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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Dante Sinferno who wrote (38318)	12/6/1998 8:03:00 AM
From: Tommaso	Respond to of 132070

The difference (if I understand your question correctly) is simply caused by demand for ownership of stocks, not by actual cash that has gone into the market and which has been invested in productive assets. Of course, over that time there has been some compounding of actual capital, but with stocks on average (!) selling at five or six times book value, and with some having no book value at all, what has happened is that prices have been bid up. At an auction, when a piece of junk sells for $1000 because several people got excited and outbid each other, no money at all has to change hands to get the price up from $10 to $1,000. In a much slower way, that's what has happened to common stocks over the last ten years. At some point the mixture of mania and complacency will disappear and there will be a drastic revaluation.

To: Dante Sinferno who wrote (38318)	12/6/1998 11:37:00 AM
From: Knighty Tin	Respond to of 132070

Rob, Very simple. It is not cash inflow, it is markups of existing wealth. For example, if you own 1000 shares of IBM and I pay up $10 for 100 shares, you have just increased your wealth by $10,000 on paper and the market cap has expanded not just by your 1000 shares times ten bucks, but by every other share already in the market. In other words, it is the tail, new money paying too much for stocks, that is wagging the dog of base wealth already in the market. Hope that makes sense. My points on liquidity, for quite a while, have been two-part: 1. As this "new" inflow becomes embedded market cap, it will require geometric rises in liquidity to move this ever fatter base. 2. If some other investment vehicle gets hot, and it has to be one that the average investor mistakenly believes he can understand (most totally missed the move in palladium last year, for example, because they knew they didn't understand palladium and thought they understood Cendant), the redemptions will not have to be great to decrease embedded wealth even more quickly than these inflows created it. This is the small door, many people wanting to exit, thesis. The market values only hold as long as investors do not want to ever cash in. MB

To: Dante Sinferno who wrote (38318)	12/6/1998 2:54:00 PM
From: Mike M2	Read Replies (2) \| Respond to of 132070

Rob, on the demand side the inflation in values comes from the public's shift in preferences of assets right now they love common stocks so they sell reluctantly and are eager to buy so higher prices are required to entice the public to sell. In addition we have companies that opt to repurchasing their shares rather than invest that money in expanding their business- a perverse consequence of the proliferation in esops.On the supply side prevents prices from going even more insane is esop participants and insiders who are pleased to sell into this mania and new stock offerings at absurd valuations. I always thought it sounded absurd when the Wall St touts talked of a shortage of stocks - is their a shortage of paper or lawyers or investment bankers ? -g- More later Have to go ho ho ho Mike