Bearish warnings on stock market exuberance

The Ticker

March 31, 2000|By JULIUS WESTHEIMER

Caution flags flying in the wind:

More than $265 billion of stock in brokerage accounts is on margin (borrowed money). That's about 1.5 percent of the market's value -- the same level of margin debt as in the fall of 1987 before Black Monday's 22 percent crash. (Greg Smith, debt analyst)

A Barron's poll showed 72 percent of money managers think stocks are on a senseless bubble. They keep buying because of how they're paid -- relative to others' performance. If a manager is bearish and everyone else is bullish, he is likely to be fired for underperformance. ("Irrational Exuberance" by Robert Shiller)

The initial-public-offering bubble could burst at any time. Speculative buying has grossly inflated share prices for dot-coms. This could lead to major corrections in most of these stocks. (Ross Levin, investment manager)

Is your stock in danger? Use the Tape Measure Rule: The thicker the company's investor package, the less legitimate the company. Examples: Exxon Corp. and Mobil Corp. had thin packages but every oil company that blew up in 1980 had fat investor kits. (Herb Greenberg, TheStreet.com.)

Some high-tech stocks could plunge 90 percent and cause a global crash. (Mark Mobius, Templeton Funds)

Tread carefully when you buy "tracking stocks." They're tied to the fortunes of their parent company. (Business Week)

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