Reflections

The Twenty Year Stock Bubble Is Still Inflated

Very relevant comments. It would also be useful to draw PE,PE/G and Inverse PE minus 5 yr US treasury yield(that gives us risk premium) long term chart over 90 years marked with major world events like WW1,Depression,WW2,Bre... wood,US delinking from Gold std,Breakup of USSR to see where we are currently.


On Nov 20 09:44 AM David Van Knapp wrote:

> Great article, full of facts. Good job. Reasonable interpretations
> of those facts too.
>
> But not the only reasonable interpretations, as the comments already
> posted show. Here are just a few of the questions that went through
> my mind as I read the article and the comments:
> (1) Has the red line (the all-time average) been correctly calculated?
> If I were just eyeballing that chart, I would have put the average
> at around 75-80%, not 60%.
> (2) What is the meaning of the ratio of market capitalization to
> GDP? I understand the mathematical relationship, but what does it
> mean? Should we expect a consistent relationship between the two
> over 100 years, given all the things that change: wars, peace, interest
> rates, the completion of the change from an agrarian society to an
> industrial one, and then from an industrial economy to a service
> economy, technological changes, the rise in proportion of consumer
> spending as a percentage of GDP, etc?
> (3) How would the graph change if it were in real rather than nominal
> terms?
> (4) What if you looked at the graph like a stock chart and simply
> drew a trendline rather than a flat historical average line? It would
> point up and to the right. What does that mean? Would you expect
> reversion to the trend line rather than reversion to the flat-average
> line?
> (5) The ratio has been above 100% since about 1990, or about 20 years.
> Has everybody been totally irrational for 20 years? I know, the market
> can remain irrational longer than you can remain solvent (ha ha),
> but really, have we all been nuts for this long? Or perhaps have
> productivity gains and other factors led to a situation where we
> ought to expect that market capitalization should be higher than
> GDP, that it makes sense?
>
> Again, congratulations on a thought-provoking article based on facts
> and reasonable analysis. I always give those a cheer when I see them
> on SA, because lots of articles here don't have one or both qualitites.

Global Coordinated Rate Cut: Nice Try, but the Party Is Over

You are bang on target.

Why Friday Came Early

We need to put 1 big banner for blind and corrupt politicians and their backroom pals to see..NO BAILOUT. Let the Greedy pay for their sins.

Why Friday Came Early

You are bang on target.What kind of policymaking is this?They have had over 6 months to prepare a policy,while all they have done is taken adhoc measures.This is not a hurricane or another Act of God taht noone could see.Why were the washington policymakes not prepared? the whole idea is to throw 700 billions to bail out their old pals.

Bondholders Are Unjustified Big Winners in Treasury Plan - Hussman

You are bang on target.it is the bondholders who nee to take hit and not taxpayers.privatise the profits and socialise the losses.great free enterprise being advocated by current and ex employees of Goldman..Hank paulson included.

Goldman and Morgan as Bank Holding Companies

It is surprising how a Great nation can so quickly forget great lessons of the past.Glass Steagal Act of 1933 was made drawing from the learnings of Great depression and served the nation reasonably well for long,though amended later.Now,with this fed decision,we will have heady mixture of Invt and Commercial banks which caused the financial disaster in 1930s and again in 2008.Wonder where the Congress oversight is?Or is it that everyone is being bulldozed over with horror stories being drawn by Treasury?