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Politics : Ask Michael Burke
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To: Dushyant Narayen who wrote (66778)8/25/1999 3:40:00 PM
From: Freedom Fighter  Read Replies (3) of 132070
 
DN,

Here's my 2 cents.

The thing that will stop the bull market is that it takes progressively larger amounts of money being directed towards stocks in order for the market to continue to rise. In general, the amount of money and credit in the economy is always increasing. But if a disproportionate amount of it is being directed towards stocks, they will rise faster than the rate of growth of economic activity and our ability to produce real goods and services. So in order for that to continue, the relationship between the amount of money and credit that will be required to come in and real economic activity will have to continue to widen. Sooner or later all that money will either spill over into inflation, create a current account deficit that's too large to finance or create some other such symptom that will blow it out. And all the while there will be more and more people that recognize the excesses and start cashing in tickets.

In addition, more and more of the credit in the system is based on the assumption of a continuation of unjustified capital gains instead of the actual income producing ability of the assets and workers. So merely a sideways moving market for an extended period of time will cause some problems.

Wayne
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