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Strategies & Market Trends : Waiting for the big Kahuna
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To: William H Huebl who wrote (16974)4/21/1998 9:07:00 AM
From: Tommaso  Read Replies (2) of 94695
 
"The real trick here is to somehow work interest rates up enough so putting your money in the bank competes with throwing it in the stock market... and not cause a major or permanent market dislocation."

I think it's way too late. A very minor shift of assets out of the stock market and into bank accounts would cause a much larger drop in stocks.

The stock market is an ongoing auction. As long as the bids keep coming in the prices rise--but suppose you turn around and offer that interesting hat rack you just paid $175 for and nobody says anything. Is it still worth $175? No--only what someone will bid for it. So even with no money changing hands and the same amount of money available, the hat rack might end up fetching a tenth of what you paid.

And a lot of these stocks are going to be about as valuable as a superannuated piece of computer equipment.

The instant that money is perceived as being more valuable than stocks it will all be over for this market.

The Federal Reserve has repeated most of the mistakes it made in the later 1920s, and the mistakes it made in the later 1960s. A huge decline in stock prices is inevitable; let's hope that somehow we avoid either the deflation of the 1930s or the inflation of the 1970s.
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