Art, allow me to be a devil's advocate here. I don't entirely buy Richebacher's stuff but I do find it useful to discuss subjects like it dispassionately.
First, if I read KR correctly, he believes that the market will do poorly because of macroeconomic issues, not because the market is poorly regulated or because of other securities market-related matters--though the damage done by the current batch of crooks make Boesky and Milken look like cuddly Santa Claus elves.
Secondly, the prediction that the dollar will fall precipitously is probably wrong because the underlying premise does not appear to be in place. It seems that a fall of the dollar to some extent is likely unless and until corporate profits go up. I see hopeful signs, such as today's revised GDP figures. If GDP keeps going up, and corporate profits therefore increase, the dollar should come out relativelty unscathed. If that should occur, the precipitous loss-of-foreign-investment catastrophe should turn out to be a minor twitch.
Richebacher does seem to have a point on interest rates, though. How can Greenspan increase them to bolster the dollar without putting a needle to the inflated real estate bubble? Is he willing to let the air of another bubble after seeing the damage done by the disinflation of the tech bubble?
Richebacher is of the opinion that the present national savings rate is a calamity because savings fund capital spending. The problem I have with this notion is that I don't know how the rate is calculated. My intuition tells me that savings made by workers in 401(k) plans are not counted, though they are substantial. Clearly, a lot of people are covered by 401(k) plans-- though mine looks more like a 201(k) plan--and I'm not entirely sure that they are counted in the national savings rate calculation. If they aren't, his claim that we save 0% of income seems to be in error.
His other point, that corporate debt is excessive in view of weak profits, appears irrefutable.
I like Q because it has no debt. Not the most important reason for my investment, but certainly a consideration. |
