Newspaper article THE JOURNAL RECORD

A Bull of a Market

Newspaper article THE JOURNAL RECORD

A Bull of a Market

Article excerpt

NEW YORK -- Just what does it take to knock the arrogance out of this market in stocks that, like some all-time great football teams, seems to run right over opposing tacklers as if they were nuisances seeking to spoil the fun?

It has defied Saddam Hussein and Alan Greenspan, ignored the president's troubles and barely acknowledged a Far East economic disaster that threatens to spread. It pays no attention to past norms, such as price-earnings ratios and return on investor equity.

It is fearless. Reaching for all-time highs, it ignores warnings, even from the market itself. Profit disappointments are treated as if they didn't happen. Price weakness of a few days is followed by surges of buying. "Buying the dips," says one market analyst, "has become the modus operandi of American investors in the 1990s." Have no fear, the believing investor declares, any price decline is a buying opportunity. And so they buy. "On occasion, this market looks to us more like a Prozac-market, particularly in its ability to keep adverse developments in perspective and remain focused on the longer-term fundamentals, which are largest positive for stocks," says Wright Investors' Service. Less noticed, and probably ignored, is Wright's caveat that markets have a tendency to get ahead of themselves, and that "if history is a guide... there will come a time when the next dip develops into a correction and possibly an outright bear market." Gerald Perritt, mathematician, professor, analyst and now editor of the Mutual Fund Letter, tends to agree. Remember, he says, "whenever something seems too good to be true, it usually is." Be careful, he says. "Save yourself plenty of grief and a lot of money." Even if stocks sidestep a significant bear market, he maintains it is difficult to rationalize a continuation of 22 percent returns on owner equity and 20-plus price-earnings multiples, both well beyond the long-term norms. Norms, he reminds us, reassert themselves. …

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