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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (80482)	5/9/2000 10:15:00 AM
From: Freedom Fighter	Respond to of 132070

Don, >>So I think we could make the case that our macrostability has markedly improved, and that for this reason, equities aren't as risky as they used to be."..."<< The fundamental flaw in this argument is that it assumes that you can discount stocks at a lower interest rate (producing higher prices) because of supposedly lower risks, but that somehow American business will contimue to generate the same high return on capital on the underlying businesses. That doesn't make sense. If the cost of capital becomes lower (higher stock prices) relative to the return on capital (active business investment) it will encourage more active investment and lower active returns thus counteracting the positive influence of lower risk. Wayne