Joan, the size of the national debt worries me less than the fact that we are looking at running budget surpluses for a number of years. As long as these surpluses are very moderate (something like paying a total of 8% to 9% interest on that debt, or a surplus of about 2% to 3% of the budget), I am not worried, but if these surpluses grow beyond about 4% of the budget, we are setting the ground for economic contraction.
As for the saving rate, the way it is calculated is a joke, it is calculated by taking home pay (after taxes) and looking at total expenditure (consumer spending) and calling that difference "savings". The savings rate is actually huge, since whatever way you want to look at those social security taxes (15% of gross pay for most people) it is a saving, and add to that 401k and other retirement savings (at least those "hidden" from the after tax consumer earnings) and these are savings as well.
As for the excess money flowing into building the I-net infrastructure and the money thrown blindly in the last few years on e-commerce companies, sure some of it will have to be written off, but I do not think that this write off will equal the S&L fiasco, and even if it did, such will be just a "blip" on the economic scene, nothing like the economic contraction of the 30' and no big kahuna, IMHO.
I do not disagree with you that excesses in the market place will cause economic dislocations, that is why my "long term view" of the market is a period (another 5 to maybe 10 years) where the DOW is stuck in the range of 6000 to 13500 (could be that 11750 was the top, but I have a "gut feeling" that the coming summer rally prior to the election will bring with it new highs in the DOW and possibly, marginal new highs in the NAZ). During this period, adjustment of these dislocations will take place in a more or less "gradual manner. However, IMHO, gone for some time are the day where a "long term investor" will be bailed out by a continually rising market.
Zeev |
