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

To: Mike M2 who wrote (42880)	1/11/1999 9:40:00 AM
From: Peter Singleton	Read Replies (1) \| Respond to of 132070

Mike, Nice article. It dovetails well with the 1929 et al stuff at www.globalfindata.com that you linked to the thread the other day. This was written in the fall of 1997, before the mini-crash in October. It lays out the extreme valuation levels reached at that time, and points out the below-trend market returns achieved in subsequent years each time such a level of over-valuation was reached. A couple of things strike me. One, the market reached historic high valuations many months ago. Greenspan spoke of "irrational exuberance" [carefully chosen words, btw] near the end of 1996, with the Dow in the mid-6000s. Since then, we've seen - earnings growth first slowing sharply, and now in decline - dramatically worsening global financial conditions, yet relative values are up almost 50% since then. hmmmm ... what did Greenspan say earlier this year, that stock prices are discounting the hereafter? That's a cute phrase, but what does that mean? Taking it at face value, it would seem that equity prices at late summer, early fall values already incorporated many, many years of expected [hoped for?] growth ... So what's happened since then? After a sharp dip, a parabolic ride up, with astonishingly thin breadth. Back to my point about a 100 year flood. This has the feel of a capital market event that might happen only once every several hundred years, like the South Sea Bubble in 1720. Peter