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Strategies & Market Trends : The Stock Market Bubble
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To: Tommaso who wrote (1914)10/2/1998 11:10:00 AM
From: Sun Tzu  Read Replies (2) of 3339
 
Doom sayers please pay attention:

Back in the early days that I started "The Art of Investing" thread, I went over it in detail why we have deflation and why it is not so bad. I'm not going to repeat that whole debate here; feel free to read it there if you want. The bottom line is: Will we have deflation? Yes. Will the stock market drop 40~60% from its top? Yes, primarily due to profit squeeze. Are we going to have massive lay offs and soup lines? No. We are going to have a long and stable environment in which the stock markets will have a very hard time performing well, but the average person who is employed somewhere will make a comfortable living. Deflation does not necessarily mean soup lines and desaster, just as inflation does not necessarily mean hyper inflation and misery. For thirty years in last half of 19th century the world had deflation and for almost 70 years the main concern of the businesses was pricing power and not inflation. Those were pretty good times to live in. There is an article in SI home page on deflation which does a good job of recaping the discussions we had in AoI thread. For those of you who want to look at the "big" picture, The Great Wave: Price Revolutions and the Rhythm of History by David Hackett Fischer. It tracks price changes for the last 1500 years across Europe (and later) Americas. You will notice many deflationary and inflationary periods. Some were good, and some were terrible.

Regards,
Sun Tzu
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