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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (161292)	4/22/2002 1:26:52 AM
From: LLCF	Read Replies (1) \| Respond to of 436258

<<If you lived somewhere else in the world where people were averse to putting money into the market or starting businesses but instead put it in passbook savings, then that country would be considered (in the way they account for savings) as having a higher savings rate even when the return is NEGATIVE.>> If the ridiculous "investing" that took place in Japan hadn't occured [ie. they had kept MORE in cash].... everyone there wouldn't have everyone so "adverse"! <<Americans invest their savings....they borrow money to invest, so they invest other people's money in ventures to make money.>> Yes, lately.... doesn't mean it's going to work does it??? It's part of the problem if you simply pay too high: By James Grant: " A propositon [talking about the feds easy credit policy and the ramifications]: the greater the volume of credit in relation to the volume of savings, the greater the likely population of "White Elephants" [investment wise]. <<Superior returns come from engaging risk.>> This depends... believe it or not... you sound like Greenspans Mar 13th [Hawaii] speech!!! "Riskier investments yield higher returns, the chariman proposed to the sun-drenched bankers. Higher returns are necessary to help the country surmount the looming demographic challenge [boomers retiring]. Ergo, according to a strongly implied conclusion, Americans should shed their speculatvive inhibitions and climb out frother on the risk curve. That they are already fully exposed to stock-market risk-- owning the S&P 500 at near peak valuations--was an inconvenient fact not touched upon. It isn't every day a central banker calls for greater financial risk taking." Greenspan: "If savers become more risk-tolerant, financial risk premiums will decline. In response to these reduced penalties on risk, firms will be induced to adjust the mix of their endeavors toward more speculative projects-but, imporantly, presumably ones that also offer higher prospective growth rates on average, witch more often than not, translate into higher long-term average economic growth." Grant: "What is a rising PE ratio [relative to G bond yields] if not falling financial risk premium?? We are stumped. And what level of risk tolerance would the chairman prefer??? The feds own stock-market valuation model is unequivocally bearish, with the S7P earnings yield well below the yield on the 10 yr. No matter, the chairman seemed to say... "more speculative projects" he asserted are "presumably" the ones that "offer higher prospecitve growth rates on average" and "more often than not, translate into hiigher long -term average economic growth." Grant: contemplating the possible meaning of this passage, we thought of the telco bubble and the internet bubble, and a decade earlier, the coast to coast commercial real estate bubble. Such projects may or may not werve to advance the chairmans productivity agenda. By proposing a policy to elicit more of these ventures, it seems to us Greenspan is doing mothing more than what mankind has unsuccessfully been tying to do since Adam and Eve.... find a way to avoid having to go to work in the morning. No where does AG define "more speculative", "less speculative" or even "speculative", so we will try: An investment is "speculative" to the sxtent that its success dependson a future event. The more contingent on it's success on that forcase, the more speculative it is. "What is" characterizes an investment: "what's going to be" is the mark of speculation. This is not the end of the discussion of course, as a cheap speculation can be less risk-fraught than an overpriced investment: An unleased office building is, on it's face, a speculation, but a price meaningfully below the cost of construction can transform it into an investment. Price is the great leveler, as the chariman [to our knowlege] has never said. Individuals get rich by buying low and selling high. Yet the bankers in Honolulu were asked to believe society can get rich by buying higher and higher and higher. To all.... I HIGHLY RECOMMENT YOU ALL SUBSCRIBE TO GRANT's INTEREST RATE OBSERVER!!! grantspub.com DAK