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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (3985)	6/4/2001 1:22:59 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 33421

Hi David, I find myself largely in agreement with your analysis. I'm curious about this though: Personal saving is low in the US because of the way the accounts are computed (the saving is happening primarily in the corporate sector and increasingly so as dividends have fallen) and in an ageing society the retired will be dis-investing at a high rate relative to a younger one. When you say that savings are in the corporate sector, do you mean household savings are in the form of stocks and bonds rather than in passbook savings accounts? If so, then the $3-4 Trillion haircut that investors have suffered in the stock market since March 10, 2000 would seem to indicate to me that we truly aren't saving much at all. Regarding the dis-investing by the baby boomers, I see the stock market being largely stagnant after, say, 2006, due to this selling pressure and the fact that up and coming investors, the 20-somethings of today, simply aren't going to have the discretionary incomes to afford vast purchases of equities. No matter how Social Security and Medicare are re-jiggered, the burden on the next generation will be onerous. Ray :)

To: Moominoid who wrote (3985)	6/5/2001 3:34:41 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 33421

David, you absolutely correct that personal savings are not being properly accounted for. More Americans are bypassing traditional passbook savings and CDs by slushing their money around between equities and money markets. Once they write that check to their brokerage, that's where it stays until withdrawn to be spent. If it isn't in stocks or mutual funds, it's in that money market account drawing 5-6%, which is better, and more liquid, than most other interest bearing instruments offered by traditional banks. And that money can be readily re-deployed back into equities or bonds with the flick of a "enter" stroke on their trading accounts, or a phone call to their broker. Now the bad side of this is that when you have an equity bubble like we have seen with the Nasdaq, those who are left holding the bag in certain stocks have seen their savings effectively wiped out, perhaps for good. But they are still pumping money into those 401K's and IRAs every year, if only to let it sit in that money market. This is why I watch the dollar index so closely. Because money market accounts are used in FOREX trading, and short-term instruments, any influx in those funds from scared investors seem to distort the value of the dollar to the upside (when a weak economy would suggest a move to the downside for the USD). Also, note that despite the US markets being up today, the USD is down from recent highs: quotewatch.com I believe this represents money flowing out of MM accounts into equities and thus any real rally in the markets will require a decline in the dollar (not a crash though). Btw... there could be a number of reasons for higher real-estate prices, but one of the most sinister is this "smart-growth" policy that many communities are requiring. This limits new development within established infrastructure, forcing old buildings to be torn down to be replaced with new ones. Hawk