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To: JRI who wrote (92182)	1/28/1999 12:51:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 176387

Relative is the key word, and in my book the "relative" must relate to risk-free rates of return. If, what you are arguing is that the stock market is being driven by huge inflows of cash via various retirement accounts, what will be the consequence of the inevitable recession? [I am not predicting a specific recession, but I am saying that a recession is inevitable.] If the market is driven by cash flows into the market, then we will suffer a double whammy. In the past, the prospects of a recession drove the market down in anticipation of the fact. The materialization of the fact did not have nearly as much of an impact as the anticipation of the fact. This is what many believe when they say that the market is a discounting mechanism. But if your scenario is correct, as people lose their jobs the cash flows will reverse as people will need to rely on their investments as a source of livelihood. Cash will be drawn out of the market not only during the recession, but also likely during the recovery phase. There is one final issue to consider. Traditional sectors of Americas economy, the smockstack industries and the brick and mortar retailers are showing very modest growth. Yet the wealth effect exerted by the market is extreme, and Americans are saving little and spending a lot relying on the feeling of wealth extended by rallying markets. What happens if the market starts to contract in anticipation of a recession which might not materialize? Will consumer spending suddenly dry up as a result of the market contraction, and thus be the cause of a recession? I don't mean to be an alarmist, but the rate of increase in certain segments of the market are beginning to frighten me. I was not frightened by October '87, or October '97. TTFN, CTC