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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Suresh who wrote (29597)	11/8/1999 3:04:00 AM
From: IQBAL LATIF	Respond to of 50167

Suresh.. great choice, it was quite an excellent article, learnt a lot.. thanks once again...regards..

To: Suresh who wrote (29597)	11/8/1999 4:04:00 AM
From: IQBAL LATIF	Read Replies (2) \| Respond to of 50167

<<Now, to get some historical perspective, let's look back at the 34 years before this one--and here we are going to see an almost Biblical kind of symmetry, in the sense of lean years and fat years--to observe what happened in the stock market. Take, to begin with, the first 17 years of the period, from the end of 1964 through 1981. Here's what took place in that interval: Dow Jones Industrial Average Dec. 31, 1964: 874.12 Dec. 31, 1981: 875.00 Now I'm known as a long-term investor and a patient guy, but that is not my idea of a big move. And here's a major and very opposite fact: During that same 17 years, the GDP of the U.S.--that is, the business being done in this country--almost quintupled, rising by 370%. Or, if we look at another measure, the sales of the FORTUNE 500 (a changing mix of companies, of course) more than sextupled. And yet the Dow went exactly nowhere. >> Dear Suresh, I had no idea to respond to this, but I went back after thanking you by sheer chance and curiosity and thought it would be intellectual cowardice on my part not to tell my side of story to Mr. Warren Buffet. I totally understand once again my size and my limitations and have only responded as I think we fossils have some rights too to question the ultimate god of investment Mr. Buffet.....for me I think,,, It is how you package this info... why not to look at the returns using 1964 as a base years and instead of talking about 81-98 years talk about DOW coming from 874 in 1964 to 9800 in 98, if you do that the returns would look quite different over 34 years and not 16 years what Buffet is predicting.. Just another question propped in my mind if bond yields were 4% in 1964 what were the corporate earnings than? If he thinks that 10 trillion $ price is too much for 330 billion $'s of corporate earnings, I would be interested to see what in 1964 was the tag price on corporate earnings with bond yields as low as 4%? I am sure that multiples would be very high in excess of 25, how could market justify that pricing is beyond me I would not have bought DOW at 875 considered it dear, because world economy was at a quite a different stage. Most of US corporations were dependent on US territory alone for their revenue growth. Now MSFT or INTC has a ?global lock? on intellectual property and they do it with very little of physical capital, no oil and no commodities, this is the economy that is at the heart of the new paradigm. The 30,000 workers of MSFT have created out of nothing a company that is worth 1/25th of the total US market cap. The question is these revenues real or paper money? If they are real than comparison to 1964 is absurd! Don't forget that 'concept' of global markets did not even exist than. Most of Europe was under ?Marshall Plan? coming out of the wreckage of great world wars, Germany carried a collective guilt of holocaust their cities were bombed out of existence. The investor confidence was its lows, we had cold war and most important ASEAN economies were still backwaters in the global environment, they were not in a p position to consume anything from US. Japan was coming out of its follies, it was only 18 years that the country was bombed with weapons of mass destruction. These were the conditions of 1964, world was still learning to live with ?speed? that brought huge disasters. In 1964 ?Bays of pigs? was fresh and a nuclear confrontation amidst cold war had been avoided, their were people in U.S. who were writing praises on greatness of socialists systems and singing praises that USSR economy will leave US behind in two decades. China was dissociated from the world instead of part of the global economy it was just a fringe nation sleeping under the burden of opium, the great cultural leap forward which took 30 million life?s had not yet begun.. To match these years and progress of these years with those of today?s age is like comparing ?Dutch tulip? economy with that of 1920?s, the comparisons don?t stand the test of ?reasonable judgment? as I read his article on every word I find that how misjudged this man is! To raise these questions with apparent no answers against a US icon is bold and of-course not gentle. However, much as I respect his decision to make Coke work, sweet water. I think that he fails to understand the dynamics of modern world and the new reaches of corporate US, he firmly remains entrapped in Omaha the little village. I thank US and its global reach that I got freed from my parochial roots he could not strange enough. My parting shot, if US economy had grown 370% from 1964 to 1981. And than has tripled from 1981 to 1998, for me it is no big deal if as a result of ?globalization? and global harmony that we reward the markets now in 1999 from 1964 when we could not price in DOW due to uncertainties the great progress of US economy. It is now belatedly prized. Why should we make 1981 as a base figures it has to be 1964! Imagine if we have ?nuclear crisis? with USSR like we saw in early part of 60?s and had similar political conditions in Europe, Japan, China and Asia. I don?t think that DOW would be at 11,000, it will in face of global showdown sell down to 4000 even lower and gold will move up to 1500$?s. Markets are about aggregate demand, consumption and most important affluence and willingness of people to spend. In 1964 this luxury was only available to 30 million people in US and Europe today nearly the global population benefiting from these services sector economy are in excess of 1.2 billion and growing. Why to miss the prospective consumer increase from 30 million to 1.2 billion? As global affluence spreads so would be the size of Us caps. Since fortunately US corporations have a total lock on these intellectual rights going forward. Regards and best of love to everyone near and dear.. yours Ike