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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: edward miller who wrote (13692)	2/1/1998 11:04:00 AM
From: studdog	Read Replies (1) \| Respond to of 18056

I don't think that liquidity per se has much at all to do with the stock market rise. Over the last several years it (stock market rise) has been driven by a steady fall in interest rates and a rise in earnings. If interest rates rise or earnings fall then the market will fall, regardless if the yuppies are buying in their pension funds or not. Liquidity might influence day to day or week to week moves somewhat but over time it is earnings, the expectation of future earnings and the interest rate environment that dictates stock market valuations. Karl

To: edward miller who wrote (13692)	2/1/1998 11:05:00 AM
From: Jack Clarke	Read Replies (1) \| Respond to of 18056

Ed, >>Throw away all reasonable metrics for valuation until the boomers start pulling out big sums from the market. Comments anyone? Every bull market with stock prices rising in the face of fundamental overvaluation has had an explanation for why it was a "new era". Your explanation for the current one is as good as any. We must accept, however, that all of the previous "new eras" were eventually trashed as valuations returned to "old era" levels. Just a comment, as requested. Jack

To: edward miller who wrote (13692)	2/1/1998 12:24:00 PM
From: Bonnie Bear	Read Replies (4) \| Respond to of 18056

Ed: it's not that stocks are the investment for retirement, it's that we're given no choice. Faced with close to 50% tax on my earnings vs 0% tax plus a 30% match from my employer (who feeds the fire by buying stock for me) the 401K is the better deal even if the stock's not worth it. There's another 25% into mortgage for the average household, another 10% into insurance..for many people there's 20% payout to the banks that own their credit cards....so just the increase in employment has fueled stock purchase and profits for the financial sector. Now consider something else: my understanding is that the law was changed a few years ago that said banks no longer had to hold cash against its deposits and could invest most of that money. (sound like 1929?) The only hope the baby boomers have is that the companies start producing huge yield instead of growth so they can live off the income instead of selling the stock. Reasonable valuations: many people I know are still putting that 15% into index funds. Scary, huh? The comment Maria B said earlier this week is interesting, its that "nobody is selling". If we see a massive increase in unemployment later this year as a result of Asia-related business contractions, I think we will see the flood of money slow down. People will use their 401K money to live on when they become unemployed, I suspect we will see this.