Roger's 1998 Short Picks Message Board

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Strategies & Market Trends : Roger's 1998 Short Picks

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To: Oeconomicus who wrote (17767)	3/19/1999 7:46:00 AM
From: Victor Lazlo	of 18691

<< My point is simply that asset price inflation creates paper wealth. Asset price deflation destroys it. If the underlying asset has no greater ability to produce income than it had 2.5 years ago, has its real economic value increased? No. Then why has its price? Asset price inflation! The money supply grew by enough to cause prices, on the margin, to rise. >> Agreed. << The reality, whether you want to talk about it or not, is that the S&P 500 has about doubled in the last 2.5 years while its earnings have gone nowhere. >> Right, and in fact I believe, if memory serves me, Sp500 earnings have actually declined so far this year have they not? I am not a permabull; I just enjoy watching some of the market trends over time. And I really do believe that "asset inflation" as you put it, has really driven the markets, in part, in recent years. The number of shares available for purchase simply has not kept pace with the increased amount of money chasing them. Victor

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