I 2, on the contrary, whenever the fear-mongers are out in force, the dip is usually buyable. allow me to point out though that what you so condescendingly call "fear-mongers" are simply people who are well aware that the Nasdaq is the most highly valued stock market of all time, and has now essentially gone parabolic. this is due to mainly two factors: a) the perception that an enormous technological revolution is taking place and more importantly, b) because the much revered Greenspan Fed has allowed money supply growth to basically go out of control since 1995, thus fostering a credit and asset bubble not unlike the one fostered by the 1920's Fed.
while record low unemployment and record high stock prices are certainly a commendable achievement per se, the critics do have a very valid point: namely, that the prosperity is founded on an ever increasing spiral of debt, which in turn has led to a rash of malinvestment. since there are plenty of historical examples proving that such credit-based booms always lead to exorbitant busts, it is no wonder that critics can be heard every time one of the famous dips occurs, believing that the 'big one' is finally at hand.
one of the arguments heard by the admirers of easy Al is that he has eliminated the boom/bust cycle and thereby allowed an unprecedented stretch of prosperity to take hold. what this argument overlooks is the fact that boom/bust (i.e. a little recession say every 4 or 5 years) allows excesses to be eliminated on a regular basis at relatively little cost, thus strengthening the long term soundness of the economy. a cycle like the current one otoh allows excesses, malinvestments and imbalances to build up on a grand scale. when the time for adjustment comes, it is a very painful, long drawn out affair...just look at Japan's struggle after the bursting of the asset bubble there or the economic landscape following in the wake of the 1929 crash or the South Sea bubble. all these eras were characterized by an exceptionally robust and long enduring period of expansion, great technological progress, vast increases in productivity, and most importantly, a lax monetary policy which allowed asset bubbles to flourish.
you are of course entitled to think that 'this time it's different'. but please don't call the critics of this type of thinking "fear-mongers". that is too simplistic.
regards,
hb |
