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To: Giordano Bruno who wrote (74328)	11/8/1999 6:22:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 86076

Jim, i'm not sure the Japanese real estate bubble will ever again be replicated....and i believe while the U.S. real estate market also experiences a bubble in some regions, it is a far cry from the Japanese bubble of the '80's. as for stocks, in REAL terms, i.e. when the S&P's p/e ratio is adjusted for stock options plans we are about where the Nikkei was at it's ultimate peak. in terms of the Nasdaq alone, the Nikkei peak looks in fact puny already....the overall NAZ p/e without stock options already surpasses the Nikkei peak p/e by a factor of about three. an interesting facet of the current mania is the attendant credit bubble, which is also reaching never before seen levels. private debt for both households and corporations stands at all time highs, both in absolute and relative (debt/income, debt/equity, debt/GDP, margin debt/GDP) terms. i believe that the credit bubble is what keeps the Fed's foot off the monetary brakes...they are in fact, just as the Economist put it so eloquently, "trapped by the bubble". the problem is simply that a lot of cash is tied to stocks in one way or another...and debt is incurred on the other side of the ledger to finance consumption and the U.S. version of "zaitechu", stock buybacks and also the buying of stocks for pension funds. for instance many people are borrowing money using their 401 K's as collateral...and the 401 k's are about 90% invested in stocks. the problem that arises from this is that the debt side of the ledger is basically immutable, while the asset side consists of common stocks, which could conceivably go down one day (i know, not in the new era). i strongly believe that a sharp downturn in the stock market would be extremely damaging to the economy for this very reason...which is why nobody wants to pop the bubble and everything is done to perpetuate it. the Fed, the banks, the brokers, the whole economy are held hostage by the twin bubbles...it takes $5 in credit to produce $1 of GDP...in 1929 the ratio was roughly 2:1 at the peak of the bubble. in addition to all this, the banking system has busily created a mountain of derivatives that hangs like the sword of Damocles over everybody's head. if one stops to think for a moment that a single hedge fund, LTCM, would have almost brought the whole system crashing down, imagine what a REAL downturn in financial assets might do. imo, market participants know all this, and feel therefore free to speculate to their hearts delight, in essence daring the authorities to do something about it. that is another similarity to the Japanese bubble, which also progressed from one insanity level to the next in the belief that the 'powers-that-be' would be impotent to stop it. of course, what happens is that the imbalances simply continue to grow...and the amount of credit needed to keep things going grows actually exponentially. this is where one day a natural limit will be reached...right now, the current account deficit is set to continue it's path of rampant growth while the system is flooded with dollars. at some point this will prove to be unsustainable. i have no doubt that the unwinding of the asset bubble will be a panic type affair, and no-one will be able to stop it...i actually think that the Fed-heads for all their brave new era talk lately are scared to death of this, which explains why they continued priming the pump as soon as the dollar looked to have regained some stability. imo we are witnessing the final blow-off move in the NAZ...however, there is no telling how far it might go or how long it might last. i guess it'll keep going until the first not-so-brave soul blinks... on a scale of 1:10: i'd say real estate 3 or 4, stocks 15....