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Pastimes : The Big Picture - Economics and Investing
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To: Sid Turtlman who wrote (426)11/23/1997 12:00:00 PM
From: greenspirit  Read Replies (3) of 686
 
Sid, you make a good case, I agree it's possible, however, I don't believe it's probable. My reasoning...

1. We will continue to feel the effects from the baby boomers reaching their prime earning years. At least for another 7 years. This will, as it has, maintain a cushion to any large downward movement in stock prices. All those pension funds will not pull out of the market, more likely any large downward move in stocks will be looked at as bargain hunting time. I believe we are now seeing this macro effect as more and more people learn how to use 401K's, IRA's and other retirement vehicles to enhance their wealth.

2. The markets in Asia, although reeling from some poor investments (mainly in real estate) will recover. Japan has one of the highest savings rates in the world. This high savings rate will cushion a large downward movement in consumer purchases until the economy recover.

3. Many of the companies in these regions understand that to be competitive into the future, they must continuosly invest for the future. This incentive will keep their economies stable until consumer sentiment turns positive again.

4. The information technology revolution is only now starting to be felt by those regions of the world. Productivity will increase, and with it profits, as more and more of their economy experiences the effect of this change. This is the main area in which many economists have completely missed the boat in the 90's. The world economies are experiencing a profound shift, and the measurement tools of the past are largely inadequate to examine this change.

Michael
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