hb -
[...however, i do not agree that we can not come to any conclusions at all by looking at economic data. to give you an example, one of the facets of the long lasting boom is the enormous increase in private sector debt coupled with a plunging savings rate...]
I can live with that.
My primary conclusion is that using productivity growth data to justify unlimited stock prices is absurd, even if the productivity data were of pristine origin.
In fact, my theory is that different rates of productivity growth have wildly different results, both for the overall economy and individual companies. For low productivity growth, well established companies will persist, with little destruction of their accumulated capital and relatively low levels of new competition ( otherwise the productivity growth would higher). These established companies will typically be those making up the large cap sector. For high productivity growth, capital is being destroyed in relatively short order in many sectors, and the existing companies will be under stress, both facing new competition and the need to update their capital facilities. This should favor the psychologically-based bidding up of new competitors, and the downgrading of the old line companies.
Regards, Don |
