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Pastimes : The Naked Truth - Big Kahuna a Myth
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To: Robert who wrote (70448)10/21/1999 9:16:00 AM
From: Mike M2  Read Replies (1) of 86076
 
Robert, you make an excellent point so why are you bearish? -g- The big story which does not receive adequate attention is the unprecedented excesses in debt. See siliconinvestor.com Bill Fleckenstein mentions a Fed study of 110 companies who spent 125% of after tax earnings buying shares. I also recall that in 4Q98 companies spent 130% . In 1929 $2 of debt was created for every dollar of GDP - we recently hit a rate of $5 debt for every dollar of GDP. Much the credit creation is fueling speculation. Keep in mind companies also need to reinvest in their businesses of course with executive stock options abuses they can take the money and run before reality sets in. To keep a credit bubble going you need an ever increasing expansion of credit but at some point your balance sheet will become so strained that a retrenchment is inevitable ( deflation- I mean a contracting of credit ) The consumer is also increasing his/her debt load. Corporate share repurchases are the largest source of demand for stocks -bigger than the baby brats money flows. Why do companies continue to buy their stock at unprecedented valuations - stock options. If I were to write a book about this mania I would call it Excesses in Debt - the Road to Tough Love and Economic Violence ho ho ho BTW They call me Mr. Tough Love -g- ho ho ho Mike
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