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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: LLCF who wrote (11249)11/23/2001 9:52:13 PM
From: Maurice Winn  Read Replies (3) of 74559
 
<What's real is the second law of thermodynamics.... the longer a system is altered {yellowstone's natural fires being 'managed'} the bigger the adjustment later as things return to their normal state >

That assumes a 'normal state' and anyway, that's not the second law of thermodynamics which is to do with thermodynamics, not economic systems.

Humans never did revert to the 'normal' state of being a chimpanzee type beast. Computers never did revert to the 'normal' state of being an abacus. The human population never has reverted to the 'normal' state of hunter gatherer numbers.

There is nothing to say that the 'normal' P:E state is the average of the past hundred years. With people living longer, property rights more secure and expectation of getting rewards for investment increasing, it makes sense to defer consumption. With a lot of people deferring consumption and investing, that reduces the average returns on investment.

So, while 8% might have been reasonably expected mid 20th century, perhaps 3% is reasonable for these days.

Profitability is a reflection of value added. Maybe there are relatively few ways in which high value can be added, so people prefer to just spend their money instead of deferring expenditure to earn a small return on investment.

Normal is not a state which is easily determined.

Mqurice
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