"Better times" cannot sustain stock prices

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Sun May 3 10:57:39 PDT 1998


Rob Schaap wrote:


> The demographically predominant baby boomers are close to
> retirement, they'd suddenly take notice, and they can't afford
> to hang in for any possible recovery in the long run. They'll
> take what they can get when the confidence goes.

I think this possibility was accounted for in The Plan. Since withdrawals from retirement accounts incur normal income tax rates, lump-sum withdrawals are discouraged. Without the ability to completely exit the market, the Market Mentality should keep them engaged, perhaps even in growth-oriented vehicles, far longer than you might imagine. In fact, with the ever-increasing reality of living longer, the threat of exiting the market too soon could cause many to never quite exit completely before death.

And there's another "new" thing: passing on unspent retirement savings to your heirs. It used to be the exclusive domain of the Haves. Now people who would normally have had little to transmit to their children upon death may actually have something.

I wonder what impact that will have ...


> But 10% will go, because Greenspan has been telling us for two
> years he's gonna push the interest rate button if he has to.
> The threat hasn't worked, so the button'll have to do the job if
> (5) is to be avoided.

Quite to the contrary, Greenspan's threat has worked like a charm. The bond market has kept interest rates where Greenspan wants them without having to push the button. Like nuclear warheads, Fed action is best avoided if coersion can take it's place.


> So my prediction is 10% correction within a couple of months, or
> crash of huge proportions when (2) and (4) bite.

We're up more than 10% this year! 10% is no correction, not anymore. An 8000 Dow was February, 7000 last May, and 6000 was November of 1996. A "50% correction" would take us back a scant year and a half.

/jordan



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