(Written Sept 20th. Posted Oct 5th. 2001.)
This comment is posted more for those new to the market.
Occassionally the market goes into fear mode, we are in one such moment
right now. For those newer to the markets, if you had ever taken the time
to study past action and see some of those days in the past when the market
dropped 5 or 10 percent, only to see the market eventually bounce back, you
might have said to yourself, I wish I could have bought on one those days.
Well this week is exactly how it felt on those days that are now history, I
can say that because I was trading at those times. Not easy to buy on those
days is it ? But days to buy they are – for the long term. Such buying can
help improve long term returns. And the stocks to buy ? Those that fall
the least, as these are the stocks more likely to be in institutional hands.
Charts may also help us in looking at key mathematical points, and at the
exisitng trend. See for example the posting on ABC.
The market has been through other terrorist attacks (though none as
horrific) such as the 1972 Munich Olympics assualt, the previous 1993 (?)
World Trade Centre bombing and other major economic stresses such as the Yom
Kippur middle east war of 1973, the Iraq invasion of Kuwait 1990, and then
later the British Pound / Exchange rate mechanism crisis, Asian economic
downturn and Long Term Capital Management hedge fund debacle.
There was never yet an occassion when the market did not eventually surpass
the prior top before the major low of the crisis. (Sept 22nd major low for
the current crises a classic Gann date, and one it was quite possible to be
prepared for – see posting on Gann) There is however, one slight difference
to note with the current crisis, than earlier ones of the past decade; panic
days in the last decade occurred within one of the biggest up markets of all
time – especially on NASDAQ. Recovery of losses were seen to be very quick.
This event, like the terror days of 1972 / 73 has come at the end of the
decade cycle with markets in a bear (down) trend. Recovery of losses will
not be so fast this time.
But recover they will; have you noted the lengths governments and Reserve
Banks go to, to protect the value of assets. (Doesn’t stop the cycle though
does it.) President Bush will go on announcing ‘unprecendented’ measures to
move the economy along. There is only one circumstance in which it is
impossible for authorities to do that, ie engineer quick recovery; when land
price collapses below the value of bank loans loaned against that land
price. Japan is in this situation at present. Australia experienced this
in 1991. In 2001 this is not the situation in the US, so recession will not
be deep or prolongued. Land price collapsing below the value of outstanding
bank loans is an 18 year phenomenon, and forms very much the bulk of our
business cycles forecasting class.
The situation to watch for now, occurring often about ten to twelve years
into the property 18 year cycle, and something I forecast in 1994 to occur
in 2004, is for interest rates to fall below the inflation rate (or
inflation to rise above the interest rate). By this time, money will be
pouring into the property sector. (Early 1970’s, mid 1980’s) And around in
circles we go.