Al Capital

The Triumphant Return of Volatility

Herb, thanks for the thoughtful and well written post. I believe that most of us will agree that you have touched upon some of the key issues facing us.

Note that the traditional methods of looking at wage inflation may no longer work. For example, despite the demographic reality of the working population, which strongly suggests an inflationary tendency, outsourcing and the presence of a large foreign population have kept inflationary force at a minimum. Basically, modeling wage pressures is more complex than it was in the 1950s and 1960s.

However, healthcare costs of our population is a huge economic and social burden, and effects all segments of the population. That is where some new and large efficiencies are needed, and we are all scanning, back and forth, on the IPO frontier for some signs of a solution, hopefully before politicians are tempted to fabricate one.

The "cheapness" of equities in comparison to risk free returns is however a very uneven condition, and thus while your statement is certainly true for groups of equities, it is not a general rule.