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Strategies & Market Trends : Tech Stock Options
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To: John Lacelle who wrote (48035)7/18/1998 4:11:00 PM
From: Jack T. Pearson   of 58727
 
John,

I know it is popular to think the market is going to "blow" because it has been going up so rapidly and valuations are at all time highs. But I don't think any correction in the next few years will be very severe for several reasons.

Long term interest rates are at record lows and declining (probably 15% more in the next year). Commodity prices are declining: Industries can pay less, sell at the same price, and make bigger profits or pay better wages. Demographics: Baby-boomers are in their peak earning years and have a LOT of discretionary income, some of which is buying more products, and some of which is going into the market. Declining inventories: This was a major driver of past boom and bust cycles, but technology has allowed them to be significantly reduced, and it will only get better in the future. Tight labor markets: I get a lot of overtime. My wife spends a little more and I put the rest into the market.

Final thought: Some people are concerned about the possibility of a major correction. That causes an occasional correction of minor significance. It is sort of like small earthquakes relieving fault stress, preventing really big earthquakes.

In summary, I think all the factors are stacked against those betting on a bust.

Jack
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