Hi ACF Mike, On
<<1) The dot com and telecomm mania led to a wicked bust (surprise) in the technology sector of the US economy which resulted in huge losses for those non-asset allocators who were fully invested in high tech.>>
Yes.
<<2) This bust was part cause of, part coincident with, a severe cyclical downturn in the manufacturing sector.>>
Perhaps, maybe, possibly.
<<3) While perhaps 1) and 2) should have led to a severe recession, they didn't, for the following reason. THE BABY BOOM GENERATION, NOW APPROACHING THE PEAK OF ITS SPENDING POWER, IS SUCH AN OVERWHELMING ECONOMIC FORCE IN THE US AND (to a lesser extent) IN EUROPE THAT THE SHOULD-HAVE-BEEN SEVERE RECESSION NEVER HAPPENED (unless of course you work in telecomm or high tech).>>
Not altogether true. The innovation of spending one’s home had everything to do with the strange character of the non-recession, where jobs are lost, equity tanked, housing, fueled by FED/Fannie/Freddie, rose, and consumer spending remained up.
And so your points 4 to 13 may not be true, and easily overturned by alternative explanations ‘epi-centered’ around FED/Fannie/Freddie and the spending of the home, same with the bullish story about your metal-basher manufacturing example.
On …
<<7) 6) plus the China/India factor will keep a lid on inflation for the foreseeable future.>>
My explanation is yes, but the strength of the dollar supported by the left over hot air of the USD 8 trillion bubble had more than everything to do with keeping inflation down. We will now see asset value losses first tenderize the equity markets, then the housing and USD currency market.
And …
<<8) Which will mean - surprise - interest rates will stay low for the foreseeable future, returning us to the best possible environment for equities - high growth, high productivity, low interest rates - in short order>>
… may or may not be true, depending on how bad events get and their affect on the supply and demand for money.
<<9) Corporate earnings, starting now, will surprise to the upside, because of: kitchen sink write-offs; increases in demand; improved operating leverage resulting from lower fixed costs.>>
… I will watch for these surprises, and if they happen and are deemed to be quality earning, I will be surprised, panic, and panic buy first.
<<10) The high P/Es that the doomsters have been wailing about will drop precipitously as earnings improve sharply>>
P/Es will drop, dividend rates will rise, and I suspect anyone fully invested in non-PM equity markets now will lose.
<<12) Investors will focus on forward P/Es and decide that US equities are cheap>>
The international investing electorates are voting as we discuss, and they are voting thumbs down, for the third year in a role.
<<13) Gold's fifteen minutes of fame will be over by 4Q, 2002>>
This prediction will be the easiest one to settle. We wait.
Not terribly worried, Chugs, Jay |
