To: Haim R. Branisteanu who wrote (67839 ) 1/28/2001 1:27:52 PM From: Zeev Hed Read Replies (2) | Respond to Haim, that is right, and last year, $450 Billions went into our markets, and got "soaked up". We now need much higher input of liquidity then we used to need to create a move (the market was smaller). I think, however that many "pension plans" were around in the last 50 years (they did not call them 401k, but the large majority of the large companies, the bulk of the economic activity had pension plans). Actually, one can make a case that the portion of "fringe benefits" assigned today to pension plans might have actually gone down with the increase in "payroll taxes" and the higher costs of medical insurance. In the 70', Social security and Medicare, were only around 6%, now they are above 15% and on 5 times the base (it used to be on $12,500, now I think it is around $75,000). Therefore, I am not sure if the old standard of the total market capitalization to GDP will not return. The only correction I would use is that a much greater portion of the GDP is now produced by companies that are publicly trading. In past peaks, the ratio of market cap to GDP was under .84 (1929 was the highest peak since "modern times" and that was the ratio then), maybe at peaks now, we could accept something like 1.00 to 1.2, but we are still at about 1.64, and I agree with George that the bear is not over. One of the reasons for my "long term forecast" of a plurality of years in a wide trading range (6000 to 13,500 on the Dow and 1900 to 5300 on the Naz) , is the "hope", that we do not go to "traditional valuations" too fast and let GDP catch up with "stagnating stock prices.
