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Jim,

The problem I am pointing to is disappearing of a market segment in the form of many hedge funds, banks and investment brokerages. With permanent evaporation of certain buyers stock prices will trade very low for extended periods. Even in the tech crash this class did not disappear. It did disappear in 1932 for several decades.

Why do you think stocks used to trade at low P/E prior to 1970? Why is it that emerging markets had such low P/E for so long. Once the intitutional investors ended share markets surged. These institutional investors are critical for creating demand for stocks and high share prices.

These institutions take decades to rebuild. That is why I call it a tectonic shift.

anurag
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