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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Shane M who wrote (1166)	3/22/1999 9:54:00 PM
From: Brendan W	Respond to of 4691

Here's a link to the "Dow 36000" article (for WSJ interactive edition subscribers): interactive.wsj.com@2.cgi?/text/wsjie/data/SB921625560294437272.djm

To: Shane M who wrote (1166)	3/23/1999 10:02:00 AM
From: Freedom Fighter	Respond to of 4691

>The article argues for precisely the "fundamental reduction in the cost of equity capital, the risk premium on stocks relative to bonds and federal funds" that Dr. Tobin mentions as a possibility in his response to you.<< The one intuitive problem I have with this idea is that even if it is true it imples that the return on equity/capital must decline also. Why should the risk premium on passive investment (stocks) decline and the risk premium on active investment (capital) expand as it has? This suggests that earnings growth may be very minimal or non existent ovet the next decade as these relationships assert themselves. It's tough for me to consider stocks prices fair under this scenario either. Wayne Crimi