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To: Oeconomicus who wrote (130426)	8/22/2001 12:10:29 PM
From: craig crawford	Respond to of 164684

>> My point in the "OTOH" was simply that the case for coal seems, to some degree at least, to depend on continuing economic growth - a scenario you seem to believe highly unlikely. << well...people still need to heat and cool their homes and i don't think the economy is going to ground to such a halt that electricity use plummets. i'm not suggesting we are going back to the dark ages. i think we are going into a stagflation scenario like in the 70's. economic growth similar to japan over the last decade. fits and starts but never ending up anywhere. the only difference is i believe prices are going to rise. many people assume if the economy rebounds that stocks automatically have to rebound. i don't see why this has to be the case. the old economy may grow and the new economy may sputter along. the economy can plod along without much profit growth, and even if there is profit growth valuations are still so high that they can contract. i suppose old economy stocks can outperform tech stocks in this scenario (as we have already seen), but valuations can only stretch so far for non-tech companies. the money that is fleeing large cap names can only push old economy and small cap stocks so high before the valuations become ridiculous there as well. even though it was a total farce people could at least make an argument that tech was so revolutionary that it deserved the ridiculous multiples. they can't do that with old economy stocks. do you think old economy stocks can have pe's like yhoo and ebay did? bonds only have so much farther they can go as well. yields are near historic lows and at the rate we are going will likely be negative soon. eventually all that money is going to have to find some other home. i doubt it will stay in cash forever considering how much greenspan is watering it down, so the only other option is to park it in some other country or in some really cheap underloved asset class like.......you guessed it. commodities. so in my view you can have an economy where people still consume, but (most) stocks don't go appreciably higher. (yes, of course there are always some stocks going up at any given time). furthermore, our economy may not make any kind of stunning rebound, but commodity prices have to do with worldwide economic conditions, not just here in the u.s. asia is more important to the supply/demand relationship than the u.s. in many respects. i know it's hard for many americans to fathom, but it's possible that we become the japan of the next decade and countries in asia or europe pick up the slack in word demand. what if people give up on assets in america and pull their money out? the dollar will continue to slide and commodities are priced in u.s. dollars so it's pretty obvious that they will benefit from increased overseas demand and a flight to commodities as a safe haven to protect u.s. dollar holders from further declines. of course if the economy comes roaring back here in the u.s. i hardly doubt my commodities will be left behind. commodities were exploding in the second half of '99 and beginning of 2000 before the bubble burst. so i think i am covered under both scenarios. the only scenario i see where commodities do poorly is one where the world goes into a depression like in the 20's and 30's. i'm not ruling this out, and that's why i'm not jumping in with both feet just yet. so i see a lot of reasons commodities can do well in the coming years even in a weak economy, but i see only one scenario that can support the bloated valuations of most stocks in america. a return to pre-bubble days. not likely.