July 24, 2002
From the desk of Jane Galt:There is a theory, which
There is a theory, which I basically buy, that a bear market will only end when investors have capitulated, which is to say that they believe, really believe deep in their greedy little hearts, that the market is going down.
Professionals are thus waiting for capitulation so they can buy.
But capitulation is a lot like Santa Claus: everyone waits for it, but no one ever sees it when it's there, only when it's gone. As the inestimable Max Jacobs said, "Every time people I work with tell me they think the market's capitulated, I say 'No, no! The fact that you're saying that means it hasn't capitulated yet!". (Max speaks with a lot of exclamation points. It's a trip.)
I was ready to believe, after yesterday, that capitulation was finally on the horizon. But not now. It's too soon. The indices are still too high for my taste -- when you've been in a boom as long as ours, the market should overcorrect on the way down as well as the way up. If it doesn't, it means years of doldrums in the market while we wait for valuations to catch up. And I really mean years. The 60's bubble didn't correct far enough -- and the Dow was at approximately the same level in 1982 as it was in 1968.
I think that the "buy on the dips" folks went back for one more go. This time, they thought, it had to be over.
And I think that over the next few days, the profit takers are going to sell out again. And the indices will fall, again.
Of course, I never saw Santa Claus either.
Posted by Jane Galt at July 24, 2002 7:28 PM | TrackBack | Technorati inbound links