enigma -
I have to concede that you are right on this score. We live in a mixed economy and that is the reality. And it's perhaps not the worst of all possible worlds either. Frankly, I think most everyone is doing pretty good right now and I believe that the level of civil discord in the US is currently lower than it's ever been in my lifetime.
We have not seen such favorable economic conditions in this country for probably more than 30 years, and both the domestic and world political environments are far, far more favorable than they were then.
I am leaning towards the view that this bull market in equities can continue to run for some time. Yes, valuations are at or approaching historical highs, but I don't think it really matters right now. This bull has for thousands of points continued to roll over those who entertain such archaic concerns. The market has basically ignored them completely and instead focused upon the favorable economic environment in which we are operating, and there is absolutely no reason I can think of to believe that it won't continue to do so.
Did you hear the inflation numbers again this morning? Non-existent. I know many will argue with this fact, but I think that it is essentially correct. Once again, inflation adjusted petrol prices are probably lower now than they have ever been in my lifetime, and I am old enough to remember .25 gasoline. During the last big inflation that we had, I was just getting my legs out from under my fathers table and I remember that every time I visited the grocery store it seemed like prices had leaped. These past years have been nothing like those.
Money is continuing to pour into the market, salaries have started to rise a bit as inflation remains tame. Retail sales were off, I think, there are signs the economy may be cooling a bit. Is there anyone who thinks that we cannot ultimately see P/E ratios of 40 if this continues? The question is of course for how long these favorable conditions can be maintained, but I think serious consideration has to be given to the possibility that it can go on for some time. The immediate question that must be addressed probably is whether the current lag in corporate profits is more than temporary or whether the pace of growth that we have enjoyed for the past few years may shortly be resumed. I would appreciate it if anyone can shed some light on this question.
Another thing, I think we are going to continue to see good demand for IT products as industry consolidation continues and as greater efficiency is realized through the management of information resources. I think it's true that in many ways this economy has become much more efficient than it used to be. If you have excess fat or overhead in your organization, if you do not manage inventory efficiently, if you do not satisy the demands of the customer, or if you are slow to respond to the changes in the marketplace or technology, you are gone. |
