You make excellent points, Heinz.
However, if the demographic argument thrown at you in Japan in 89 was supportive of the Japanese economy, there is no comparison between the birth rates and the productivity cycle of the Japanese and American bommer generations. The Japanese have been trying to boost their birth rate, while the U.S. has (successfully) lowered theirs, and the boomer generation is at its peak earnings power.
As far as stock buybacks being larger than households, who have been net sellers, this is news to me, and it sounds surprising. Do you have a reference to that?
About the greater fool theory continuing, yes, that is what I am saying, but that has been the case, IMHO, since stocks got divorced from dividends, which has been the case for at least 20 years. The important point, as you say, is where would the natural limit be reached? You say it takes $5.30 in additional credit for every dollar in GDP growth, and that is a sobering figure. As long as the foreign capital continues to flow into the U.S. economy, this is sustainable, but of course, the foreign flow is in itself not sustainable. And, as you know, the dollar took a dive today.
I do remember '73 as well as '87, and maybe J6P was hurt, but I don't recall the average person having nearly as much interest or capital in the market as they have today. That is good, and it is bad, since a downturn would have more serious consequences. OTOH, this gives added impetus to the Fed's liquidity infusions, and I believe it will be several years before the chickens really come home to roost.
BWDIK |
