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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: MeDroogies who wrote (2805)	4/5/2001 10:15:01 AM
From: Cogito Ergo Sum	Read Replies (1) \| Respond to of 74559

Hi MeDroogies, A few generalizations that requires qualification at the micro level? 'Well, I would not agree that the recent bubble was based on the extension of credit.' A few months ago I went to my bank to get a line of credit for 'emergency use'. I asked for 30K. Everything was fine except that the representative INSISTED that based on my financial position I should take 120K !!!. Now while that was very flattering I guess it was her rationale that flabbergasted me. 1- 'You can INVEST it in mutual funds or stocks.' and deduct the interest, that's what I do (DOH!) 2- You are in much better financial shape than the majority of people that I see come in for a credit line. (SCARY) Also each RRSP season in Canada, (the time leading up to making qualifying tax deductible contributions to retirement plans for the current tax year) people who have waited to the last minute as is their wont, borrow to make their contributions. These 'contributions' are invariably placed in some banks's 'Mutual Fund' de jour. Combine that with the fact that a few years back Canada changed the tax legislation to allow for 'catch up' on unused contributions (ergo deductions). After a few years some people suddenly had 30, 40, 50K of contribution room available with the accompanying deduction. The financial planners and banks were promoting borrow to make that contribution... borrow at prime !!! Very enticing to take on a little debt, get a huge tax refund, and double your money in the market to boot. So imagine all the lucky souls who borrowed 40K at prime and put it into a Tech fund in time for the 1999 taxation year :0) 'Still, Kudlow isn't wrong. Speculation is necessary for the liquidity of markets and fluidity of transfers. Therefore, there is technically no such thing as a speculative bubble.' If a thousand people buy a 'to the moon penny' and are left holding the bag. Well, too bad, and that's not a bubble, just a few stupid greedy suckers. However, when 'investing' in stocks with ridiculous valuations becomes so commonplace that creating bagholders out of the 'investors' affects the general economy... sir you have a speculative bubble. regards Kastel PS: The BOTTOM is in when the SI spell checker recognizes bagholder as a word LOL.

To: MeDroogies who wrote (2805)	4/5/2001 10:30:53 AM
From: tradermike_1999	Read Replies (1) \| Respond to of 74559

By the way, there is a portion of Manias that I DID use. One thing that was clear throughout the book, is that GOOD COMPANIES will survive, and always do well EVEN AFTER the bubble bursts. That is why I have focussed my investments on AOL, GE and ORCL. Solid companies, solid positions in their industries. Would Warren Buffett buy these companies now?

To: MeDroogies who wrote (2805)	4/5/2001 10:50:59 AM
From: tradermike_1999	Read Replies (1) \| Respond to of 74559

LINUX was particularly funny because it had NO SHOT at ever getting the returns MSFT did due to its open structure. It couldn't create a monopoly in the form of MSFT. Yet people wanted to believe it could. Still, Kudlow isn't wrong. Speculation is necessary for the liquidity of markets and fluidity of transfers. Therefore, there is technically no such thing as a speculative bubble. It is possible to point to one and describe it after the fact, but there are few technical means of determining one while you are in it, and there are even fewer to explain it after the fact. Kudlow is nothing but a political hack. He is not a real economist. Everything he states or claims comes in support of his political ideology. What is that? He is basically a free market capitalist and social darwinist out of the Ayn Rand mold. He believes that the best society is one in which the market dominates and the government has as little role as possible. He claims that the market is efficienct and any problems are a result of the government. Since the market is efficient it makes no mistakes and therefore it can never be overvalued. The stock market crash was a result of the government's interfernce(Greenspan). If Greenspan hadn't interfered with the market it would still be going up. This is all nonsense. You might agree with his political ideology - that is fine - but almost everything he utters about the economy or the stock market is garbage. This is the guy that claimed that the internet stocks were immune to interest rate hikes and that the "new economy" had suspended the business cycle. Anyone who claims things like this is not an economist. He is no different than the Marxists in the Soviet Union who would put out propoganda tracks.