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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Casaubon who wrote (35571)	12/21/1999 12:26:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 99985

Casaubon, the question is what would happen in an '87 style meltdown in view of the extreme degree of leverage in the marketplace and the mountain of derivatives that has piled up during the 90's. i believe that the effect of these new elements in the equation are generally under-estimated. and let's not forget that demographics are but one (though admittedly important) aspect of the bubble. at the moment, people are very confident due to the strong economic and stock market performance, which has led to a negative savings rate, overconsumption and the highest household and corporate indebtedness since the depression. can a really jarring systemic shock be withstood under such circumstances? i doubt it, but then i believe that we will find out. you do not only need the boomers, you need their confidence as well. if they begin to save instead of spend the party will end a bit sooner than predicted by those who rely solely on demographics. if you think it cannot happen, look at the savings rate vs. the stock market in the '73-'74 period. all of a sudden, people became very frugal and started to save. since we are at extremes in many of the economic and market related yardsticks, even a small shift in confidence could have a very big effect. regards, hb