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Pastimes : I AM A MINDLESS ZOMBIE -- Ignore unavailable to you. Want to Upgrade?

To: EL KABONG!!! who wrote (147)	9/11/2002 8:25:56 PM
From: Maurice Winn	Respond to of 258

Thanks for the Fleckenstein review Kerry. One little point is the hedonics argument, which Bill flicked over, thinking of it as a minor issue. Uncle Al's argument is that yes, the bubble, which he identified way back, along with many of us [in the cyberspace mania particularly, but the telecosmic part of it became obvious too], could have been stopped. But the bubble was just a small part of the total world's economy and it wasn't at all clear just how much was bubble and how much actual value. As Uncle Al said, raising margin requirements and interest rates and cutting money supply increases would stifle the bubble. But it would crush a lot more besides. A bit like nuking the whole middle east to get Osama. A cursory glance at the different markets shows that across the world and among the Nasdaq, Dow and S&P 500 there was NOT the same bubble shape. It was particularly the USA Biotelecosmictechdot.com Incorporated zone where the bubble mania was manifest. Brokers were not allowing margin on those stocks or limiting them severely, especially for concentrated positions. Still they came and still the prices rose. Interest rates were high. Still they came. It really is nigh on impossible to stop a mob of Mindless Zombies on the rampage. Raising interest rates and cutting money supply growth [which was actually quite moderate] at a time when inflation was near zero, despite the burgeoning economy, would have been very foolish. It would have created deflationary forces and set the stage for a deflationary implosion. We have had an amazingly controlled market clearing post bubble. It has been a thing of wonder. It is all I had hoped, way back about 5 years when I was trying to figure out what the heck would happen when the bubble was eventually sorted out and people were taught that money doesn't grow on trees [unless one is Uncle Al, who in fact has got a money tree]. So far, the script has gone just as I thought, except that the Nasdaq has dropped a lot more than I thought. I hadn't looked at the structure of the telecosmictechdot.com companies so didn't know just how much debt they had and just how tenous their foundations were. The cyberspace companies were going to crash dramatically but I had no idea just how far [I'd have guessed nearer the cost of replacement, which was vastly lower than the market capitalisations they had]. It is also taking longer to tidy up than I thought. I'd have thought after a couple of years the process would have been complete, and it is for many companies, especially in the cyberspace industries and nearly so in the telecosm industries, but the biggies like MSFT, Intel, Citigroup, Morgan and General Electric seem still to be in an unwinding process that could continue for another 3 years as people finally adjust and accept. Uncle Al seems to be surprised how long it's taking to tidy up too - they have kept having to push back their recovery date. I'm ecstatic that there wasn't a deflationary implosion. We really should be grateful. So much time has gone by that I really can't see it happening. I bet Uncle Al and co were sweating at times. His job, people seem to forget, is to run a money supply and pluck as many feathers as the golden goose can provide without undue honking and panic. They are running a money business and profit matters, even though it's a publicly-owned enterprise. So they print as much as the market will bear and keep interest rates as high as the market will bear and inflation is the guideline. They have enjoyed enormous profits because of the huge productivity miracle of Biotelecosmictechdot.com. They could print and print and still no excessive inflation [even allowing for the hedonics stuff being a bit self-serving]. The mean hourly rate of 6 billion humans hasn't increased in US$ over the past decade much [not that I have accurate figures - I'm guessing]. The hourly rate of humans is a better guide to inflation than prices of consumer goods and services in Main Street USA. Bill Fleckenstein was strong on vitriole and abusive language but weak on reasoning. He seemed to me like a mystic. I haven't read much of his stuff and from that example, I'm not inclined to. Back in 1996, when Bill was screaming for tighter money, there wasn't any inflation to speak of. So tighten up? Better to keep on printing and enjoying the spending of the freshly printed dosh on umpty $billion of stuff produced by China, Japan, Korea etc. The latest herd idea is the coming Property Bubble Crash. Well, I doubt that it's coming as surely as Bill and co seem to think. Perhaps a 10% drop and a long flat period. But more likely a US$ drop of 20%, which would rebalance a lot of stuff very nicely. Sure, a $300,000 house in Escondido seems overpriced to me, but that can be corrected by making the US$ more like a NZ$. But, maybe the USA really is as robust as I think it might be and they'll just sit there with a high dollar, high priced houses, high salaries etc, just as Japan has done for decades. The rest of us will go on funding developments there because it's the best thing we can do with our money. Robert Mugabe isn't encouraging investment there. Brazil is dodgy at best. China is likely to filch it from foreigners. Japan has got all the money they need and getting more each day. New Zealand managers milk the shareholders more than the cows. Europe gives it all to the bureaucrats. Looks like I'd better stick with QUALCOMM. etc... Mqurice