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Party!! New ERA? Don't be so sure. In 1981 and 1982, when I started as a broker, inflation was raging, you could get over 15% on US Treasuries, 11% on tax free municipals, and CDs were in the mid teens-even real estate and gold were cooking. You could only get a 6% dividend yield on blue chip stocks. Who in there right mind would ever buy a stock? "Only 6% dividend yield and absolutely no prospect for capital appreciation was the wisdom. Why? Of course stocks had made no net gain in over 15 years, and with high inflation and stratospheric rates on bonds, they couldn't possibly go up. The OLD ERA would last forever. I know, I begged people to buy stocks citing historic extreme undervaluation etc. Tough Sell! Conventional wisdom: They couldn't go up [just before embarking on a sweet little 18 year best ever bull market.] Now, it is the New ERA, and they can't possibly go down except for short term corrections that are merely convenient buying opportunities for remaining margin buying power]. I guarantee anyone that this is not a permanent new era, for the exact reverse reasons as above cited as to why the Old ERA would never end. Oh yes, in '80 and '81, stocks were cheap-and got cheaper. Now they have been over priced, and have gotten more over priced-but eventually fundamentals re-assert. Doesn't mean one has to sit in all cash, [though if ones daily job provides plenty of income, one can do that and go harrumph-ba-humbug]. One can still play the game [bought more SFE Safeguard Scientific today breaking out at $186, while still holding part of original '93 purchase of SFE, $3.20 cost basis], but one should never forget that this is a speculative mania fueled by a seed of truth-That we are in a a teck., productivity revolution, but that human greed emotion has taken it way past economic justification. Since human emotions do not change despite business revolutions, the excess produced today will one day be replaced with white knuckle fear and loathing. No one knows the timing. Party hearty---Just be very close to the back door when the cops show up. Lets see, long bond over 6.62% The Fed will raise rates 1/4 to 1/2% in a month. Hmmm. Is that a siren I hear over the loud music? Mike |
