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

To: Petrol who wrote (13536)	1/16/2002 4:51:44 PM
From: Maurice Winn	Read Replies (2) \| Respond to of 74559

Petrol, actually, most invested dollars have made a LOT of money since 1996 and continued on through the boom to 1998 when the Dow crossed through the 8,000 mark and it is still around 10,000. The anecodotal "I know a lot of people" stuff is irrelevant. Returns on money invested at 4000 in 1994 have been excellent. As have returns on money invested in 1996 at 6000, 1998 at 8000 and 1999 at 9000. It is only in the last crunch since then that people have lost value [they haven't actually lost money until they sell, but they have less asset value]. The Nasdaq hit a low in 1996 of just under 1000 and was mostly around 1500. It's now above 2000, so there have been gains since then and those gains have held, which isn't so hot, but is still okay [it bears out the Buffet ideas of sticking with shaving, food and insurance]. If fact, MOST money invested before 1999 has made a good return on investment. Buying and selling separated those returns into bigger winners and losers, depending on when people placed bets. Focus on particular sectors [such as dot.coms and Nasdaq] has been bad news since 1997. Since Y2K's high in March, the average invested dollar in the Nasdaq has been badly beaten up so people buying then have been badly damaged. But Dow is only down 10%. Yawn. What I wonder, is what the billions of dollars sitting around are going to do. MSFT has enough to do a lot of shopping. So do many companies and many investors. They either spend it on something, invest it in shares or something, or lend it to somebody else. Lending it is not a heck of a lot of fun due to low interest rates and rapid dilution as Uncle Al prints up a storm and the risk increases that the chickens will come home to roost one day when the Q takes over from the $ and the $ becomes like a hot potato [nobody wants to hold it]. There is no law of the jungle which says that people have to get 10% on their money [by way of P:E of 10]. The "this is the official historic return on investment" isn't actually a law of physics. It's an artifact of human hopeful expectations on life, liberty, the pursuit of profit and their worry about when to stop earning and start spending - gotta get the timing right [don't want to die rich and leave it to the spendthrift government or deadbeat relatives]. There's nothing wrong with 2% return on investment across the index if that's what investors are happy to accept as their carrying risk and hopes for compounded profits over a decade or two so they can make some profit and defer spending to a time they think they'd rather do so [such as being old when they don't want to work]. I'm happy to accept 3% return [it's ahead of inflation, especially in a deflationary economy]. I want to have a cushy life when I'm 75, so I think it's best to stash it away and 3% return looks like safe stashing to me. Human desire for the products of the companies I invest in isn't going away, so it's a safe bet that while there are people, they'll be working to get money to buy the stuff I'm selling. The US$ is not so secure - it has no fundamental competitive position. People need money, but the US$ is inherently undesirable because it's owned and controlled by Americans who are of course interested in their own interests, not alien holders of US$. So they print themselves up a new supply on a very regular basis, diluting the rest of us. Yes, yes, I know the argument about companies printing shares but that's the cost of remaining in business and hiring people to produce the goods which my companies sell. USA citizens aren't my employees - they own the money and have got themselves a money tree at my expense without doing anything for it. I don't think the other 6 billion humans will fall for that game for too many decades. Maybe another one at the most. 2010 will be the end of the game. The Dow and Nasdaq are also hostage to the USA voters, but at least those companies can abandon the USA if the voters get too greedy and set up shop in China, Vietnam, Australia or Britain. Mqurice