Zbigniew Piekarski says that the bull market rally on the WSE is drawing to a close
I was saddened to hear that the Europejska Wyzsza Szkoła Biznesu closed its doors rather unexpectedly and that its pupils were encouraged to seek other centres of excellence. Obviously, the hallowed halls of academe ignored the first commandment of business - earn enough to stay in business.
Business is about making decisions that lead to profit. Investment is about making decisions that lead to profit - pure and simple. Nothing else counts. All else is mere commentary.
The recent lack of movement and knee-jerk reactions of the WSE clearly illustrate that the boys and girls are tired and are behaving like "headless chickens." They hardly reacted when Professor Balcerowicz and his highly qualified team informed them of the fourteenth interest rate cut.
So after this bout of interest rate reductions everything will be all right, and the markets will start moving up after a period of consolidation - for, after all, "(The country is) on the edge of a golden age of prosperity The contraction occurred in the investment sector where we had an overexpansion." (US Treasury Secretary Paul O'Neill, June 24, 2001).
Well, let's have a look at a little bit of history.
On Oct. 17, 1929 Irving Fisher (1867-1947), America's most famous economist and a professor of economics at Yale University, said: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon, if ever, a 50- or 60-point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
Wall Street crashed on Black Tuesday, October 29, 1929 and depression set in.
Days after the crash, the Harvard Economic Society informed its subscribers: "A severe depression such as 1920-1 is outside the range of probability. We are not facing a protracted liquidation." After continuously issuing erroneously optimistic forecasts, the Society closed its doors in 1932.
Irving Fisher lost $140 million of personal wealth (that's just under $2 billion in today's terms). John Maynard Keynes (1883-1946), the most famous British economist and the father of macroeconomics, who made fortunes in the financial markets for himself and Cambridge University just before the crash, lost £1 million (which is around $280 million in today's terms).
Friedrich August von Hayek (1889-1992), a 1974 Nobel Laureate, was the only academic economist who wrote that prior to the Great Depression a crisis and downturn in America were imminent. This prediction was printed in the Austrian Institute of Economic Research Report, in February 1929.
His mentor, Ludwig von Mises (1881-1973), also an Austrian, anticipated a worldwide depression in the 1930s. In the summer of 1929, he had rejected a high position at Kreditanstalt, one of the largest banks in Europe at the time. His explanation was "a great crash is coming, and I do not want my name in any way connected with it." Less than two years later, Kreditanstalt was bankrupt.
Did rational economists in the hallowed halls of academe adopt the economics of Hayek and Mises? Alas, no. They adopted the economics of Keynes and the delusions of Schwartz and Friedman.
The Austrian School regards the Depression that will undoubtedly occur as the unavoidable, disastrous end of the unsustainable, structural maladjustments which the monetary and financial excesses of the past 60 years have inflicted on the economies and financial systems of the USA and the "advanced" capitalist economies.
In this view, the severity of any depression is largely predetermined by the magnitude of the economic and financial maladjustments that have accumulated during the preceding boom, and no amount of political, monetary or fiscal interference will stop what is about to happen.
What has always concerned me is that "schools of thought" other than the Austrian one still believe that changes in monetary and fiscal policy can influence the outcome even though none of them have any history of being able to make accurate predictions. They tend to be mere commentators.
If you really want to know what the future holds, then follow the writings of Dr. Kurt Richebacher, a former chief economist at Dresdner Bank, who predicted the Asian crisis, the tech wreck, and the dot-com collapse amongst many other events. You can find him on the Internet.
I, for my part, tend to ignore the pronouncements of most economists and financial commentators and listen to those who actually make decisions.
Two weeks ago, the Business Roundtable in the US asked 150 top CEOs (who lead a combined workforce of 10 million employees) what the future holds. These CEOs expect "weak GDP growth, declining employment and flat capital spending in 2003."
A few particulars:
" 60% of CEOs expect their company's employment to drop in 2003, while 28% expect no change
" 57% expect their 2003 capital expenditures to remain at 2002 levels, while 24% expect a decline
" 64% expect GDP growth of less than 2% in 2003, while 36% expect GDP growth of more than 2%
So the question is: who is closer to where the trend is really heading - the economists or the CEOs who make the decisions and spend the money (or not)?
On the WSE, the most recent bull market rally is drawing to a close. The 80-week cycle is scheduled to bottom near the end of the first quarter of 2003. Both the 10- and 20-week cycles should be hard down until mid-December. Once the market tops, there will be a sharp decline into the cycle low.
Once the 10- and 20-week cycles bottom in mid-December, expect a three- to six-week rally; however, from whatever high is then made, there will be a relentless decline that will carry towards the end of the first quarter of 2003.
Business is about making decisions that lead to profit. Investment is about making decisions that lead to profit - pure and simple. Nothing else counts. All else is mere commentary.
The recent lack of movement and knee-jerk reactions of the WSE clearly illustrate that the boys and girls are tired and are behaving like "headless chickens." They hardly reacted when Professor Balcerowicz and his highly qualified team informed them of the fourteenth interest rate cut.
So after this bout of interest rate reductions everything will be all right, and the markets will start moving up after a period of consolidation - for, after all, "(The country is) on the edge of a golden age of prosperity The contraction occurred in the investment sector where we had an overexpansion." (US Treasury Secretary Paul O'Neill, June 24, 2001).
Well, let's have a look at a little bit of history.
On Oct. 17, 1929 Irving Fisher (1867-1947), America's most famous economist and a professor of economics at Yale University, said: "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon, if ever, a 50- or 60-point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
Wall Street crashed on Black Tuesday, October 29, 1929 and depression set in.
Days after the crash, the Harvard Economic Society informed its subscribers: "A severe depression such as 1920-1 is outside the range of probability. We are not facing a protracted liquidation." After continuously issuing erroneously optimistic forecasts, the Society closed its doors in 1932.
Irving Fisher lost $140 million of personal wealth (that's just under $2 billion in today's terms). John Maynard Keynes (1883-1946), the most famous British economist and the father of macroeconomics, who made fortunes in the financial markets for himself and Cambridge University just before the crash, lost £1 million (which is around $280 million in today's terms).
Friedrich August von Hayek (1889-1992), a 1974 Nobel Laureate, was the only academic economist who wrote that prior to the Great Depression a crisis and downturn in America were imminent. This prediction was printed in the Austrian Institute of Economic Research Report, in February 1929.
His mentor, Ludwig von Mises (1881-1973), also an Austrian, anticipated a worldwide depression in the 1930s. In the summer of 1929, he had rejected a high position at Kreditanstalt, one of the largest banks in Europe at the time. His explanation was "a great crash is coming, and I do not want my name in any way connected with it." Less than two years later, Kreditanstalt was bankrupt.
Did rational economists in the hallowed halls of academe adopt the economics of Hayek and Mises? Alas, no. They adopted the economics of Keynes and the delusions of Schwartz and Friedman.
The Austrian School regards the Depression that will undoubtedly occur as the unavoidable, disastrous end of the unsustainable, structural maladjustments which the monetary and financial excesses of the past 60 years have inflicted on the economies and financial systems of the USA and the "advanced" capitalist economies.
In this view, the severity of any depression is largely predetermined by the magnitude of the economic and financial maladjustments that have accumulated during the preceding boom, and no amount of political, monetary or fiscal interference will stop what is about to happen.
What has always concerned me is that "schools of thought" other than the Austrian one still believe that changes in monetary and fiscal policy can influence the outcome even though none of them have any history of being able to make accurate predictions. They tend to be mere commentators.
If you really want to know what the future holds, then follow the writings of Dr. Kurt Richebacher, a former chief economist at Dresdner Bank, who predicted the Asian crisis, the tech wreck, and the dot-com collapse amongst many other events. You can find him on the Internet.
I, for my part, tend to ignore the pronouncements of most economists and financial commentators and listen to those who actually make decisions.
Two weeks ago, the Business Roundtable in the US asked 150 top CEOs (who lead a combined workforce of 10 million employees) what the future holds. These CEOs expect "weak GDP growth, declining employment and flat capital spending in 2003."
A few particulars:
" 60% of CEOs expect their company's employment to drop in 2003, while 28% expect no change
" 57% expect their 2003 capital expenditures to remain at 2002 levels, while 24% expect a decline
" 64% expect GDP growth of less than 2% in 2003, while 36% expect GDP growth of more than 2%
So the question is: who is closer to where the trend is really heading - the economists or the CEOs who make the decisions and spend the money (or not)?
On the WSE, the most recent bull market rally is drawing to a close. The 80-week cycle is scheduled to bottom near the end of the first quarter of 2003. Both the 10- and 20-week cycles should be hard down until mid-December. Once the market tops, there will be a sharp decline into the cycle low.
Once the 10- and 20-week cycles bottom in mid-December, expect a three- to six-week rally; however, from whatever high is then made, there will be a relentless decline that will carry towards the end of the first quarter of 2003.
