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Old 01-10-2002, 12:26 AM
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Default nikkei average



wild bill has stated that stocks must go up because they are a function of the growth. or some such thing. i dont quote him but just add this to make a point.

stocks do go up over time but do not surely go up. such is the case in japan.back around 1989 the nikkei average was almost 39,000 and now its fighting to stay above aout 10,000 or so. what happened . i dont know. but around then i wanted to short the japenese market. but i was talked out of it, as it just always went up even though valuations were way too high. like 70 p/e ratio. as most know, thats what i say p/e determines a stocks value and almost nothing else. so i didnt short those stocks as i chickened out and felt that the wait could be a long time as people in japan were willing to pay those prices forever it seemed. but it crashed and still hasnt shown any chance of return to those lofty levels of 1989.

what really haqppend is that one fine day everyone just decides that a 70 p/e ratio is too much to pay for those stocks. then it gets adjusted down to what they will pay. thats what happens when we have a crash. for the last ten or more years people new to the game believed that 30 to infinity was ok to pay for these new growth stocks. cant be right as earnings too far into the future cant be forcast and always are way too optimistic. so we had a big adjustment in the market. but really just a small one as the ratios are still very high for stocks traditionally. i still remember all the young experts on tv saying its a new world and thats how to evaluate the stocks in our new economy. bullshit.


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