Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (62194)	6/12/1999 10:52:00 AM
From: Tommaso	Read Replies (1) \| Respond to of 132070

I wasn't around in 1929, but in 1969 it was very hard to tell anyone who had been in the market for a long time that there was any risk in holding common stocks. As recent calculations have shown--on this thread and elsewhere on SI--when you take inflation into account, the decline in the stock market's real value from 1969 to 1981 was just as bad as the 1929-1932 decline. Between 1929 and 1932 the dollar actually gained so much in value that the seeming 90% decline (in dollars) of the market was really more like the 70% real decline of the 1969-1981 bear market. I wish someone would do a survey of about a thousand randomly selected persons between ages 25 and 65, and find out how much wealth they have and what forms it takes--equities, savings, home equity, pensions--and how much debt they are carrying. As has been said often on this thread and elswhere, one suspects that there are a lot of people who consider stocks and home equity to be their savings, and who feel perfectly safe carrying large amounts of debt. A decline in the stock market, or just a failure of the market to make any real gains for a year or two, might well have as drastic an effect as the 1929 crash did on spending patterns. I know a family that put a great deal of (brrowed)money into a quite modest house at the top of the Boston real estate market of the 1980s. "I consider this an investment," my friend told me. I don't know if they still have the house, but within a couple of years they must have had negative equity in it. This could happen on a large scale. This country has so many automobiles that Americans could function quite well for a year or two without buying a single automobile. The same is pretty nearly true for lots of things that people put money into, the more extravagant examples being home theater systems that cost thousands of dollars. There are many services that could be postponed or curtailed. If a hundred million Americans suddenly ceased feeling rich, the consequences could be serious for economic activity, and could become self-reinforcing, as they have in the past. I am afraid that we may in for a long and painful period of debt liquidation. Of course, as Bill Fleckenstein himself says, there is always the possibility that we really are in a new era and that nothing will ever go wrong again economically. That would be fine with me. But there is this thing called history, Henry Ford notwithstanding. There's always a chance of a hurricane season with no hurricanes, too.