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

To: Alohal who wrote (51080)	3/10/1999 7:33:00 AM
From: Mama Bear	Read Replies (1) \| Respond to of 132070

"Some who saw it happening 1,2,3,4,5, years ago and bought into something like the Prudent Bear are probably a pretty miserable bunch right now. Alohal, don't you think that as a security or the market becomes more and more overpriced the probability of a significant correction increases, not decreases? Someone who shorted Presstek at 100 on the way to 200 may have been laughed at as a fool when PRST was trading in the high 100s. But if a stock or a market is fundamentally overvalued, isn't the fool the one who buys into the market, not the person that avoids it? Just because there is a greater fool out there does not make someone who pays too much prudent in their purchases. It is a fact that stock prices are increasing faster than earnings, and have been for a number of years. Some folks claim that there is a new paradigm in valuing securities, others note that the more things change, the more they stay the same. So, despite the fact that people have used the new paradigm argument near the top of every mania in the past and been proven wrong, the bulls hang their hat on the supposition that it's somehow different this time. We have also seen the baby boomers cause 3 significant bubbles as their life cycle went on. In the mid-late 70s/early 80s when they were starting to accumulate consumer goods they caused inflation. After they finished, inflation diminished. In the mid-late 80s, it was time for them to buy houses. Real estate prices ran up. I recall vividly when everyone and his brother was projecting 30%+ per year of increasing RE prices ad infinitum. But when the boomers were sated, RE declined and then flattened out. Now the boomers are buying stocks, and folks are again predicting gains forever. I think the most logical conclusion is that the boomers will finish buying at some point and the market will go flat for a number of years at a minimum. What happens when the boomers want to cash out to retire? The following generation (is that Gen X?)is less numerous than the boomers by about 40%. Will there be enough demand to keep the prices up? Also, I'm not sure how wise it is to key your happiness to your market gains. It would be an awful feeling if they evaporate. Barb