From: John Conover <john@email.johncon.com>
Subject: Re: Microsoft is propping the market, and may crash with MSFT Re: Has S&P made a mistake or is Microsoft worth 400 billion?
Date: 5 May 1999 21:05:09 -0000
Archimedes Plutonium writes:
>
> I was not alive or conscious of the roaring 1950s bull market. But
> can someone tell me if there were any Microsoft type monopolies at
> present in the last great bull market and did the monopoly in some
> degree trigger the end of the bull market? Perhaps monopolies are part
> and parcel of bull markets and bull markets denoument
>
It has been the case through the century that the major indices have
been supported by about a dozen stocks. Currently, the NASDAQ is
supported by 8 stocks, the DJIA 5. There are about 6,000 stocks listed
on the US exchanges. Most have not gained in value in the past two
years, or so-and many have lost value, (re: Russell 2000 and Value
Line vs. DJIA and NASDAQ.)
About 80% of the century's index gains have occurred in only 20 of the
century's years. In all of the 20 years, there was a MS type of
"monopoly," (eg., AT&T, and later IBM, and earlier, RCA, all of which
had the DOJ's attention for AT.) But there were companies that were
supporting the indices that were NOT "monopolies," too, in all
cases. Most of the companies supporting the indices were not
"monopolies."
The current bull market is starting its ninth year. The chances of a
bull market lasting at least nine years is about 30%, (and that is the
chances of it continuing, BTW.) If it makes it through this year, then
it will be the longest bull market run of the century, (4.3 years
being the average.) By contrast, the chances of a bear market like the
one that lasted from 1930-1955 is small, (about 20%,) but it was a
virtual certainty that it would happen at least once in the century.
The chances that the markets would loose 90% of their value, (like
they did in the 14 months of 1930 and early 1931,) is finite, but very
rare-about a 4.43 sigma chance, or it would be expected, on average,
every 841 years. In the century, there have 54 declines in market
value of more than 10%, 15 of which were more than 25%. (All stats
assume a fractal dimension of 2, ie., the EMH.)
John
--
John Conover, john@email.johncon.com, http://www.johncon.com/