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NUMEROUS FACTORS UNDERLIE MARKET’S 190-POINT COLLAPSE

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The stock market's volume today is many times greater than it was two or three decades ago. Data and rumors spread infinitely faster. The dollar power of the players is in multiples of yesterday's.

It is a very different place than its stereotyped view as a public forum where people vote with their wallets, and which reflects the hopes and fears of the American public.A one-day price collapse of more than 190 Dow Jones points is shocking, but it is at least better understood in light of market size, mechanics, liquidity, fads, trading patterns and devices, and valuations.

Anyone trying to understand today's volatile stock market might consider:

-There are always two separate activities involved. One is relatively long-term investing on the basis of corporate values and economic conditions. The other, in various forms, is playing the market - trying to outguess it.

Are the values there?

Price-earnings ratios, or the number of times earnings at which a stock sells, have not been unusually high. The post-1950 average P-E ratio for the Standard & Poor's 500 stock index is 12. Just prior to Oct. 13 the P-E was 14.

It's a different story when prices are matched against book values. The S&P before October 13 was about 2.4 times book value. Since 1930, the valuation has been higher only once, just before the 1987 crash.

Investors must also consider stocks vs. bonds. In the 1980s the bond market has averaged nearly a 13 percent annual return, best of the century. That gives stocks competition for the investment dollar.

A statement early last week by Federal Reserve chairman Alan Greenspan was widely interpreted as indicating the possibility of higher interest rates, a move generally regarded as bad for stocks, good for investors in debt issues.

Adding to this fear was a report Friday that wholesale prices were rising and fears that September's consumer price index would, when announced, add to fears that inflation, considered subdued, might not yet have surrendered.

-Recent advances in the stock market probably were generated more by the prospects of corporate takeovers - and a runup in prices - rather than basic values, primarily the earnings of corporations.

Corporate earnings have been fading. Earnings gains last year for the Standard & Poor's Composite Stock Index were 36 percent over the previous year. In this year's first quarter the gain was 22 percent; in the second, 5 percent.

Takeover activity can disguise such a deterioration because, first, the excitement of takeover companies offering prices far above market, and second, the elimination of stock through such takeovers.

In the years 1984-1988, a total of $369 billion of U.S. equities was removed from the market, much of it replaced by debt. Fewer shares, and more potential buyers, tends to push up prices.

In contrast, during the years 1969-1983, newly issued stock generally exceeded withdrawals by an average of $9 billion a year. That is, the amount of stock on the market grew rather than shrank.

Doubts about the continued ability to raise money by those seeking to take over large corporations, and the ability of already debt-ridden companies to continue making payments, deflated the prices of the shares involved.

-Today's trading techniques, as opposed to investing techniques, might have much to do with price surges or collapses. The market has been programmed with many automatic triggers, pulled by computers - often simultaneously.

The players trade in scores of millions of dollars. Institutions, such as mutual and pension funds, trust departments, foundations and more - rather than individuals - do most of the trading.

Do they think alike? Act alike? React to each other? To some extent, but how much is likely to be studied more intensely by those concerned about the market's volatility.

Exchanges usually deny it, but stock market liquidity appears to be badly damaged. Otherwise, it is difficult to explain why drops of such magnitude as that of October 13, 1989, can occur.

Liquidity means the ability to match buyers and sellers. Years ago, individual investors made up a so-called randomness of views; but institutions are often think-alikes. As they rise in importance, individuals shrink.

In 1988 alone, household stock holdings shrank by $105 billion. In the five years 1984-1988, individual investors cashed in a half trillion dollars of blue chip stocks, much of which was replaced by debt - often rickety debt.

Perhaps even worse, by cashing in they removed themselves as voices in the marketplace - a multiplicity of views, a randomness of thinking that the market could use today.