Bearded One;
This article from this morning's Bloomberg seems to refute much of what was said at the seminar you attended:
Top Financial News
Fri, 10 Mar 2000, 12:00pm EST
Boom in U.S. Stocks Expected to Last, Survey of
Wealthy Investors Shows
By Michael McKee
U.S. Economy: Investors Expect Stock Boom to Last, Poll
Shows
(The following is based on results of a poll conducted
for
Bloomberg News.)
Washington, March 10 (Bloomberg) -- The U.S. stock
market,
helped by the record economic expansion, will overcome
higher
interest rates and rally for at least another year,
wealthy
investors say in a new survey.
Ninety percent of this elite level of active
investors --
defined as those with annual incomes of $250,000 or more
and
$150,000 or more in stocks -- also plan to increase
their stock
holdings in the coming months or hold onto what they
already have,
according to a poll conducted by Penn, Schoen and
Berland
Associates for Bloomberg News.
``In terms of the economy, it's the best I've ever seen,
for
the longest I've ever seen,' said Allan Meyers, who
oversees $3.5
billion of equity assets as chief equity officer with
Lyon Street
Asset Management, the investment division owned by Grand
Rapids,
Michigan-based Old Kent Financial Corp.
This kind of investor optimism could make it harder for
Federal Reserve officials to slow an economy they fear
may be
overheating. Fed Chairman Alan Greenspan told Congress
last month
that strong consumer demand, aided by rising stock
prices, could
lead to inflation-generating shortages of goods and
services.
Three-quarters of the wealthy active investors surveyed
in
the nationwide Bloomberg News poll last month said they
expect the
bull market to last another year or two -- and more than
one out
of three expect a longer run for stocks. That optimism
comes even
as 84 percent predict interest rates will rise in the
coming 12
months, and 52 percent say they are ``worried' about
higher
borrowing costs, the poll found.
600 Investors Surveyed
``People have made so much money,' said Robert
Klemkosky,
professor of finance with the University of Indiana.
``We've had
corrections every year, and we haven't had a bear
market. It's
always paid to jump in and buy stocks.'
The survey of 600 investors was conducted between Jan.
29 and
Feb. 16 and has a margin of error of plus or minus 4
percentage
points. The investors surveyed are overwhelmingly white,
91
percent, and well-educated, with 81 percent having
attended
college or graduate school. Forty-three percent are
between 50
years old and 64 years old, with 35 percent between 35
years old
and 49 years old.
For the most part they are managers, with 52 percent
describing their occupation as management or
professional. Fewer
than 1 percent considered themselves ``blue collar,'
and 21
percent said they were retired.
A majority of the wealthy -- 53 percent -- said they are
registered as Republicans, 21 percent as Democrats and
10 percent
said they are independents. Eleven percent listed no
political
affiliation.
More than 93 percent of the investors have a net worth
of
over $500,000, and 76 percent are worth more than $1
million. Much
of that is invested in stocks. Half said they keep 75
percent or
more of their retirement assets in stocks, and 50
percent of their
non-retirement assets in the stock market.
Some Fear a Crash
While the poll was being conducted, the Fed's
policy-setting
Open Market Committee increased the overnight bank
lending rate by
a quarter percentage point to 5.75 percent on Feb. 2.
The Fed has
raised the rate a full point in four moves since June.
Not all of those polled were optimistic. One in four
said
they thought a ``severe correction or crash' is
imminent.
The Standard & Poor's Index of 500 stocks has returned
20
percent or better in each of the past five years, and
while the
poll participants expect market gains to slow, they
aren't
forecasting much of a slowdown. Almost half of the
investors
surveyed said stock prices will reach that level of
growth this
year.
A belief that that economic expansion, now in its 108th
month, is not in danger of being derailed underpins the
faith of
the wealthy in stock markets. Ninety-three percent said
the state
of the economy is good to excellent, and 92 percent
saying they
are optimistic about the economy over the coming year.
U.S. gross domestic product grew at a 6.9 percent annual
pace
in the fourth quarter of 1999, and shows few signs of
slowing so
far this year.
Stocks Still Have Value
The more money investors have, the more likely they are
to
think stocks are fairly priced, the poll suggests. Among
those who
said they earn more than $500,000 a year -- about 25
percent of
the sample -- 76 percent thought stocks were fairly
priced or
undervalued, and would continue to climb.
American stock markets will provide the highest return
over
the next year, followed by international stocks,
according to the
investors surveyed. They weren't enamored of fixed
income
securities. Just 3 percent chose Treasury bonds, and 4
percent
picked municipal bonds as the investment alternative
with the
potential for the best returns this year.
Technology stocks represent the best investment over the
next
five years, 40 percent of the wealthy investors said,
followed by
telecommunications, chosen by 23 percent, and
pharmaceuticals,
chosen by 14 percent. Two of three of the active
investors have
invested in Internet stocks.
The wealthy investors predict the Nasdaq market -- with
its
concentration of software, computer and Internet
companies -- are
the most likely to post gains in 2000. Sixty-five
percent
predicted the Nasdaq would rise, with an average gain of
19
percent.
Tech Stock Questions
While a little more than a quarter thought tech stocks
would
increase in price this year, 69 percent of those polled
said
stocks of technology companies are overvalued. And 90
percent
predicted a correction -- usually defined as a drop of
10 percent
or more -- this year. Over the next year, 39 percent
said the
technology sector wouldn't gain ground, while 34 percent
said tech
stocks would fall.
So far this year, the Nasdaq Composite Index has risen
24
percent -- closing above 5000 for the first time
yesterday --
after an 86 percent increase last year. In contrast, the
Dow Jones
Industrial Average has lost 13 percent and the S&P 500
is down 5
percent.
There's also room in the investors' scenario for the old
economy -- though shares of industrial companies, such
as those in
the Dow, have fallen in recent months.
At least 64 percent thought the Dow, which includes
General
Electric Co., General Motors Corp., Hewlett-Packard Co.
and 27
other large U.S. companies, would rise this year. The
average gain
was estimated to be 12.4 percent. The S&P 500 index also
will do
well, the investors predicted, with 60 percent
forecasting it to
rise this year, by an average of 11.6 percent.
Inflation Outlook
If anything does go wrong, accelerating inflation will
probably be the cause, survey respondents said. Rising
prices, and
the increase in interest rates that might accompany
them, were the
two biggest problems facing the U.S. economy in the year
ahead,
the wealthy Americans said. Inflation was the concern of
47
percent of those participating in the survey, with 57
percent
expecting prices to rise this year.
The consumer price index rose 2.7 percent last year,
after
increasing 1.6 percent in 1998 and 1.7 percent in 1997.
Of those expecting higher prices, 40 percent predicted
the
inflation rate would rise to 3 percent this year, while
27 percent
thought it would increase to 4 percent and 19 percent
expect it to
reach 5 percent.
Even as investors expect inflation to accelerate, a
smaller
percentage of them than the population at large favors
an increase
in the minimum wage from the current $5.15 an hour.
Almost two
thirds of the investors surveyed -- 64 percent --
favored an
increase, while 32 percent were opposed.
Gallup Poll
The last time the Gallup Poll surveyed Americans on the
subject of raising the minimum wage to $6.15 an hour, in
April
1999, 81 percent favored the change and 18 percent were
opposed.
That survey had a margin of error of plus or minus 3
percent,
Gallup said.
Yesterday, the U.S. House of Representatives approved by
a
282-143 vote a Democratic plan to raise the minimum wage
by $1 an
hour over two years, a measure that will be paired with
a $123
billion, 10-year package of tax breaks for business that
was
adopted hours earlier. Approval came after 78 of the
House's 222
Republicans -- many of them from pro-union districts --
bucked
their party's leaders to back the measure. Republican
leaders
favored a three-year phase-in of the $1 increase to make
it more
palatable to business.
President Bill Clinton yesterday renewed his threat to
veto
the measure if it included the tax cuts. |
