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

To: TobagoJack who wrote (6024)	7/19/2001 5:04:46 AM
From: Maurice Winn	Respond to of 74559

federalreserve.gov My idol's testimony to Congress there. Thank you Jay for your considered advice and warning. I am nervously watchful [a longtime fan club member of 'only the paranoid survive' and 'sometimes the paranoid are right - they really are after you']. I agree with you and Alan Green$pan that the pre-tech.wreck and pre-dot.bomb share prices were irrationally exuberant. But the few stocks I watch and the general tenor of the markets lead me to think that valuations are sort of reasonable. Sure, they might be a bit high, but they might be too low. The Dow with 4% returns in a rapidly growing world economy [present glitch notwithstanding] is fair enough in my book = not cheap but not dear either. Oil is dropping more in price. Trickling away ... it will continue. I agree that financial laws are immutable, like gold. But P:E = 10 is not a financial law although many think it is. In the long run, earnings have to pay back the purchase price of the company and something like 4% per year compounded. Yes, bankruptcies rise, mortgagors bite the dust, telcos go bust, but that's just life in the fast lane - the numbers are well under control [meaning manageable = markets can clear the carnage quickly enough that the system isn't collapsing]. <... and they keep on not saving, until they realize they need to fund their own retirement, and when they do, the third leg of the economy will be kicked out from under the system via consumption collapse, triggering deflation.> This is a puzzle. Yes, hordes of baby boomers [and a lot of others] have not saved anything. How will they live when they are 70? I think they will work! The useless and impecunious will eke out a quiet existence, perhaps in some charitable institution [probably still state-funded, but at a low level]. I doubt that their problems will cause an economic problem. I think their problems will be sociological; there could be some fairly harsh difficulties they face, such as no money for medical treatments which others have access to. My guess is that taxpayers and voters will say, 'tough titty mate - you should have looked ahead and worked, saved and invested [successfully]'. True, <It is not necessary for the world to end in order to make a mess of things.> Some say that we are talking pandemonium ['coming financial collapse' means more than a significant decline]. Yes, the US$ will probably decline and I have got some bets on that [especially for the past year - I am getting impatient]. Mqurice

To: TobagoJack who wrote (6024)	7/19/2001 10:44:24 AM
From: carranza2	Read Replies (3) \| Respond to of 74559

Home refinancing traditionally (pre 4th quarter 2000) was accompanied by credit card debt reduction due to debt consolidation, until the 4th quarter, when both grew. For the Q1 2001, home refinancing was accompanied by cash withdraw from home equity, even as credit card debt grew. People are spending their houses now. It's an economically rational thing to do. Interest rates on home equity loans are substantially lower than those on credit cards. The interest, unlike that charged on credit cards, is tax deductible. The figures to look at, should your thesis be correct, would be those showing foreclosure rates on homes with more than one mortgage. Don't know where to look for those, but have not heard any reports of problems in that area. With home ownership in America turning over every seven years or so, home equity is simply another asset to be rationally managed like any other. Increased rates of home equity are largely due to a healthy real estate market. If there is a generalized loss of value in family homes, putting consumers in the hole, the kind of problems you see may happen, but it's certainly not happening yet. Given the generalized trend of increased valuations for family homes, it is unlikely to happen. Hey, I forgot, I'm on the Doom and Gloom board!