To: Lizzie Tudor who wrote (80867 ) 10/15/1999 7:18:00 PM From: GST Respond to
Hi Liz -- as I mentioned, I am in total manic work overload and chatting here just to relieve some stress -- so I can't compare spin. But look at the bigger picture for a moment. We have (1) a shift from falling prices to rising prices for the things that reflect global economic activity -- oil is key, but other things as well. (2) We have had a runup that very few honestly foresaw -- there were believers, and some post here as you know -- with the extreme example being the stocks near and dear to those on this thread. Perfection is not priced into the market, it has been surpassed. (3) The 'recovery' in Japan, and it is really hard to say that with a straight face has two weird and unpleasant side-effects: (a) a trade deficit which perversely makes us as dependent on their investment decisions as they are on access to our markets -- this has also been carried to extremes for them and us, and (b)public and corporate debt in Japan has skyrocketed -- partly to try to kick-start the economy and partly as a hang-over from decades of poor financial decision-making. Whatever the reasons or the blame, the fact is that this is one heck of a big issue -- and one which has very peculiar and potentially disasterous implications for our financial markets -- big, big risks. For example, despite the anemic recovery, the huge debt in and of itself in Japan is driving up interest rates worldwide -- ours included. Japan and the US are no longer seperate economies -- hard to grasp I know. (4) Then comes AG, and he says, we have prices that reflect zero risk -- is that sensible? No. We have risk, perhaps very substantial risk, and the risks are rising. That MUST be priced into stocks. Do you want to do it now? Or do you want to face the inevitable panic and collapse that comes with ignoring the risks -- is it really so surprising that the market fell today? Today we started pricing in the risks -- not of a fed move -- but something far more important. Today we began to price in the inherent risks of owning stocks -- we are going down. That is my take.
