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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 681.44

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Nov 10 4:00 PM EST

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To: James Strauss who wrote (48565)	4/28/2000 2:41:00 PM
From: pater tenebrarum	Read Replies (1) of 99985

Jim, no doubt technological advances are improving productivity. my point was merely that the official numbers overstate this improvement. as for the internet, it is slowly but surely doing away with the basis for profit margins, which is informational deficits. so while it allows for an increase in efficiencies on the one hand, it is also a great leveler of margins. of course it is a bit early to say how this will ultimately play out. it definitely represents a revolution, and is ushering in profound changes. i am actually a long term bull, in spite of my frequent critical assessments of the current state of affairs. i just happen to think that many of the excesses that are currently present in the financial system will need to be shaken out before we can really move on to the next big upward cycle. i am specifically concerned about the amount of leverage and credit in the system, the current account, as well as the high valuations in the stock market. i think the fact that the economic expansion has gone on for so long has made the economy more vulnerable to shocks, not less. in a more cyclical environment credit excesses get corrected on a regular basis, whereas currently they have been allowed to build up unchecked. furthermore recent years have seen an incredible growth in the notional value of outstanding derivatives. their performance is as of yet untested in recessionary conditions, and they represent great systemic risk. so it may well be time to do the one step back routine before we can move two steps forward again. note also that the changes the economy is undergoing may well have a disruptive effect at first as old and new integrate. regards, hb

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