Nathan Newman wrote:
>Okay, so we have higher rates of exploitation and a growing stock market.
>Except for your fussing over the trend in the last couple of years, I am not
>sure where what you are saying contradicts the general argument that the
>ever expanding stock market valuations are based on that history plus
>expectations of increasing profits in the future.
"Fussing" isn't the right word to describe what's happened in the
U.S. stock market. The last several years have seen one of the great
speculative manias of all time. There's just no other way to describe
it. The first stage of the bull market, roughly the 1980s, was a
fairly rational reaction to the rise in profitability, the fall in
interest rates, and the political triumph of capital. There was a
pause during the Bush years, then a resumption just after the Gulf
War. That's when the bull market crossed the line from rational
exuberance to irrational exuberance - sometime around 1995 or 1996.
>The one caveat seems to be your focus on interest rates,
I'm hardly alone in this. Interest rates are one of the most powerful
influences on the stock markets around.
> which of course
>will not be significantly falling in the future. Warren Buffet wrote an
>interesting article a couple of months ago on why the bottoming out of
>interest rates essentially means the end of the bull market. Do you
>subscribe to that view?
Yup.
Doug
