Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: Jay Mowery who wrote (3)	2/28/1998 11:20:00 AM
From: porcupine --''''>	of 1722

Jay: (Population growth) The bulk of population growth in the economically developed world, including the U.S., seems to be from increasing life expectancy and immigration, rather than the reproductive rate of their indigenous populations. (Investment assets controlled by Seniors) About a year ago, the financial press was kicking a figure around. Their spin was: "Look at all the investment assets Boomers will inherit (as their parents pass on to a better place)!" I have a vague recollection that the figure they were using was somewhere in the neighborhood of $8 trillion. (Are labor force dropouts "employed" managing their own investments?) People who live off of their investments do drop out of the unemployment numbers since labor market "dropouts" are not counted as actively looking for work. However, looking at the doughnut instead of the hole, the employment rate (the percentage of the adult population that is in the labor force, has risen to record levels for peacetime. The point being made by the Fed and the Bears is that (whatever the dropouts are doing) there aren't enough of them left to keep wages from rising to an extent that increases inflation and/or decreases profits -- either of which would make the Market too high at current levels. (I thought that that hour had arrived when the Fed raised interest rates 1/4% last March. So, I sold my stock in my Southwest Securities, which has since skyrocketed --'''':< ) Contrary to popular opinion, it seems that the labor force dropouts are not middle managers who were downsized out of a career. It seems that their numbers increase the lower their education level is. Therefore, the bulk of them are unlikely to be living off their investments. (The labor force has grown because a greater number of women have entered the labor force than the number of men who have left.) However, you have raised a very interesting possibility: that higher education dropouts are actually "employed" managing their own investments. What do you feel your ideas suggest for whether or not the Market's price level is too high?

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