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

To: Freedom Fighter who wrote (604)	8/9/1998 6:18:00 PM
From: Freedom Fighter	Respond to of 1722

U.S. Savings Rate I agree with the view expressed in Barrons this week by Gene Epstein. That is, the U.S. savings rate isn't quite as low as it appears. In my view though, that is exclusively the result of outsized taxes paid on capital gains. Under NO circumstances should capital gains from either stocks or real estate be considered as income or savings. This is true whether they are taken either directly through an asset sale or through refinancing. These gains are in no way predictable or sustainable (at least recent year returns). They may not even be justified. If 28x late business cycle earnings turns out to be the bubble that many value investors believe, there could be substantial stock losses in the future. At the very least a decade of little or no capital gains going forward is possible. That would imply that much of the consumption being done at present could be based on HOT AIR - annual capital gains levels that are not sustainable. Consumption levels would certainly go down without a continuation of the asset boom of recent years! An improved measurement to obtain the true income stream and thus savings levels of the public might be accomplished by multiplying the shares they own by the E.P.S. of the companies. (ex. 100 shrs. earning $1.50 per share = $150.00 of income) If markets value $1.50 at 15x earnings and then up it to 30x earnings, these capital gains are not income or savings. They are good investing at best and reversible at worst. Indeed, only the "outsized" (above average) capital gains tax portion should be used to adjust current savings levels. Over the long haul this measurement problem has always existed. That kind of adjustment indicates that savings aren't quite as low as they appear, but still very low! Wayne Crimi Value Investor Workshop members.aol.com