The Portent of Doom (The Collapse of the Stock Market, Part 4)
Posted Wed Mar 21 00:44:04 2001 by steveg |
(Note: this is Part IV of this week's multipart series on the collapse of the stock market and its effect on IT.)
By Steve Gilliard
Imagine a Dow at 5000 and a Nasdaq at 500.
Impossible? No more so than a Dow at 12000 and a Nasdaq at 2000. If this happened, we would be back in the 1990's. Not so bad?
Well, there would be no economic future for millions of Americans.
We have moved into the stock markets in unprecedented numbers. Between
1990 and 2000, the number of people invested in the stock market
tripled, from 16 percent to 48 percent.
In 1987, the stock market collapse affected a few investors while
the rest of the world continued. Such a crash today would wipe billions
from the investments of Americans. The shift from pension plans to
401K's means more people than ever are affected by the ups and downs of
the marketplace.
In the current downturn, bedrock companies like Intel, Microsoft,
Oracle and Dell are a fraction of their 52 week high. Few investors
really spent their money on dotcom stocks. You always have the fortune
hunters and the speculators in any market, but the difference between
that routine activity and the 1990's was who played the game. The
difference between the average investor of the 1980's boom and the
average investor of the 1990's was simple: the investors of the 1990's
had far less money. Stocks became the investment vehicle of the middle
class. Banking stalled out in the 1980's with below average inflation
interest rates.
Keep in mind the reason behind the move to the markets is a simple,
rarely heard phrase: wage stagnation. Wages stalled out in the early
1970's and have not kept pace with inflation. Which means you make less
now, even at IT salaries, than you would have in 1970. Which means as
prices go up, you need to keep pace not only with inflation, but with
the fact that your wages are not going up enough to make up the
difference. This is why stocks make for a very attractive investment.
Now, the Fools won't tell you this, nor will Henry Blodget, but
investing in stocks is risky. They cover it up with fancy language and
soothing tones, but there is a big honking difference between your bank
account and money market account. You are insured up to 100K with your
bank account. The stocks your money market accounts are based on can go
up or down at will. Bet on the wrong fund and that money can disappear
and Uncle Sam will not get it back for you. Now spread that over tens
of millions of Americans and you will be talking disaster.
The Worst Case
You wake up one morning to find out a major disaster has happened,
the North Koreans cross the 38th Parallel, Dick Cheney rushed to
emergency surgery, Alan Greenspan has a stroke, Iraq launches a
chemical attack on Israel. Any one of these could trigger a panic sale
on the exchanges. One company, like Microsoft, could trigger it as
well. If Bill Gates were to die suddenly, the company would be
crippled, not in terms of actual operations, but in mindshare.
Once you have a trigger and people get scared, really scared, a
selloff could result in a disaster of unprecedented proportions. This
isn't 1929 -- enough mechanisms are in place to stop a full-scale
crash. But if people wake up and find that Intel is at 5 and Oracle is
at 3, all hell will break loose. People's lives are in these companies.
These are not dotcoms riding an IPO tide, but the core of a new economy
based in technology. These are stable companies run by competent
executives with solid products.
If the value were to fall out of these companies, your parents may
face a retirement with a fraction of the income they expected. Which
means that there is more than a small likelihood that you and your
folks will spend their declining years together, in the same house.
Because they won't have any money to move and someone will have to keep
things up.
That's the good outcome. The bad one has your brother getting his
college money patrolling Kosovo or your sister teaching school for a
few years. Why? Because there won't be any college money, anything but
equity in the house and a bank account. All that investment for the
future stuff....gone like your virginity. And like your virginity, that
puppy isn't coming back.
Be aware that if your stock investments go, they may take decades to come back.
The only good thing is that the federal government didn't shift
Social Security into the market. If they had, the disaster would go
from losing your job to getting shot. It would be that serious and that
dangerous for the economy.
The VC Disaster
Venture Capitalism is not inherently evil. Greed always is. VC's
wanted to pump and dump an entire sector and the chain of greed went
from Sand Hill Road to Wall Street and sank companies good and bad.
Let's explain this, so that in the future, you will understand exactly what happened.
Venture Capitalists wanted to invest in companies where their
positions would allow them to make billions. They wanted to dominate
entire market sectors, as if they were being given a chance to invest
in Boeing in 1929 or Nike in 1974. They didn't care about the
fundamentals because the fundamentals didn't matter in this scenario.
Only rapid growth and market domination mattered.
Which was fine, in theory. There was only one hitch: people. People
didn't roll out broadband fast enough, the market resisted Internet
Time as a palliative for everything. Consumers never trusted Internet
shops. In short, they bet on the best case assumptions and those didn't
happen.
Instead, the worst did and they were screwed.
In the past, IPO's were designed to introduce established companies
to the stock market. The VC process rushed companies who had barely
been in operation 18 months to market to capitalize on the boom. The
danger in this was that the companies were so shaky and poorly run that
this became speculation. Who was burned in this? Small investors.
Why?
Institutions move millions of shares a minute. They play the market
for advantages. So when an IPO came out, they snapped it up, watched
the frenzy and were out in hours, maybe days. You and I could not do
that. We have to hold our IPO shares, even when they're offered to us,
which was rare at the height of the market.
At the end of the day, only one company withstood the test of time: Krispy Kreme. Which sold donuts, not technology.
One could ask why a web site should be a private company. If one
asks that question, the answer becomes clear: most shouldn't be. The
problem isn't that these were bad ideas, but untested companies which
had never made a profit nor had any clue as to what to do to make one.
Part V
Rethink the market before it ruins you: common sense rules for NetSlaves investing
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Name: Roy
Email: rho@unlv.edu
Date: Sun Mar 25 00:16:45 2001
Comment: Haha.
I like the idea that the economy could totally collapse when Bill Gates dies.
I am certain if microsoft dies we will find a way to live without the newest version of outlook express.
|
Name: MasterPo
Email:
Date: Fri Mar 23 10:41:48 2001
Comment:
Kurt - For how many years were we told by Greenspan that 5% growth was
"over heating"? And that things had to cool down for a "soft landing"?
Well when you're at only 5% and you drop 2 or 3 percent that isn't
good.
While Greenspan was so worried about INFLATION he overlooked
DEFLATION. And Bubba did care while he was out fund raising for his
800k/yr office.
|
Name: Kurt Nimmo
Email:
Date: Fri Mar 23 01:14:42 2001
Comment: http://dailynews.yahoo.com/htx/nypost/20010314/
cm/excuse_me_while_i_scrounge_up_some_crumbs_1.html
|
Name: Kurt Nimmo
Email:
Date: Fri Mar 23 01:08:22 2001
Comment: If the following isn't serious stuff, I don't know what is:
"In December, department store mainstay Montgomery Ward announced that it was shutting down all 250 of its stores.
That announcement was followed by news that Sears would be closing 89 stores, laying off 2,400 people.
Then Federated Department Stores Inc. said it would close its Sterns stores - including two in the New York area.
Add in 26,000 jobs lost at DaimlerChrysler, plus 4,000 at Xerox and
thousands more from such major companies as Lucent Technologies, Sara
Lee, J.C. Penney, Worldcom and a host of media and communications
firms. And so on.
Meanwhile, newspapers across the country are experiencing
double-digit percentage drops in classified-ad job listings. In other
words, hiring is grinding to a halt.
This is what happens as the economy slows from 5 percent growth to
last quarter's 1 percent. Federal Reserve Board chief Alan Greenspan
estimates that we're now at zero growth - and that's a conservative
guess.
As the Fed noted as it cut interest rates on Tuesday, factories are suddenly cutting production as consumer demand drops.
This trend is likely to continue if capital tightens as stocks - the market value of businesses - plummet.
All of which, in turn, will further hurt Americans - 50 percent of
whom are now invested in the stock market - and weaken the economy.
This is serious stuff: In the past 10 days, the Dow lost more than
1,300 points. Last week was its biggest one-week point loss ever. This
week, it's not much better." |
Name: Billy
Email: bill@buffnet.net
Date: Thu Mar 22 21:27:31 2001
Comment:
A very concise assessment. Dead on: which is why I keep my meager stash
in the bank, lousy interest and all that. Also, I use a credit union
which has free, interest bearing checking and a no fee credit card with
low interest. All this helps offset the shortcomings of banking. |
Name: Ertischek
Email:
Date: Thu Mar 22 14:02:26 2001
Comment: Bob:
Actually, Bob, its not a depression until the economists and
analysts lose THEIR jobs..how come we never hear: Enormous corp
announced the layoff of 2400 ecomists today. Wall Street cheered the
news. |
Name: MasterPo
Email:
Date: Thu Mar 22 13:31:18 2001
Comment:
Steve - You can't stop someone from making a bad or foolish decision.
That's life. Hurts a lot more when your financial life is at stake but
people do have the freedom to be stupid or foolish.
I agree completely that no one on CNN, CNBC etc ever raised a
single red flag about all these IPO dot-coms. NTL, you can lead the
horse to the water but if he drinks it that's up to him. Buyer beware.
|
Name: MasterPo
Email:
Date: Thu Mar 22 13:28:13 2001
Comment: A recession is when your best friend looses his/her job A depression is when you loose yours! -)
Seriously, the best you can get out of CNN, CNBC etc. are names of
companys that YOU should then research on your own. Anyone who takes
them at face value for investment advise is like those who listen to
messages in chat rooms or on AOL.
Unfortuntately these shows don't have to deal with the same rules
as chat rooms and forums, and the do try to pass themselves off as
being "inside information" for the masses.
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Name: bob
Email: pale_13@usa.net
Date: Thu Mar 22 11:45:19 2001
Comment: I heard about this "credit card company protection act," which is really what it is.
BOHICA. Bend over, here it comes again.
I can't beleive we keep electing fools that show such blatent
disregard for their constituents. Anyone read Tom Clancy? What we need
now is a really angry 747 pilot... |
Name: Tom Croft
Email: t.w.croft@att.net
Date: Thu Mar 22 10:19:47 2001
Comment:
More seriously, no it may not be the great depression, hopefully. But
it's not the 1991 recession, either. It's more like 1980-82, which in
some parts of the country was more like 1978-1985. Major unemployment
in both urban and rural areas of the country, and in some of the towns
I worked in in the redwoods of N. Cal, every other house was up for
sale. Our nation's economic policy was to have these loggers pack up
the campers and move to Tulsa or elsewhere to look for work. So, they
would be in a Tulsa RV camp, next to steelworkers from Pittsburgh and
autoworkers from Detroit. And then the oil field jobs went bust, so
these guys would come back to Eureka, so at least they would be with
friends and family in their unemployment. Thru the 80s and 90s,
millions of workers were "rationalized". And don't believe the crap
about multiple careers. When workers lose skilled jobs, they generally
lose wages and benefits when they come back up for air in the next job.
And so on, part of the cycle of falling wages for the last 25 years.
(and then the companies complain they can't find skilled
workers...they're working 2 jobs to get by or working as greeters at
Wall Mart.) Many of the smartest of the tech workers will do fine after
this crash. But there will be millions (the current four week jobless
claims are up to 360,000 per week on average, highest in 3 years, and
climbing) who will take longer to find a job, and when they do, the job
will be worth less. That's the math. And for all the bright engineers
or HTML whatevers, there's thousands more of service workers,
secretaries, cleaning people, middle manager grunts, bookkeepers,
technicians and others in corporations who are getting axed. They will
suffer foreclosures, marriage break ups, bad credit, dreams foregone.
And when they wake up to this new reality, they will find that the new
bankruptcy law will treat them as credit card cheats, and the new
welfare laws will allow them to fall through the safety net when the
unemployment benefits run out. There's not even a decent
re-employment/employment services system left to provide real
counseling and training. And these changes in our civil society were
the work of both parties sold to corporate lobbies. And when the
corporados finally get around to re-building capacity, watch how many
plants they move to Sri Lanka, instead of the "high cost, bad business
climate" US (as in Seattle and Boeing, which will move new plants to
Mexico and China). And there will still be new frontier cowboys who
think this is all fine, because they're smarter than the rest of us
(even though they lost 60% of their fake wealth), and all this will
really not affect them. Welcome to the new world order. |
Name: Tom Croft
Email: t.w.croft@att.net
Date: Thu Mar 22 09:43:42 2001
Comment:
As Nancy Walls, the faux tv reporter on the Daily Show, reported to Jon
Stewart from the floor of Wall Street, "well Jon, those in the know
here say that the market, which is at about 2000, will probably stay at
that level for awhile...give or take 2000." |
Name: realitycheck
Email:
Date: Thu Mar 22 07:07:36 2001
Comment:
Steve, I think we're mostly in agreement. I too am appalled at the way
all these "financial news" programs can pass themselves off as
competent, independent financial analysts when they are little more
than infomercials for certain stocks. In fact any of the "financial
advisors" you are likely to go to for personal advice are salesmen
first and advisors second. There is no question that people were (and
are still being) deceived about the market on a massive scale. But I
would also say that people who beleived all the hype must share some of
the blame, because all the warning signs were out there if they cared
to look. |
Name: anticool.com
Email: anticool@anticool.com
Date: Thu Mar 22 04:58:36 2001
Comment:
Well...If it is time to start playing the blame game, don't start by
blaming the VC's (duh, in it to make a buck) or the Investment bankers
and the IPO's(same thing) "It's a zero sum game pal, somebody wins,
somebody loses." GG. 1987.
Don't blame the gov or Greenspan... "Now your not naive enough to believe we actually live in a democracy.." GG. 1987.
Start by blaming the added mass of doofus MBA's that increased the
inertia of too many baloni business models and flawed executive
strategies ....blame the folks who contributed to little to the bottom
line and to much to the abstract dilbertesque "little red book"
e-conomy slogans below that sub'd for tried and true business acumen:
"extending revolutionary niches"
"envisioneering B2B channels"
"morphing extensible applications"
"transitioning transparent eyeballs"
"syndicating 24/7 paradigms"
"generating frictionless communities"
"delivering scalable deliverables"
"extending sexy interfaces" and my class and every dot com CEO's favorite ..the ubiquitous..
"leveraging our Technology"
What started the 90's Boom was cheap money and every company on the
planet buying and promulgating IT products firm wide that finally
became relatively affordable and usable enough that almost every
employee got a new box on their desk whether they needed it or not.
What is killing the boom (or at least knocking it out right now) is
slightly more expensive money and the fact that most business managers
have no idea how to successfully utilize all the technology they have
bought. They are now catching a chagrined clue that most of their
championed Gee-whiz gizmos don't easily integrate into the catchy
little slogans, recently espoused, equally and forcefully to owner,
stakeholder, and associate alike. They are now stuck with "stuff" and
"staff" that does not increase their profitability by the orders of
magnitude that were promised and they are shaken. So the slogans are
now replaced by chuckleheaded "save thine own ass" notions of "austere
returns to basic core business values" which is just a blinding glimpse
of the obvious realization that, maybe, not every employee needs a P4,
G4, or T-3 connection to do their job.... and thus capital expenditure
slows and stops, hiring freezes, layoffs begins, etc.etc... one big
Disney economic sing along .."It'ssss the [cycle] of liffffeeee..."
Some of you may actually remember a time when there wasn't a lawyer
on every corner. When having JD was almost ALWAYS a big deal unlike now
when it is almost always a sign that someone prolonged there collegiate
adolescence.
Just as the over-breeding law schools in the 80's turned out herds
of incompetent lawyers (mostly practicing personal injury now) that
have completely crapped up the legal system ..So too the B-schools of
the 90's have given the business world herds of incompetent managers
with only the occasional leader who actually knows of what they speak,
write or do.
Tom Peters wrote "the pursuit of high ethical standards might be
well served now by the elimination of many business schools today. The
implicit thrust of their MBA programs is that great systems and great
techniques win out over great people." Amen.
An MBA used to, more often than not (GW aside :)mean something ...a
manager who had "portfolio to accompany resume" now, more often than
not, it is just another ticket punched ... it will take a few seasons
to cull out these herds of management script kiddies in the business
decision loops, until then we can only hope that most of them are
tagged as having managerial hoof'n'mouth disease and humanely
destroyed...
Dow 5000. you bet. I imagine the first Governmental WPA program for MBA's will be building power plants in Cali.
And I say ..shit, man, sign me up.0
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Name: bob
Email: pale_13@usa.net
Date: Wed Mar 21 22:51:58 2001
Comment:
MBAPro-- I don't think Bush can be anything but frank. God bless him,
he doesn't strike me as being articulate enough to lie in a
non-scripted conversation.
In a way, I find that refreshing after eight years of Slick Willie. His President Clinton was pretty rotten, too... :)
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Name: MBAPro
Email:
Date: Wed Mar 21 21:42:33 2001
Comment:
MasterPo- being frank is fine. I don't think Bush has been frank once
in his entire public life, and there are professional economists who I
respect and trust much more than Dubya or Dick Cheney who give a much
different assesment of the economy, but that's a matter of opinion.
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Name: DJMZ
Email: DJMuzzzE@graffiti.net
Date: Wed Mar 21 17:42:31 2001
Comment: I don't think it would be such a catastrophe if my sister were to teach school for a few years.
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Name: steve gilliard
Email: sgilliard@yahoo.com
Date: Wed Mar 21 17:33:41 2001
Comment:
Look, if you're a neophyte to the market and someone says you can
double your investment, you're not an idiot for investing. The odds are
that the risks would have been buried deep inside the 10K or 10Q.
It's not like stock analysis is reliable. So let's get away from
blaming mom and dad for trusting CNBC and let's blame CNBC for selling
this noxious fairy tale. You would have to spend hours to learn how to
know what Amazon's real potential is. Read the glossies would not have
helped. Stock analysis would not have helped. |
Name: MasterPo
Email:
Date: Wed Mar 21 17:04:18 2001
Comment:
Reality - 1) If working stiffs had ALL their life savings in the
market and in tech stocks they deserved what they got. 2) If you think
the stock market is gambling you don't understand markets. Maybe for
day traders but not for true investors.
|
Name: realitycheck
Email:
Date: Wed Mar 21 16:12:33 2001
Comment:
My point was that although I am sure that there are many working stiffs
who lost their life savings, and many more IT workers who accepted
stock options in lieu of cold hard cash or benefits, the fact of the
matter is that the stock market is primarily a playground for the very
rich and powerful. It is also a form of gambling, and people who pumped
all their money into tech stocks believing they couldn't lose, well,
they have no one to blame but themselves. There were and are many safer
forms of investment. There are also more important things in life than
money.
So sure, we can blame etrade.com, CNN, MSNBC and those insufferable
Motley Tools on PBS -- and a plague on all there houses in fact -- but
it's actually pretty hard to feel sorry for people who lost all their
money on tech stocks.
|
Name: MasterPo
Email:
Date: Wed Mar 21 16:10:14 2001
Comment:
MBAPro - Funny. You come down on Bush for talking gloomy yet most
people want the politicians (and especially the office of the
President) to be frank with the public. What if it really is so bad and
Bush is being open and honest? Sounds like you're saying you want them
to be honest when times are good and tell you something soothing when
things go bad.
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Name: steve gilliard
Email: sgilliard@netslaves.com
Date: Wed Mar 21 14:00:43 2001
Comment: Bob,
I'm not suggesting that there is going to be a depression. It's
called the Worst Case for a reason. It is the worst that can happen.
Not what I think WILL happen.
What I believe is that the economy is still fundamentally strong
because of the lack of bodies for jobs. IT still needs millions more
skilled workers. The question is where. There is still billions in
unspent VC capital. If you had a decent business plan which had a lock
on profits, you would be funded to the eyeballs.
What is going on is that we are going back to pre-boom levels. What
makes it shaky is that Bush is clearly a puppet for his masters in big
oil and big business.
And the hoof-mouth/BSE scare will lower prices and raise fish
prices. The Food Network did a special on fish last week and it is the
most expensive food product around for many reasons.
Anything to reduce the levels of meat consumption in the US is a
good thing for dietary reasons. Maybe a potato blight and a pizza
weevil will come along as well.
reality check,
Those numbers are misleading in one way: it doesn't matter how many
shares mom and dad have in Intel when it hits 5 bucks. It matters how
much of their net worth is in Intel when it does. When your little
brother is humping the Kosovo hills because the college money is gone,
you'll see the point.
It isn't who owns the stocks as much how much of their personal
wealth is in the market in any form. Billions are in mutual funds,
which means they own only one stock, but have an interest in between
10-20 stocks. Which makes their fall have a domino effect on your
personal wealth. |
Name: MBAPro
Email:
Date: Wed Mar 21 13:26:26 2001
Comment:
While it's true Bush can't be blamed entirely for a downturn which
started before he took office, he and his cohort have certainly not
helped matters over the last several months with their attempts to
spread economic panic in order to sell their tax plan. Negative
comments by top officials can have a significant impact on markets
during times of uncertainty, and can lead to self-fulfilling
prophesies. Bush seems to think he can play the economy like a violin,
pushing it down a little now, getting his tax cut passed, and then
claiming credit for the recovery. If his little plan goes wrong I think
he will justly receive a significant amount of blame for the recession.
|
Name: ralf
Email: ooxelith@hotmail.com
Date: Wed Mar 21 13:15:39 2001
Comment:
Bob, here?s the good news! Since the outbreak of hoof and mouth and the
first cases of BSE on the continent prices for beef and pork have
dramatically dropped. Burger King and McDonalds hamburger sales are
good for only 30% of revenue. (Actually the mixed salads offered in
McD?s Piazza de Spagna outlet in Rome are of extremly good
price/quality. Add to that the airco freshness on a hot Roman summerday
and impeccably clean toilets and you will feel just perfect.)
It?s fish products which have become prohibitively exspensive. But
knowing how Norwegian salmon is focked, you would probably abstain from
it anyway and want to throw it on a protected dump for contaminated
chemical waste materials. I remember you talking about going on a
fishing trip? Well, if the US gets infected by your special allied
friends products from Britain, you?ll be enjoying the best of all
possible consumer worlds. Dunque, niente da temere nel prossimo futuro
e buon appetito! |
Name: Eric
Email:
Date: Wed Mar 21 12:34:23 2001
Comment:
Funny thing is that up through last November, www.whitehouse.gov
claimed full credit for the economy (the web pages are archived in the
national archives and are available online if you want to go back and
check). Since the official data shows an economic decline begining in
April or May 2000(depending on which index you use), presumably the
White House (of the time) has full responsbility for the economic
decline.
A lot of people are blaming Bush for the downturn that started in
May of 2000. So we must ask, what specifically did Clinton do that
created the market hype of 1999 and 2000? (Answer: nothing in
particular). What exactly has Bush done in the few weeks he's been in
office to have started an economic downturn that began in May of 2000?
(Answer: nothing in particular).
The politicians do not have as much impact on the economy as they
like to believe they do. They are quick to claim credit when things go
right (whether they have anything to do with it at all), and quick to
assign blame to others when things go bad. Yet rarely do they have a
whole lot of impact. Economists have pointed out that fiscal policy
impacts on the economy are largely random. They are random because of
the time lags involved. First, we look backwards to spot a problem. In
this case, we look back over the past year and spot a problem. Then we
debate the issue for 6 to 12 months and pass legislation that takes
effect the following year. So, 2 or 3 years after the problem actually
began, the fiscal policy takes effect - by which time the economy has
long sense gone on to other things and the impact is largely random.
Hence, monetary policies remain the preferred approach to addressing
economic issues because of how quickly the Fed can respond (consider
the last 3 fed interest rate drops).
Finally, the primary reason we've had low unemployment since 1993
has nothing to do with politicians at all. FACT: there are about 6
million FEWER 20 to 29 year olds from roughly 1993 to today, than there
were throughout the entire 1980s (Source: www.census.gov). That's
because of the impact of the "post-baby boom" effect. 18% fewer new
workers seeking jobs leads to low unemployment. Historically, people in
their mid-30s to 50s have the lowest unemployment rates (e.g. 2% to
3%). If they lose their job, they are more likely to take the first
available job since they have kids to feed and mortgages to pay. If you
are 24 and get layed off, you don't take the first job opportunity but
continue looking for a "better one". You stay at home with Mom and Dad,
if needed. You don't yet have a huge mortgage bill. You also have fewer
networking connections than the average 40 year old. Hence, you stay
unemployed-job-seeking longer and 20-29 year olds end up with,
historically, very high unemployment rates. With so fewer 20-20 year
olds, we've had low unemployment and it has nothing to do with
politicians who continue to claim full credit.
None of this is a mystery. Its documented in most intro economics
texts. The low unemployment rate of the 1990s was predicted in "World
Population", by Stockwell and Groat, published in 1984, based solely on
the demographic changes.
Politicians are lying when they claim credit for unemployment and
the economy. Voters are duped into believing that politicians are in
control. Don't let yourself be duped again. Ignore the political spin
masters who are quick to blame "the other party".
Will the market "crash"? Go look at the Dow 30 and the NASDAQ stock
charts for the past 5 or more years. The past two years were way off
scale and unjustified. The markets appear to be reverting back to a
level roughly in line with historical growth rates. A Dow 5000 and a
Nasdaq 500 are way below the historical growth rate curve. We are,
however, likely to see much pain as the Dow may very well drop to the
6,000 to 8,000 range, and the NASDAQ to 1500. Those are realistc
numbers based on historical valuation models and historical growth
rates. The "New economy" nonsense has only served to prove that old
economy rules still prevail.
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Name: bob
Email: pale_13@usa.net
Date: Wed Mar 21 11:59:38 2001
Comment:
Call me an optimist or a fool, but I just don't see us dropping in the
sequel of the Great Depression, and I think people are being overly
dramatic. The world is not ending. Quite frankly, I'm more worried
about hoof and mouth and mad cow, simply becuase it might make Burger
King drive up the price of the Whopper.
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Name:
Email:
Date: Wed Mar 21 11:50:32 2001
Comment: YAY
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Name: realitycheck
Email:
Date: Wed Mar 21 11:48:48 2001
Comment:
Let's not forget that in North America 90% of all stock is owned by 10%
of the population. 50% of all stock is owned by 1% of the population.
Yes, there has been a deliberate effort by governments to underfund
public pension funds and to offer tax breaks for people to gamble away
their life savings in effect. But it's hard to escape the suspicion
that what we're really talking about here is fools and their money.
More than two years ago there was a very famous Doonesbury cartoon
about the "ideal" Internet IPO, whose only product was its stock. It's
not like the warning signs weren't there a long time ago. I don't think
it's a major tragedy that the rich and stupid are suddenly poorer and
(hopefully) smarter. I also find it hard to feel sorry for all those
60,000-a-year Front Page newbies that now have to find real jobs at
salaries more in line with their skills (or lack thereof). |
Name: Bill Volk
Email: bvolk@youworkit.com
Date: Wed Mar 21 11:20:35 2001
Comment:
The Stock Market is really "bennie babies" .... the stocks are only
worth what people think they are. For many years a P/E ratio of 8 was
not all that uncommon. The press drove the Internet Frenzy, and as long
as everyone believed in Tinker Bell ... she lived.
It can turn the other way ... you can have companies meet their
projections, be profitable, and still have their stock prices drove
down.
That's all it takes for a major crash ... an erosion of any faith in stocks (or even banks).
I feel a greater closeness with my Grandfather ... who lost a ton
of money in the crash of '29 ... but was smart enough to sock enough
cash away to live out the Depression in high style. Even got a Rolls
from one of the folks who owed him money.
Cash right now is nice to have.
|
Name: beammeup
Email: no@intelligentlife.net
Date: Wed Mar 21 10:40:03 2001
Comment:
masterpro, I don't think that Greenspan erased it, if I'm correct he
tried to convince people that monkeying with interest rates would have
a far greater effect than a lot of people seem to have thought.
Interest rates are a very course adjustment. I'm not vindicating
Greenspan, I just wonder if monetary policy isn't better suited to
maintaining an illusion of scarcity in a sea of abundance. . .
|
Name: MasterPo
Email:
Date: Wed Mar 21 09:51:29 2001
Comment:
Like it or not, legal or not, Greenspan has been the defacto
"Minister of the Economy" for at least the last 4 years. He's done more
to help (and hurt) the economy and the markets than anything that has
come out of Washington in recent years (save for the major tax
increases in Clinton's first 2 years of his first term).
I know the Fed is supposed to be free from political pressures but
Greenspan knew full well how many people had their futures (and
retirements) riding on the market. If he was going to say things and
take actions to bring down the market so much so fast I would hope (not
likely I know) the President would have had a meeting with him asking
him to show proof that his (Greenspan's) points are valid AND to remind
him of the effects on the people.
Like it or not the market rise of the last 10 years has done MUCH
more to raise people into higher economic levels than ANYTHING to come
out of Washington in the same time period. And with the stroke of a pen
and few words Greenspan has more or less erased it.
Don't get me wrong here. I am NOT vilifying Greenspan! Just saying
that his opnion, not accountable or answerable to anyone, has a
tyranical overtone (yes that is a harsh word).
|
Name: beammeup
Email: no@intelligentlife.net
Date: Wed Mar 21 09:44:16 2001
Comment:
Somewhere along the line, some perceptive individuals realized that
offering easy credit is cheaper than increasing salaries or wages. The
debt also functions as a type of currency in its own right?
Easy credit also obligates people, who now must turn the mill wheel
to meet their obligations. Absolutely wonderful for crowd control
purposes. Indentured servitude. . . we can build roads, corporate
headquarters, develop real estate. . . the possibilities are endless. .
.
Easy credit is not cheap. Those people are making a mint.
Tying the (perception?) of economic well being to the market. . . a
flawed idea. . . we buy, the market goes up. . . we don't buy, the
market goes down? we have no money, we don't buy. . . we have credit,
we buy even though we have no money. . . it sounds like the credit card
companies are making a bad investment. . . what happens to people who
make bad investments, they LOSE money. Yet, they are lobbying,
lobbying, lobbying. . .
The only problem is. . . we still have to deal with scarcity.
Monetary policy is the mechanism for substantiating the myth of
scarcity. Is it real or an illusion?
My questions for the astute financial minds of the world are. . .
1. Does money as a medium for exchange realize the idea that those who work eat?
2. Does it do so in any direct proportion to the degree which people labor?
3. Ought it to?
4. Does tying an abstract currency to a scarce resource create, in effect, two currencies?
5. Are there enough resources to feed, house and clothe the world's population?
6. Ought we to?
7. Why or why not?
|
Name: Dave
Email:
Date: Wed Mar 21 09:39:45 2001
Comment: Steve writes: "Everyone is afraid that the man will say something stupid"
I was driving home from work and on the radio listened to an
impromptu answer by Junior to a simple question about the economy.
Apart from the stumbling and lurching around words which while painful
to hear is a change from the normally smooth and rehearsed dreck, it
struck me that Bush wasn't saying ANYthing of substance. Nothing. He
wasn't even trying. It was as if he had memorized a list of cliches
(e.g., "I have confidence in this economy...and...and we also need...")
and was stringing them together into a 10 second dump.
Say what you will, Florida or no Florida, an awful lot of Americans
voted for this putz. The grownups send him off selling his tax cut on
the hustings while someone is running the government. He couldn't be
more open and obvious about who his real (natural
resource/energy/defense/finance) constituents are: even his best
rhetoric fails the figleaf test.
Time to go back to Sinclair Lewis' "It Can't Happen Here".....
Oh, speaking of the economy, Hillary is spending an ungodly sum for
her "hometown" office in Manhattan (not radically less than Bill was
prepared to spend on his space), and in the interests of economic
development has invested a whopping 11k this year to rent space to
service us Western NY constituents she cares oh-so-much about. It's
good to see her identify her real constituency. Of course, our local
furniture factories have closed due to the economic situation, so
perhaps she's staying close to the source. Will Hillary relocate to
Harlem? I doubt it, Leona C. would never want to entertain her
Hollywood donors surrounded by 'the little people."
|
Name: steve gilliard
Email: sgilliard@netslaves.com
Date: Wed Mar 21 08:06:53 2001
Comment: Kahuna,
The thing which is clear is that few people have confidence in
Bush. That is tremendously scary on its own. Everyone is afraid that
the man will say something stupid and Cheney will go to the great oil
field in the sky, leaving our last emperor without a tutor. |
Name: Digital Kahuna
Email:
Date: Wed Mar 21 03:40:12 2001
Comment:
Careful. You're starting to sound like one of those "How to Make
Millions Off the Great Crash of 1998... I Mean, 2001!" authors. Solid
companies are solid companies, and stock market herd instinct has very
little impact on that.
Investors who panic (sometimes even from what they read on a Web
site saying the "End is Nigh!" or something like that... I'm sure you
can think of something similar) and dump their shares in a solid
company at a low price deserve to lose their money. Sorry, but you have
to look at the long term. If you don't (and many don't just like many
thought the dot-junkbond bubble would never burst) you're going to lose
your cash. Hope you had a plan B. Not Social Security.
Just the same, the general trend of the stock market has been two
years up for every year down. Do your homework, keep your eyes open,
and don't invest anything you can't do without (that's what goes in
INSURED savings accounts and certificates of deposit.)
As far as Social Security: well, you'll probably never see a red
cent from Social Security. (Ponzi schemes are like that.) And even if
you do, you would get a better return from buying T-Bills. |
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