irrational exuberance?
Yes, I believe it is.
Better cash it in soon, c.i.........................
Lola, Yes, irrational exuberance - I agree 100%.
The DOW first crossed $10K in early '99, near the end of the '92-'99 boom. Interest rates then, short and long term, consumer and institutional, were considerably higher. Inflation was running at around double the current pace. Labor productivity was around half its current level. The current ratio of stock prices to corporate earnings is considerably lower than it was then, and corporate earnings are increasing at a rate far in excess of that which applied in the '92-'99 boom. The current market strength is broad-based, not concentrated in speculative, earnings-shy techs, as was the case in the '92-'99 run-up, and includes basic industries, financial services, and so-called "Consumer Cyclicals", such as autos, homebuilders, and durable goods ... all lacking significant momentum in the tech-crazy earlier period, particularly as regards the latter months of the previous boom. The combination of low interest rates, low inflation, and consistent market gains in well in excess of the yields available from interest-bearing investments render stocks a relative bargain, without even taking into account the effect of the cut in the dividend tax rate. The rate-of-return-on-investment is more attractive for stocks than it has been in years.
All of this is drawing huge amounts of cash into the market, and that cash is not coming from just, or even chiefly, "The Funds". Institutional buyers hold some 80% of all US stocks, and include banks and other lending institutions, insurance companies, federal, state, and local retirement and investment plans, and foreign governments and financial institutions. None of these are "short-term" speculative investors; they're quite deliberate and risk-averse, and notably began curtailing US stock purchases in late '98-early '99, predicting, if not in fact predicatring the bursting of the bubble. All of these are pulling resources from other investments and placing those resources in the US stock market. The rate of increase of Net Institutional Stock Acquisition has never been higher. The mid-to-long-terml impact of this will be a firming of the dollar, a softening of the bond market, continued broad-based economic expansion, increased capital investment, and, of course, rising employment,and increasing upward pressure on wages. Given the recent astounding increases in productivity, however, a larger money supply will have proportionately smaller inflationary impact, as there will be more goods and services competing for the increased dollars, which will in turn hold interest rates at or near historic lows for a good while to come ... likely, judging from previous market performance over the past 75 years, around a decade or so. The US GDP could well double from its current record high within an astoonsishingly short period.
timber's quote, "The US GDP could well double from its current record high within an astoonsishingly short period." What do you mean by "astonishingly short period?" GDP double? Naw. Your pipe-dream is not realistic. Many pundits are still worried about the employment picture. Increase in productivity isn't gonna do it. The 57,000 job increase last month was mostly in retail. How that will translate into increased purchasing power is not realistic. A recent study shows that there's also an increase in bankrupticies of middle class families. Where you get'n your crystal ball from? K-Mart?
From economics, I should be knowing what!?
This is a subject with which I am not chummy. Anatolian pottery shards from the late Neolithic will get me hard, but economics is, for me, like an intellectual reverse-viagra.
So here's an area where I turn to authorities. Rob Ruben, on PBS this week, says it is going to get very bad indeed unless they change their present policies. He said there is no statistical evidence that tax reductions effect the economy. He refered to a conversation with Greenspan where they shared these concerns.
Now, I calculate these two guys as authorities I ought to trust. Happy PR announcements choreographed by the administration (like Bush's appearance in a rap video where he's inviting black teenagers into his home and giving them some of the plentiful cash that's flooding the land) I find...um...interesting.
Goddang it, bernie, I have to Google something in every single post of yours lately just to get the joke... :wink:
Yes, the rap video with the President takes a bit of a search, but one can just imagine its worth, if found.
ps...craven...cool little Christmas hats there
blatham wrote:Rob Ruben, on PBS this week, says it is going to get very bad indeed unless they change their present policies. He said there is no statistical evidence that tax reductions effect the economy. He refered to a conversation with Greenspan where they shared these concerns.
Haven't heard Ruben say that though I've heard Greenspan say that the tax cuts do positively affect the economy. It's common sense. Whether or not the tax cuts could have be targeted more wisely or whether or not it was fiscally irresponcible is another story. But I don't think there's any doub that tax cuts help the economy however limited it may be.
ye
Apparently there is doubt, and the doubters ain't small potatoes on the subject.
Recommend you go to the PBS site, look for the video or transcript of this interview. It was within the last three days, but should be easy to locate.
Common sense, is, of course, a compass of fitful dependability.
Bernie, you are making me laugh.
I doubt very seriously that Bob Rubin or Alan Greenspan ever said that tax policy doesn't affect the economy. Before accepting that I would have to know their words and the conntext in which they were supposedly said.
That tax policy does affect the economic behavior of individuals, corporations large and small, banks, and investors, is known beyond doubt. To suggest otherwise betrays a serious lack of both common sense and basic economics.
Per capita retail sales in Portland Oregon are significantly higher than those across the Columbia River Bridge in Vancouver Washington. Why? Because people from Washington state drive across the bridge to shop in Oregon and avoid the 8+% sales tax in Washington. Same goes for the Lake Tahoe area in California - the stores are all in Nevada. Moreover Reno is booming with businesses fleeing California taxation and regulation and settling there.
Government tax and accounting treatment of business investment has a pronounced effect on the decisions of business regarding such investment.
Very high marginal income tax rates are very strongly associated with schemes for tax avoidance through barter or other forms of 'underground' economic activity. Often such activity harms the economy through inappropriate allocation of capital. Reducing confiscatory marginal income tax rates in Britain and the U.S. under Thatcher and Reagan significantly shrank the underground economies of both countries and stimulated new capital investment, launching periods of economic growth that continue even today.
The EU has sought to 'harmonize' tax policies among member nations to prevent low tax states from attracting economic activity from the high tax 'old Europe' states. So far low tax Ireland has resisted and is booming economically. Meanwhile France and Germany are stuck in high unemployment (almost twice ours), low growth situations, exacerbated by inflexible labor laws, high social benefits, and declining populations, increasingly unable to pay for it all.
george
The interview (which I've paraphrased liberally) should be available on the PBS site. Go look. I'll wait here in this swirl of autumn mist under the street lamp for you.
georgeob1 wrote:Well Blatham makes a few good points. I did like the quote from Tom Foley (a cousin). It does describe something which I believe to be generally true and as well descriptive of my own feelings.
However that perception is not uniquely American. There are plenty of Frenchmen, Canadians, and others who in a like (if a somewhat lesser) manner, implicitly assume good intentions on their own parts and there is even a bit of it among Europeans concerning their new union.
george
I like you too. I trust you will grant this statement the cedibility which you grant the President's statements.
You know, as I read Foley's comments, which I assume were extemporaneous in conversation with the Brit reporter, I grew increasingly respectful of the fellow. He's clearly very bright, and has a wonderful mastery of the language. A good guy, I expect.
Re your last paragraph...yes, I think what you say is true. And I note your suggestion that magnitude is relevant. But let's be careful to acknowledge that the paragraph really only merits a footnote, otherwise it dismisses all that came before. And this is important stuff, in that we are talking about not simply a 'blind spot', but one which has immense significance for the US and for the world.
Bodman only confirms what I've been saying all along, that the president or administration has very little influence on creating jobs. When President Carter talked about this very issue, he claimed that the president may have about five percent influence on the eocnomy. I think that's conditional on the situation the president is faced with.
It's a good time to revive this forum on "The US Economy." It's only four more days till year-end, and only three more days of stock trading. We're sitting above 10,300 on the DOW, but frankly, I'm not sure what's keeping it up there. Not only because of the "mad cow disease," but because our economy is barely plugging along. Here's the latest from Reuters. "NEW YORK (Reuters) - Treasury prices rose on Wednesday after unexpectedly soft data from the housing and durable goods sectors suggested the U.S. economic recovery still has some rocky times ahead." Maybe, perhaps, my prediction of the market hovering close to 9,000 at year-end is premature, but I still feel that my prediction of the overall economy as "moderate" still stands. We're still not adding new jobs to stablize this economic growth. Anything that improves in the future will be slow and painful. For those of you who think I'm "complaining," you're wrong. Our investments are up over $100,000 so far this year, and that's net of my withdrawals. c.i.
Just found this release: "By Paul B. Farrell, CBS.MarketWatch.com
Last Update: 11:53 AM ET Dec. 26, 2003
LOS ANGELES, CA. (CBS.MW) - How should you invest in 2004 when corporate earnings and the stock market are pointing up?
NEWS FOR DJIA
U.S. stocks rally after mad-cow scare
U.S. stocks set up to return to winning ways
McDonald's, Sirius move after the bell
More news for DJIA
Everybody seems upbeat. Economists, politicians, securities analysts and pollsters are falling all over themselves forecasting a rising market that may blow through 11,000 in early 2004 and predicting a growth economy that will bolster the President's reelection bid.
This euphoria smells like 1999 all over again to me, a renewed irrational exuberance negating common sense as the lemmings blindly rush over the cliff."
****************
I totally agree. c.i.
It may well be that the financial economy and the productive economy are disassociating from one another. The financial markets my be doing fine for managers and investors while the productive economy is failing everyone else. This sounds like Britain in the late 19th and early 20th centuries.
That certainly sounds correct, Acquiunk. Massing of wealth does not necessarily spell out massing of inventory and employees. The figures for Christmas sales are now likely to be dissapointing and some very high profile retailers are having sales, some of the who never have sales. The only one so far not proposing any sales is Cartier. Like we all shop there anyway.
