say specifically why the markets will come down in 2 months.

-- Rich (rubeliever@webtv.net), January 03, 2000.

There's absolutely nothing wrong with you other than that you're saner that the people who've boarded the Bubble Paradise Express and who insist on staying about as it hurtles towards a rockslide or washout around some not-too-distant corner :). And, on top of that, you've preserved your capital and your conscience.

When the world goes mad, the wise man is always regarded as a fool...

-- John Whitley (jwhitley@inforamp.net), January 03, 2000.

I have a question, how high can the jones industrial average or the DOW go before the market has a crash? As for the dow it is climbing skyhigh, sounds like if it suffers sudden sharp rises or drops too suddenly the market will crash. One crash might not do it the market would recover quickly, but several crashes leaing to the big one could, watch the dow.

-- Brent Nichols (b-nichol@ihug.co.nz), January 03, 2000.

the market will crash due to: 1) increase in debt/money supply 2) a rapid and irreconcilable(sp) shaking of investor confidence caused by a threshold event (60% likely in next two months as govt is really tested in performing through y2k 'paper cuts' yet to come) 3) collapse of global confidence in dollar as a reserve when our bubble is seen to be bursting by foreign 'smart institutional money'

-- pliney the younger (pliney@pompei.old.time), January 03, 2000.

Nothing wrong with you at all. Your stories sound just like those of the haberdashers, butchers, et al in 1928-29, who ended up losing their shirts and lamb chops -- literally. By the time a boom euphoria has hit the masses, they're already walking on a precipice. They just don't know it. Good for you that you see the cliff.

-- Oldtimer (happened@before.com), January 03, 2000.

el snipor, I don't have a single investment, am zero market savvy, so forgive any stupidity here on my part. I'm only an aging petty clerk who sank far far too much of our savings into y2k preps, just trying to safegaurd my wife & three cat. Was basing it primarily on what I still believe were the best reputable authorities, including Ed Yardeni (whom I still believe gave us His best, not his 'fault' nothing much has happened yet).

Anyway, I watch the market, I guess as a result of having read so much of Yardeni's y2k predictions. And I pretty much agree with what you just wrote above. I guess my question is this. How bad do you think this crash (?) will be, and when? Thank you, el s.

-- Jim Young (jyoung@famvid.com), January 03, 2000.

Didn't Joe Kennedy say:

The time to get out of the market is when the widows and orphans get in.

It means: When all is so optimistic that it seems there is no risk whatsoever, that is the time the market can go in the crapper at any time.

Also folks: Always take profits. Those who wait for another stock split (or whatever) always lose out because of their greed.

my 2 cents.

-- (formerly@nowhere.zzz), January 03, 2000.

I, too, jumped ship just over a year ago - felt I owned a reasonable portfolio and that the proceeds from Tbills would be adequate. Suddenly the risk/return ratio didn't feel right - I've been in the market my whole life, including stocks my parents gave me when I was a kid (so 40+ years). I've always liked the market and even bought a bunch of stock the day after the October '80 something crash (can't remember the year, '86 maybe?!). Anyhow, things started feeling funny last year.

Greed. Easy money. The "economically challenged" class struggling to make $8/hour to pay rent and buy food and those with expendable money getting rich overnight, for buying and selling stocks with no earnings but presumably great future earnings.

The explosion of 401K plans, across much of the working population, has allowed the average worker to get involved in the stock market. Tradionally, the "blue collar" population stayed clear of stocks and played it safe with bonds and money markets. There has been a shift, and many more are pouring money into the market every month. Everybody is getting into the market and prices are going up and up. Many are first time stock marketers, and as soon as they see their investmnents drop below what they've put in, they will want to jump ship fast. Yes, they all say now "I'm a long termer, market corrections are OK, I can handle them", but when they see their their money taking a nosedive, they'll bail. And once the "little guy" starts bailing, there is the potential for a significant downward shift. Because all the "little guys" make up the 401K plans, which have various pools to put money in - money market funds, bonds or different stock funds. A mass shifting from stock funds to money market and bond funds in these plans will definitely hurt the market.

Interest rates are also creeping up; speculation is that Greenspan did not rasise rates in Dec. b/c of Y2K fears, which fortunately have not amounted to severe problems as yet, though the chapter isn't over yet. Greenspan raised the rate slightly 3 times before December and many believe he will raise them again in January, making investment returns on safe investments even more attractive. The bond prices fell again today, and returns are looking pretty decent, especially in comparison to the risk involved. This won't help the stock market.

Inflation is a worry - oil has doubled and there do not appear to be any signs of relief in the immediate future. Both UPS and FedEx have recently announce rate increases as a result of this. Higher oil prices will undoubedly affect other major industries, particularly manufacturing. As their costs are necessarily adjusted, inflation will be fueled. An other of Greenspan's fears.

And then there is the huge supply of money that was pured into the economy, to alleviate Y2K concerns - $50 billion extra put out into the economy. Though it turned out not to be as necessary as Greensapn thought, much of the money is out (though I read it was not all issued, and will be held in banks and slowly released into the economy, but the article didn't say how much was distributed and how much is still in the banks).

Oh, and then there is the fact that a high percentage of the population is in debt up to their ears, with the lowest savings rate in history. This applies to rich and poor. Big homes, expensive cars, all the toys, and a huge monthly mortgage that eats up all the income and leaves nothing for savings. Gotta have it now syndrome.

And the education in the US - in comparison to other industrialized countries, the US is nearly at the botton at the time of high school graduation. In an increasingly complex and technological society, we are turning out massive numbers of technologically illiterate people and unskilled workers who couldn't handle "manual" transactions if power went out. We are an incredibly short-sighted nation, centered on making profits today and not on how to make this world a better place tomorrow.

I'm sure there are many arguments the optimists can counter my points with. After all, we are trying to estimate what will happen in the future. Bottome line, my "gut", which I've come to rely on, tells me that I have "enough", that "greed" isn't a good enough reason to want more, and that what goes up, must come down. That Americans are arrogant and over confident for no apparent reason, other than the fact that the economy has been good for many years now, and so, by all means, it should stay that way.

So, someday, this week, next week, next month, next year or next decade, our follies will catch up with us. It won't take much - the world it too interdependent. We are blinded with greed, just as people were in the 20s. I, personally, am grateful for what I have, and all I want to do is hold onto it, and get a nice little return. And sleep easy at night. If I miss a bonanza, so be it. I can live with that. I'd have a much tougher time seeing it dwindle down and down and down. I prefer watching without an emotional investment, or financial one for that matter.

-- Boggled (still@wondering.now), January 03, 2000.

el snipor, your problem is the same as James Grants...who gets $2000 a year for his newsletter. The more you know about market fundamentals, economic theory, and COMMON SENSE, the less likely you would have been disposed to sink your money into an overvalued and mega leveraged casino like Wall Street. I hope the geniuses are enjoying themsleves....theyll be the monkey when the SHTF, and it will.

-- Frank Lee (I dont give a damn) (ibuy@halfoff.com), January 03, 2000.

The Bull Trap

A stock market buying panic recently rallied the "Dow Jones 43 points in the three trading days with record volumes. This is a trap to catch the unwary bull who has been itching to get some action. The bear market has not seen the bottom. It was "over bought" before the rally and it is now grossly "over-bought." Bear markets end with a broadly-based selling panic at the bottom, and we haven't seen that yet. Howard Ruff, From A to Z, June 1980.

-- late reader (latereader@latereaderrr.xcom), January 03, 2000.

From Bill Fleckenstein

http://www.siliconinvestor.com/insight/contrarian/

On borrowed time?... Last but not least, I want to share something that Dennis Gartman wrote late last week when I was out. It is the perfect period piece to capture the mood of what is really going on. To any sane person, it should be frightening; but then again, anyone who's frightened isn't having any fun. And those who are not frightened are making gobs of money speculating their heads off. Here's what Dennis said:

"As a final aside for the year, we went to our local branch bank yesterday to transact some business [Ed. Note: we actually got some cash for the Y2K `turn'...just in case!], and spent some time chatting with the branch manager. She does not know what business we are in, so when we asked her if she'd seen any increase in personal loans she replied out of hand that indeed she had. Indeed, the personal loan demand at her branch had escalated rather substantively.

"She then proffered that the sole reason for the sharp rise in personal loans was the investment in the stock market. She said that local doctors, lawyers, farmers, auto dealers... all of the leading figures of the local economy (and their wives) had been in recently to borrow money to `put into the market.' We asked her how long this had been going on, and she said that the branch had been making personal, signature loans like that for some while, but that the demand had really escalated in the past several months and has really become `hot' in the past several weeks. She wondered if it was too late for her to join in the market's enthusiasm! We said, `We don't know,' and left bemused and afraid.

"It is perhaps not new news, but we find it odd that the public is borrowing money on signatures without collateral (other than CDs and/or sizeable demand deposit accounts) that is then used to buy stocks, very probably upon margin. The leverage is immeasurable, for the public is apparently `Reg-T'ing' money that it has already borrowed with nothing down. She said that those who've been borrowing the most indicated that they `could get more out of the market than the interest charge,' and considered it unwise not to take advantage of the circumstance.

"Friends and clients, if this is not rampant, `tulip-bulb'-like speculation of the worst sort, we've no idea what is. Of all of the things that we've read about, heard about and discussed at length concerning the mania that is the U.S. stock market, this is the most manic of all. When speculation comes to small-town southern Virginia, it is rampant and it is dangerous. We have at this point said enough."

_______________

From Me: I was in the discount brokerage office December 30th (buying Puts, of course) and an old ladt comes in and says she has some money and wants to buy some stocks (I am not making this up). She has no idea "how to do it" or what to buy. Just wants to "buy some stocks".

Folks: the end is near.

If I had been able to think of a way to do it, I would have tried to pull 'granny' aside for a little discussion of the equity markets, but what could I do?

The bull has but *days* to live.

-- Me (me@me.me), January 03, 2000.

Whoa ! If ever there was a group who fit the label 'sheeple', those running with the herd headlong into a market crash fit. Hubby and I got out 15 months ago. While hind sight says we could have increased our wealth, peace of mind and safer investments are what we chose. When it happens, people are going to blame the gov't, investment counselors, day trading, and anyone else they can think of, just as some people are blaming Yourdon, Yardeni, and others, because they feel duped by them. We make our own choices and are responsible for them...no one else.

-- Kenin Marble (kenin17@yahoo.com), January 04, 2000.

John D ALSO said that when cabbies and shoeshine boys were touting stocks it was time to get out.

I've heard cabbies and gas pump jockeys talking stocks for the past 2 months.....

chuck

-- Chuck, a night driver (rienzoo@en.com), January 04, 2000.

Stock market is like vegas--- when it crashrs the house will still win (global money-changers), even though everyone else loses.

-- bob dunn (superprimate@webtv.com), January 04, 2000.

This thread is one of those "6 degrees of separation" links. Everything is interrelated. One large Y2K glitch or lots of paper cut size small ones, an environmental disaster, bad storms, some sort of terrorism, and an overheated, .com driven bubble all add up to problems--big ones. Pick your poison.

I pretty much pulled back from the speculative stocks a few months ago and am dollar cost averaging Ginny Maes (thank you, Bob Brinker of Money Talk)into a Vanguard Wilshire 5000 replica fund for the long term. I also moved my 401K into an guaranteed income fund until I see how this shakes out.

I don't have the same number of years experience investing as many of you, but no way am I going back to the corporate grind because I lost it by being the greater fool.

Good post. This forum needs to hang around for a while

-- Nancy (wellsnl@hotmail.com), January 04, 2000.

I posted this last night to Rick Cowles' discussion groups in response to a discussion much like this one. In a previous life I taught investments for the Texas Society of CPAs to CPAs, and was coordinator for a third of Texas of Financial Planning for an international firm of CPAs. The only thing I would add to the following is that this morning the Wall Street Journal has an article to the effect that last year slightly more bonds were issued in the Euro than the Dollar. The emergence of the Euro as a deliberate challenge to the Dollar is a sea change. We have mercilessly manipulated the dollar to our national advantage ever since 1971 when we reneged on our Bretten Woods commitment of 1944 to redeem 35 dollars for an once of gold. The world is getting tired of us.

WHY ARE INSTITUTIONS PULLING MONEY OUT OF THE STOCK MARKET? The reasons I submit are based on fundamentals.

Late in the year the Federal Reserve pumped M-3 (money, checking, credit card debt, etc) and reserves into banks at an unprecidented rate on a world wide basis. The Fed's assets have been growing at 12% for the last 12 months, and at 24% over the last three months. In contrast, the European Central Bank is growing at only 0.5% over the last three months and Japan is negative. Much of this money and credit created by the Fed and the banks has gone into the stock market bubble. The Fed has to raise interest rates and sop up this credit and money or risk a run on the dollar -- and do it fast. Apparently Greenspan believed there was a serious Y2K risk of a run on the banks, and now has to pay the piper. He will probably not want to wait until further into an election year to raise interest rates.

Longer term, the so called GDP growth of the U.S. economy over the last few years has been "cooked", primarily by assuming, for example,that in the 12 months ended 3/31/1999 that $5.4 billion increase in computer sales should be recorded as $146 billion chained dollars in new production due to the power of the computers being sold. Meanwhile the sales price of computers is declining and they are becoming obsolete very fast.. Over the years 1996-1998, according to Dr. Kurt Richebacher, U.S. GDP rose by $810 in chained dollars, or 4% annually. "Of this total, a stunning share of $310 billion, or 38%, accrued from investment in computer power (not sales of computers). Taking the computer power assumption out of the GDP accounting, the rest of the economy really had an annual growth rate of 2.5%. Last year (1998), it was just 2%." Welcome to Clintonian accounting! The real numbers are known to institutional investment managers. Only the large mass of voters is fooled. I have also been informed by a very expensive newsletter I get that areas of chronic unemployment have been dropped from the unemployment figures, but that if unemployment were computed like before Clinton, then our unemployment would approach Europe's unemployment, that is, close to 9% in our case. Will snarls in main frame computers, networks, and PCs cause an increase in unemployment?

Concerning debt, up until 1989, every new dollar of income created $1.36 to $1.43 of debt by the Fed Reserve and the banks. Now, for the first half of 1999, every new dollar of income created $2.88 of debt. Meanwhile, consumer spending has declined from $.67 for each new dollar of debt to $.42 cents of consumer spending for each new dollar of debt. The rest of the new debt went into the stock market bubble. These figures are all before the money pumped during the last couple of months by the Fed Reserve.

Further, the U.S. trade deficit, $26 billion last month and a trillion over the last five years since 1994, has left a lot of U.S. monopoly money in the hands of Red China, Japan, Europe, etc. When will one or more of these countries decide to exchange dollars for something better? Red China has upward of $200 billion of U.S. dollars and has announced they want to have several hundred tons more gold for their national reserves instead of a lot of dollar debt. The Wall Street insiders like Goldman Sachs have been quietly accumulating gold options and even buying and taking delivery on gold bullion. Where does this go? Does one invest with the elephants? Meanwhile, the Euro was designed to compete with the dollar as a world trade currency. If you held a 30 year U.S. Treasury bond as an investment or a central bank reserve, since 1971 the loss in value of your bond is 88% due to devaluation of the dollar (measured against gold where 35 dollars did buy one ounce of gold but now $285 is required to buy that ounce of gold); therefore, the world is not especially eager to hold dollar debt. The trade deficit and continuing devaluation of the dollar is a further risk to the dollar, which can only be met by the Fed by reducing the dollars washing around the world and by increasing interest rates. These two steps will hurt stock market prices.

Over the last year but particularly last fall in 1998 the Federal Reserve intervened directly in the bond and stock market, often on a weekly basis with up to a billion dollars. The means was coupon passes in the bond market (the monetizing of govt debt), and 1,000 or 2,000 S & P 500 futures contracts at a time through New York Investment firms. The Fed Reserve is influenced by the Clinton Administration and is owned by the banks, principly the New Yorkers. The stock market is purely a creation of this cabal, and will persist until world events and competitors such as the Euro overtake it. Black monday in October, 1988 was described by the WSJ and Forbes editorily as a run on the dollar. The market dropped 30% in a weekend. Granted, the Federal Reserve and the markets will take steps to stop this happening again, but they can't stop fundamentals forever, when the rest of the world is fed up with us. These things can develop very quickly.

I suspect these fundamental facts are concerning thoughtful institutional investment managers.

-- Alfred Hill, CPA (abhill@cyberhighway.net), January 04, 2000.

-- Alfred Hill, CPA (abhill@cyberhighway.net), January 04, 2000.