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Market Trend Realities
923 Monastery St.
Cincinnati, Ohio 45202
(513) 421-8737
(513) 421-8733 fax

Market Trend Realities
Reality Check Update Special Report
by Mitch Harris

May 22, 1999   A Growing List of Ironies
  1999 Volume 6 Issue 4


Reality Check

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 A Growing List of Ironies? 

We have been observing a growing number of what we consider to be "bass-ackward" ironies that are contributing to the most resent stock market binging. We can only point them out with warnings of caveat emptor, because it is clear that investors are much more willing to remain convicted to their sustanance of perpetual motion than they are with the ultimate consequences of their unrealistic expectations.

It has long been recognized on Wall Street that the markets have their own kind of logic that is different from the logic used in science or mathmatics. In fact, it is thought that the market’s own sense of reality is indeed perverse. For instance, can you think of any other industry or product that shows the greatest demand when prices are at their highest? Of course not. Only in the perverse world of securites investing do you often find this phenomena.

To illustrate why I’m making this point now, I’ve been taking note of what I consider to be a growing list of troubling issues that seem ridiculous, contradicting what a rational person would normally conclude.

Perhaps the most obvious issue is that of equity valuations, which have sustained heights never before seen or previously imagined, (the S&P 500 hit 36 times earnings, far above the 24 P/E reached at the 1987 high). Investors can’t seem to satisfy their appetites for the newest national past time, speculating on what they see as a "sure thing", or "easy money". Confidence is so high, many have gone so far as to take second mortgages (home equity credit lines) on their homes. Lenders are willing to lend as much as 140% of this equity, presuming borrowers will both, succeed in their investments and that their real estate will remain strong collateral. There is little in the way of evidence to support this. The irony is that in the past, such exuberance has shown that a top of significance was at hand. Yet, in the late 1990’s, we have seen these extremes exceeded to reach even greater extremes, convincing many that this is normal. Few are prepared for the consequences of being wrong about this perpetual motion.

The world’s economies have remained sluggish at best, with many showing the worst GDP price deflation in more than a generation, yet money keeps flowing into these markets. China, Japan, Russia, Europe, Indonesia, Malaysia, Latin America

We have a President who can literally talk his way out of any mess he gets into, yet he has been among the most popular presidents in US history.

The International Monetary Fund (IMF) will lend money to almost any nation who’s government has mismanaged, plundered or stolen their countries assets, IF the country will adopt the IMF’s policy "recommendations". These suggestions have often hurt the impoverished nations even worse. Now, the IMF is negotiating with Russia to refinance billions in western debt. We aren’t hearing much about it, but the majority of the loans under negotiation are to provide the "interest" coming due on old IMF loans. The Irony, the IMF is essentially lending Russia the money to make their interest payments back to the IMF. Much of this "robbing peter to pay paul" money is funded by US taxpayers.  

completely missed the real news that 70% of all US stocks have been in a bear market since last April and the progressively narrow strength of the blue chips to such a large barrier is more of a charade than a parade. According to Paul McCrae Montgomery, Editor of Universal Economics (as reported by Investors intelligence), "The Dow reached its first ‘order of magnitude’ number of 100 on January 12, 1905 but never significantly exceeded that number until the fall of 1924, more than 18 years later. The next ‘order of magnitude’ number of 1000 was hit on January 18, 1966 and that reading was not significantly surpassed until October of 1982, nearly 17 years later." Hopefully, this will dispell the myth that remaining invested "for the long term" ALWAYS assures a tremendous return.  

We are now able to deliver the Reality Check Newsletter in MS Word via the Internet!! If you’d like to get it this way, simply email us at either: <mtr1@ix.netcom.com> or at <mtr@fuse.net>


           & nbsp;  Market Trend Realities (MTR) is a Registered Investment Advisory which manages personal, corporate, Trust, and retirement accounts on a fee only basis. Several low cost, flexible management fee arrangements are available. Investment Advisor, Mitch Harris has studied the Point & Figure Charting Method under the direct supervision of Michael Burke, Editor of the prestigious Investors Intelligence research organization. Management is based on a unique combination of technical analysis methods and tools which include, The Point & Figure charting method, Elliott Wave Analysis & techniques, industry group analysis, cycle analysis, Relative Strength Analysis, Stochastics, and investor sentiment studies. MTR offers a very uniquely structured managed mutual fund program using the RYDEX family of mutual funds, which offer outperformance potential whether equity markets are rising OR falling! Inquiries are welcome by calling us at (513) 421-8737, or by email at: mtr@fuse.net -or- MTR1@ix.netcom.com

          & nbsp;    MTR also publishes a monthly investment newsletter called "Reality Check", which offers technical commentary on the stock & bond markets, the Dollar Index, gold & gold stocks (XAU), Treasury yields, utilities, investor sentiment, and Federal Reserve policy. It also offers stock trading recommendations each month with price targets, stop loss points and insider activity. There are 4 trading portfolios, including a short selling account (we are very proud that our short sale recommendations have averaged 12.5% "compounded" during the roaring bull market of the last 5 years). Short term market commentaries are updated on Tuesday and Friday mornings, along with portfolio changes on this web page. They are also emailed for free to anyone who provides us with their email address. The regular subscription rate is $200 (US) per year. A special first time subscriber rate of $139 is available to  viewers. Samples are available upon request. MTR will be happy to send information on any of the above mentioned services. Please email us your home or business address and specify your interest(s).


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