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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (53332)	9/28/2001 12:23:19 PM
From: Sam Citron	Read Replies (1) \| Respond to of 70976

Tice is talking his position. No question about it. However, I believe he makes some points that are worthwhile to consider for all investors. (1) Markets do not necessarily go straight up, even over relatively long periods of time. Over 104 years of Dow Jones market history, excluding dividends, all the return was earned in three secular bull markets: 1921 to 1929, 1948 to 1966 and 1982 to 1999. The other 58 years generated a negative return. Had you invested in 1929, it took you 24 years to recoup your initial investment It is the statement in boldabove that I found most surprising. I would never have imagined it were true. Is he saying that the market was down in aggregate over this entire 58 year period or it was down in each of these years? I will need to go back to my historical charts. (2) This is not just a normal business cycle but a "bubble aftermath", and history suggests that aggressive rate cutting by central bank authorities does not necessarily produce the desired results at such times. I can't refute this statement. We all know what has happened in Japan since 1990. Many dismiss it as a special case due to peculiarities and inflexibility in Japanese economic and financial system. Our memories may be a bit more vague about the US depression. We learned in Ec 10 that Keynesian fiscal policy measures (gov't spending to get people back to work) were effective. I am murky about the role of the Fed in the thirties. korpios.org suggests that the Fed did not do enough from 1930 to 1932 to increase liquidity. If so, it undercuts Tice's argument that such measures are ineffective after a bubble. (3) Perhaps the last major point of interest to me is his idea that credit growth caused the boom and that it is going to cause an even bigger hangover. Tice is very concerned about the decline of personal savings rates in America. In recent years many people argued that these "savings" didn't accurately measure peoples accumulated wealth in the stock market. Now it seems that much of this wealth has dissolved. I do not suggest we take Tice or any other "guru's" word for it. But it is worthwhile to consider their views in the overall mix of information. Sam