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Author: BatBoyJoe Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 349  
Subject: Foot In Mouth Disease Date: 3/23/2001 11:32 AM
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http://nypost.com/business/27150.htm

IF LITTLE GUYS SELL, MARKETS COULD TUMBLE FURTHER
Friday,March 23,2001

By JOHN CRUDELE


YOUR mother gave you the best investment advice you'll ever get. Most people who are in the stock market today probably wish they had listened.
Remember when she sat you down and said, "If it's too good to be true, it probably isn't true." Maybe your father was the one who dished out that wisdom, probably after you bought a leather jacket from some guy on the street - and it fell apart in a week.

The stock market went down a lot yesterday - again. By now big declines aren't really shocking. But this one was stunning - the Dow Jones index was down 389 points at its worst but bounced back for a loss of only 97.

If you were under the spell of technology stocks at this time last year you have probably lost more than half your money. If you went for the "safe" stocks - like the 30 companies represented in the Dow Jones industrial average - you are likely in the hole for anywhere from 10 to 30 percent.

Why is this happening?

The performance of the stock market over these last few years was just too good to be true. It was a bubble, a Ponzi scheme, an investment pyramid.

And if you check your pockets, you'll realize that you were the chump.

Hype was causing the value of companies to rise far beyond what they were worth. So when you bought a piece of those companies - which is what stocks are - you were paying too much for something that wasn't nearly as valuable as you thought.

Think of it this way.

Your broker - aided and abetted by a compliant, cheerleading media - was selling you a Chevy at Mercedes prices. And now that the market is driving like a 10-year old Chevy, you really shouldn't be surprised.

This can't be sugar-coated. You need to understand that much before we can move on to the more pertinent questions about the future. When will this stock market sell-off end?

That's the problem. Nobody really knows.

The stock market could turn on a dime in two hours, and this'll all be just an unpleasant memory that, hopefully, will have taught people a valuable lesson they didn't learn on their mother's knee.

Everyone is hoping for that outcome, regardless of whether they own stocks. The U.S. economy will rise or fall on how the market performs, and a tax cut of any size or reduced interest rates aren't likely to offset the harm that this loss of investor wealth is doing.

If I were a bookie, I wouldn't be giving the best odds on the turning-on-a-dime outcome. In just a few weeks, corporations will be closing their books on the first quarter. And this much we already know: The news about profits won't be good. The best that Wall Street can hope for is that companies have already cushioned the blow. Many have already publicly stated that they are having a hard time, so the pain might be lessened. But the mood among investors is so bad right now that they are likely to continue punishing companies that don't live up to inflated expectations.

Small investors haven't yet lost faith in this market. Mutual fund inflows were up in January, and down just slightly in February.

So if they do start to lose the faith, how much further will stocks drop? The answer: a lot.

* Please send e-mail to:

jcrudele@nypost.com

NYPOST Biz section 3/23/01
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