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Market Midges

December 27, 1987

Irwin L. Kellner of The Times Board of Economists must have read Bernard Baruch's forward to the celebrated tome of economic folly, "Extraordinary Popular Delusions and the Madness of Crowds," before writing his outlook for next year. To Baruch, investors are like hovering midges on a sunny day that instantly and simultaneously dart three feet in one direction while keeping equally distant from each other.

Kellner's Dec. 6 warning, "Recessionary Storm Looms for '88," notes the increasing dominance of "large institutions" whose managers have "talked to the same people, read the same reports and run the same computer programs, it stands to reason that when one wants to buy, they all do, but when one wants to sell, the others do too."

Large institutions and midges may not be skittish for the same reasons, but their common habits of behavior may help explain how thousands of large institutions could move south about 508 points all at the same time.

DAVID WITUS

Los Angeles

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