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

To: Ilaine who wrote (13883)	1/25/2002 12:03:16 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 74559

<How many people actually quit their jobs to become day traders? How many people actually took out home equity money to invest in the stock market?> CB, The indisputable part is the wealth effect. People respond to that in as many ways as there are people. I know a few people who gave up work on the strength of their new wealth. I have no idea how many day traders there were. There was a dramatic increase in margin debt, much of which would have been in addition to mortgages [either existing or increased]. I don't think the argument is based on assumptions. It's what people actually do. When they think they are wealthy, they spend more money [depleting their assets] which is economic action. Producers produce more stuff to satisfy the buyer. Production goes up. That's a boom. When they get a dose of the poor effect, they pull their heads in and start consolidating. It surprises me how economists seem to be guessing about how things work and what the effects of things are. In the engineering and scientific world, guesswork isn't how things are done. Cause and effect are established and quantified. A dose of acid causes a certain consequence depending on the other known factors. I suppose economists argue that humans are not predictable, so they are stuck with guessing in a world of infinite economic variables. But effects from herd investment in bad ideas, speculative stock markets are not in doubt and not really assumptions. Bad ideas don't get a return on investment. So the dot.com world wasn't going to return investors profits to justify the huge prices that were paid for shares at the peaks. Which meant the crunch was inevitable and macroeconomic effects also certain [because the bad ideas attracted such vast amounts of investment]. Mq