RSA/Future Tech Market comments Sept 19th
RSA Update V5 # 5.1 September 19 1999
Excerpt from Sept 19th update
MARKETS
Main Street USA is in love with Wall Street.
Is this a mania or what?
According to Edward Wolff, an economist at New York
University, 43% of American households own stock,
either directly or through mutual funds and pension
accounts, up from nearly 25% in 1983.
The poorest 40% of U.S. households now invests an
average of $1,600 in stocks, up from $300 (in today's
dollars) in 1962.
The wealthiest 10% of Americans still dominate Wall
Street, owning 82% of the value of all stocks.
There are now more than 108 new business and finance
magazines in print, nearly triple those of the early
90s. There are nearly 7,500 Web sites geared towards
investing.
The number of amateur investment clubs has doubled
since 1995 to 37,000
The most amazing one to me is that the poorest 40% of
US households, which includes all those living in
poverty, now invests an average of $1600 in the stock
market. That is amazing because you know that the
people who can least afford to lose it, are playing
Wall Street hoping to make a quick profit.
Internet Mania
As you know, one of the reasons I believed the Internet
bubble popped was because of excess supply coming onto
the market (IPOs). Hang on, because there is still lots
on the way. Another wave of Internet IPOs is due to hit
in September and October with an expected 90 companies
expected to go public.
The numbers this week
All eyes were on the Consumer Price Index Wednesday
morning, which came in at 0.3%, and 0.1% for the core
CPI, versus expectations of 0.3% and 0.2%,
respectively. The markets rejoiced, with the Dow
Industrials jumping 100 points at the opening bell
August's US retail sales gains were the strongest since
a 1.7% rise in February, and marked the eleventh
increase in retail sales in the past 13 months.
Americans are buying everything from cars to clothes,
pushing the total value of retail sales up 1.2% to a
seasonally adjusted $252.39 billion. This outstrips the
expected rise of a 0.8% forecast by economists in a
Reuters poll and the initial report of a 0.7% rise.
Sales at clothing stores were 1.3% higher at $11.42
billion.
Conclusions:
Strong retail sales means more Interest rate hikes and
the Government statisticians have now mastered
containing the inflation numbers no matter what happens
to prices.
Warning:
Perhaps prices can be controlled with the PPI and CPI
numbers but it is going to show up big time in the US
Trade Deficit. These numbers are going to blow the
street away and pound the US$ over the next several
months. I hope to go into more detail with a few charts
on how and why this will happen in another update.
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