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

To: Nadine Carroll who wrote (67222)	9/3/1999 1:59:00 PM
From: Skeeter Bug	Respond to of 132070

a couple points: >>assuming dividend and cash-flow growth consistent with historical rates<< poor assumption. it assumes that foreign investors will continue to send $300+ billion to the us (growing at a rate of about 20%) forever. it assumes the savings rate will become even more negative. it assumes debt can surge at double digit rates for eternity. stooopit assumptions. >>In our book we show that, assuming dividend and cash-flow growth consistent with historical rates, the current equity risk premium is about three percentage points<< again, another garbage in / garbage out example. recent history is about a poor comparison as one could ever make. >>We believe that, instead of 3%, the risk premium should be close to zero.<< to prove this nonsense he cites a guy that says that history has shown stocks to be a better investment than bonds. i can point out a lottery winner who was better off spending their retirement money buying lottery tickets than investing it. does that mean buying lottery tickets isn't more risky than investing? that is the logic these clowns put forth. stoopit! they neglect the nikkei problems where it has taken about a 50% haircut over a ten year period. why? he's proof texting his point and the facts of the nikkei market don't support his nonsense. i also take issue with his 3% rate of retuen. define dividend and cash flow. i absolutely do not believe that dividends + free (and i mean free!) cash flow at the average company is averaging 9% a year (t-bill + 3%). i think he is fudging numbers. why? to proof text the point that he started out to make rather than review the data and reach a conclusion based upon the data. they suffer badly from paradigm paralysis - a terminal disease of certainty.

To: Nadine Carroll who wrote (67222)	9/3/1999 2:25:00 PM
From: Mike M2	Respond to of 132070

Coby, gilded age is a better description IMO. The August issue of the Richebacher Letter sums it up nicely: " Wealth creation through capital gains in the stock market involves zero,we repeat zero, creation of resources in the economy. Genuine wealth creation requires the creation of productive resources for higher production in the future. In other words, it implies capital formation. But what has taken place through huge capital gains in the US stock market is not an ' accumulation of resources' with a future benefit to the economy as a whole but the exact opposite: the accumulation of rising claims on existing resources. " The Richebacher Letter 1217 St. Paul St. Baltimore, MD 21202 FA Hayek said the road to poverty is lined with paper wealth. The Austrian Twins say all bubbles burst creating tough love and economic violence. ho ho ho Mike I would say the article to which you refer is bubble propaganda. It is easy to identify a bubble but difficult to determine when it will end especially when the Fed continues to encourage and fuel the bubble. to quote Dr. Richebacher " the four classic elements of a bubble are all present and most obvious 1) money and credit have been expanding vastly in excess of savings and GDP growth 2) inflationary pressures being channeled toward , and concentrated in, asset prices 3) low inflation ( product price inflation) has kept monetary policy too loose 4) soaring asset prices have overstimulated domestic borrowing and spending. Mike

To: Nadine Carroll who wrote (67222)	9/3/1999 3:55:00 PM
From: Les H	Read Replies (3) \| Respond to of 132070

A more detailed explanation of Glasman on why $ 1 return on a $ 100 stock is preferable to $ 6 return on a bond... slate.com He fails to add up the cumulative simple returns on the two investments, to account for the reinvestment of dividends in the latter (if a fund), etc.