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To: Ilaine who wrote (144)	3/31/2001 3:43:10 PM
From: Thomas M.	Respond to of 443

He spouts the same line you read in the papers - the Great Crash in October and November 1929 destroyed $25 billion in assets. Yet, when you analyze that, it's simply not true. As we have discussed before, when you multiply the total market cap of a stock times the closing price of a stock, that doesn't tell you anything as to whether anyone made or lost money. If I buy 100 shares of XYZ for $10, go on an extended vacation to a secluded desert isle, and while I am gone the stock runs up to $100 and then plummets back to $10, I have not "lost" anything The difference is quite simple. When the market is going up, when Person A sells to Person B, the seller nets a profit, and the buyer starts making a paper profit. When it peaks, the person who sold at the peak has a profit, but the buyer now begins to show losses. In the meantime, every dollar that a stock sold for wound up in someone's pocket, and no one ever accounts for that, either. We are talking about asset prices here, and marking to market. In that case, the dollar that wound up in the seller's pocket is money he already had, in the form of the stock at that peak price. What is changing at the margin is that the buyer is losing money, at least in a mark to market sense. . At the end of 1929, shareholders were ahead of where they were at the beginning of 1929. That is irrelevant to his example. He is simply comparing the loss in wealth from the peak to the shrinkage in money supply from its peak. Tom

To: Ilaine who wrote (144)	4/1/2001 2:02:46 PM
From: Mike M2	Read Replies (2) \| Respond to of 443

CB, I am very impressed with his analysis and have been a subscriber for over 4 years. Your assessment is based upon a limited sampling of his work - I've read 650 pages of his work. His analysis is quite alarming and I'm sure many of his subscribers got out of the market too early but now we are just beginning to see the price of being too late You may not like the use of words which may inflame the emotions " mania, frenzy" but perhaps these words are appropriate as the bubble is only beginning to unwind. Dr. R was one of the first ( that I know of) to raise the issue of stock options accounting, hedonics, the impact of creating shareholder wealth at the expense of long term investment. Dr. R was the only economist that I know of who predicted the bursting of the SEA bubble before the fact. I'd bet that your opinion of him will change by year's end. We'll see . It is worth remembering that Mises and Hayek anticipated the Great Depression before that event. Mike