GST,
Interesting post, as always. Couple of thoughts...
>>perhaps
Japan in 1989, except our US valuations are more extreme than they were in Japan.
Luckily the U.S. isn't hobbled by a high personal savings rate like Japan is. :) I know that's an unconscionably flippant comment, but I'm trying to hint at a more serious point: Drawing lessons from wildly different socioeconomic systems gets tricky very quickly. For example, Japanese businesses' reliance on banks (rather than capital markets) for funding has undoubtedly prolonged the slump. I am not suggesting that the American model is better--though I suspect it is more supple--but merely that it is sufficiently different to make extrapolating from Japan's experience dangerous.
>>We are so
dependent on the decisions of foreign investors that it is hard to describe.
True. But it cuts both ways, almost by definition. The U.S. is dependent on foreign investors, just as many of the world's economies are dependent on U.S. consumers. It is too early to tell whether Japan's strong growth numbers reflect surging domestic demand or merely government public works boondoggles and exports to stronger overseas economies.
The current account deficit is on track to hit 3.2 to 3.4% of GDP I think, which is horrible, but not necessarily enough to trigger the kind of collapse you seem to be envisioning. If the current account deficit were to continue to grow at the same pace, I gather we would blow through the historical high (again, as a % of GDP) in about 2 1/2 years. But, obviously, the softening dollar should have already started flattening the trend.
>> In 2004, AMZN, if it survives at all, is likely to be trading lower than where it is today.
Assuming we enter a 73-74 style bear, I would rather be in the leading tech/inet stocks than in traditional safe havens like drug stocks or consumer nondurables. The techs/inets are richly valued in part because they are hard to value, and consequently easily infected with the market's euphoria, but mostly because they have superb prospects. By contrast, a lot of big caps like Gillette are richly valued, imo, because they are perceived to be safe and liquid and fund managers have to put money somewhere .
In a prolonged market downturn, many of the inet companies which have been coming public in the past few months would instead be going around to YHOO, AOL and AMZN hat in hand. Consider: Though the deal flopped in the aftermarket, on Thursday, Goldman Sachs et al managed to sell 98 million dollars worth of stock in an online retailer of luxury goods.
That, I'll grant you--and you too, Mr. Ballmer--is absurd.
I'll be offline for about 10 days. Best of luck to you and to everyone else on the thread,
Ganesh |
