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The silk road to riches: How you can profit by investing in Asia’s newfound prosperity by Ivan D. Martchev, Yiannis G. Mostrous, Elliott H. Gue

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Chapter 5. Straws in the wind

Richard Russell of Dow Theory fame once said, “I believe stocks in bull markets advance to the point where they are seriously overvalued. I believe bull markets end—after which stocks make the long trip down to the area where stocks become seriously undervalued.”

If big bull markets spawn big bear markets, investors must ask if the bear market of 2000-02 was the spawn, or if there is more pain down the road. If stocks did indeed become more overvalued at the 2000 top than at any other point in history, have they made the trip to the bottom that now makes them seriously undervalued?

The answer to this quintessential question is the basis for formulating a long-term investment strategy as it can alter the assumed rate ...

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