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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Jay Mowery who wrote (3)	2/28/1998 3:27:00 AM
From: Berney	Read Replies (1) \| Respond to of 1722

Jay, as usual, you always ask incredible questions. As I remember, the last federal reserve numbers I saw indicated that stock ownership by individuals was declining and represented only about 25% of investments. This site is interesting and posted by Tomasso on the BK thread: ici.org The net is that for the month of Jan, only about 25% of net inflows into mutual funds went into stocks. This 25% figure seems to come up again. It seems to me that the folks that control the money, by and large, don't have a large amount of it invested in stocks. I see two reasons for this: 1) I call them the Depression Children, and 2) about the time they would have started the savings phase of their lives, the 73-74 bear market happened. For many in the 70+ age group, buying a bond, rather than a CD, is an aggressive investment. The amazing thing that has happened is that they have been changing all the rules. For folks of even modest means, they are not consuming their investments in retirement and are adding to it fairly dramatically. Over the next decade or so, this money is going to be moving to the hands of the baby-boomers. Now then, are the baby-boomers going to be content to invest in CD's and bonds. I don't think so! Since we live in close proximity, I think you would have to admit that, simply by considering the number of schools being built, population growth is being caused by both ends of the age spectrum. The bigger issue, I believe, is that the older one becomes, generally, the less toys one needs to acquire to find contentment. Thus, more money goes into investments. Judging where its going before it's already going somewhere else will be of great benefit in the future. Hope this helps! Berney

To: Jay Mowery who wrote (3)	2/28/1998 11:20:00 AM
From: porcupine --''''>	Respond to of 1722

Jay: (Population growth) The bulk of population growth in the economically developed world, including the U.S., seems to be from increasing life expectancy and immigration, rather than the reproductive rate of their indigenous populations. (Investment assets controlled by Seniors) About a year ago, the financial press was kicking a figure around. Their spin was: "Look at all the investment assets Boomers will inherit (as their parents pass on to a better place)!" I have a vague recollection that the figure they were using was somewhere in the neighborhood of $8 trillion. (Are labor force dropouts "employed" managing their own investments?) People who live off of their investments do drop out of the unemployment numbers since labor market "dropouts" are not counted as actively looking for work. However, looking at the doughnut instead of the hole, the employment rate (the percentage of the adult population that is in the labor force, has risen to record levels for peacetime. The point being made by the Fed and the Bears is that (whatever the dropouts are doing) there aren't enough of them left to keep wages from rising to an extent that increases inflation and/or decreases profits -- either of which would make the Market too high at current levels. (I thought that that hour had arrived when the Fed raised interest rates 1/4% last March. So, I sold my stock in my Southwest Securities, which has since skyrocketed --'''':< ) Contrary to popular opinion, it seems that the labor force dropouts are not middle managers who were downsized out of a career. It seems that their numbers increase the lower their education level is. Therefore, the bulk of them are unlikely to be living off their investments. (The labor force has grown because a greater number of women have entered the labor force than the number of men who have left.) However, you have raised a very interesting possibility: that higher education dropouts are actually "employed" managing their own investments. What do you feel your ideas suggest for whether or not the Market's price level is too high?