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

To: IQBAL LATIF who wrote (30119)	12/16/1999 10:06:00 PM
From: MeDroogies	Respond to of 50167

Excellent article... I agree 100%. However, I think that one thing that is missed in this article is the effect of liquidity. If there is alot of available cash (or, alternatively, alot of velocity), then it has to go somewhere. It can buy products and bid up prices/profits/stock value or it can buy stocks, which is then recycled back to purchase other investments, then recycled again to buy products...etc. The thing is, in the 1st scenario, prices are the first thing effected and by the time the cash reaches the stock market, inflation plays a deleterious role in values. In the second, values are driven up first and inflation last. Of course - actually knowing what comes first is a chicken/egg argument. You never really can tell the direction money is flowing. What IS evident, however, is that there IS alot of free cash available as people empty their savings accounts to invest in the market, which (combined with technological advancements enhancing productivity) keeps prices moderated (through decreased demand/increased productivity), which makes managing businesses much easier. This is a truly unique situation, which has been seen only rarely - but never as well understood. It is a virtuous cycle. Can it be sustained? Who knows? I doubt it. I don't think that business/stock cycles have been abolished. However, who is willing to call "the top"? Actually, nobody and everybody. There will be 3 people (yup, that's all - LOL) who will get it right. The rest of us will be near the top - or will still be convinced the bull has legs and take a bath. My personal point of view is that there is one more leg to this bull. It isn't a strong one, and we'll have a sharp correction before it kicks in....but I really believe there is still too much optimism out there. I have never seen more people who are salivating for a correction. Even the last one didn't have this many people sitting on the sidelines waiting for it...........so it's going to be interesting. If the next correction is truly bloody - will they have the guts to step back in? I think they will. The internet has a few more "paradigms" to play out before boredom sets in.