"I would like to think that our Fed will take steps to "manage" the
situation and prevent this from happening by "lancing" the markets
periodically to prevent a massive blow out."
Of course, let me first say that projecting 10+ years ahead is mostly for fun, but also to develop a plan based on what could occur.
If Alan Greenspan never dies, or retires, we will all be better off. I don't know if he is taking his immortality pills, I expect the next Fed chair cannot possibly give a repeat performance. Yes, I believe in Greenspan, not the institution.
Even Greenspan has tried to talk this market down, and very unsuccessfully. If growth stays slow, with inflation near zero, how much will raising rates really effect the performance of the dow and large cap stocks? Stocks, not companies.How much could he justify raising? And if it gets really out of hand, say inflation at 1% with short rates at 7%, the fed could possibly cause a recession.Meanwhile, long rates would probably collapse in this scenario, leading to another burst of equity investing.
I see a real possibility of dow and S&P pe's of 35 between now and 2010. E could well climb to 2400 on the dow, giving us a dow of 70,000+. The inevitable collapse will be spectacular, and create a horrific situation with younger boomers.
There, I have provided enough material for everyone, in case boredom has set in. Believe me, I am not relying on such developments, but I hope to be around to see what the market behaves like when the boomers start withdrawing money from equities, to spend on retirement. |
