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Strategies & Market Trends : The Stock Market Bubble
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To: Roger A. Babb who wrote (1)4/18/1998 6:56:00 PM
From: dealmakr    of 3339
 
Roger,

I happen to agree that the present era is a time of great change. Technology growth is moving at an ever faster pace. This bodes well for a truley global society and economy as information flows fast and free. As for your points, a couple of thoughts.

1. Yes there is more peace in the world with a lessening of cold war tensions. I do think that it is a more dangerous time in other ways however. The possibility of some terrorist or criminal organization causing an event that could wreck havoc with the financial markets should not be underestimated. You don't have to have a massive budget to obtain the desired result.

2. Interest rates are funding much of this expansion in the stock market. Debt levels though by the average consumer are at a very high level. Bankruptcies by those same consumers are at historic highs. Derivitive exposures by major financial institutions also at unheard of levels. I don't understand a lot of those structures, but have read that the losses can be horrific.

3. Agree

4. Energy costs are low now, but fossil fuels are still being depleted more rapidly than replaced. A shortage could develope quite rapidly if OPEC and others slow production to firm pricing. Don't know if they could ever consolidate enough to do this though. Also events occuring in the major oil producing areas could have a negative effect.

5. Agree

I do think that the market is in a bubble formation with the internet stocks leading the way. What it will take to pop the bubble as yet remains to be seen. Whatever happened to investing in companies that have reasonable PE's(and earnings). I do think that by looking at the past histories of these events you can possibly discern one taking place. I hope to be in a position that is advantageous when it pops.

Smelling the tulips

Dave
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