"Better times" cannot sustain stock prices

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Sun May 3 10:21:51 PDT 1998


[ there he goes again, responding to his own posts ... ]

Jordan Hayes wrote:


> it is now the case that the largest amount of the holdings
> comes from appreciation and not savings itself; so
> it's worth looking at the total amount invested.

And this is precisely why "the savings rate" remains low in the US: the gains in the market have become a replacement for further savings. If your account went up $20k last year and you're allowed to put another $9k in, the actual savings begin to pale in comparison to what you see as the year-on-year balance. This is new; a 7% return doubles your money in a little over 11 years.

The market has doubled in a little over two years, quadrupled in the past six.

This decrease in the impact of a "low savings rate" has also left people with more disposible income, leading to further consumption gains.

/jordan



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