Hello Doug!
My uneducated guess is, yeah sure, that bubble's going to pop and good, but I can't imagine when.
When I look at your chart, the 90s line nestles right up against the 20s line like <insert favorite sexual metaphor here> so it appears you would not get nearly as good a fit if, say, you moved the 90s line a couple years to the left. But since the two lines are scaled to match at the Y-axis, as long as the nine-years increase were about equal, any two more-or-less exponential curves would fit together equally well. If you graph years vs. log(S&P), which kind of makes sense for growth, you get something that is a lot more like a straight line, so you could slide the 90s trend line right or left several years without spoiling the fit; this diminishes the predictive aspect of the chart.
Dumb question time: I see an inflection point in the 90s trend line around early 1995. Did they change some tax laws in early 1995, or could it be related to increased Wall Street confidence due to the Republican take-over of Congress, or do you think it's just a coincidence?
Specifically, did the laws governing IRAs change in late 1994 or early 1995? I guess, though without any data to back up my guess, that a lot of the growth in the stock market is driven by 401K plans. Lots more people are buying stock, and the amount of stock remains roughly the same, so you'd expect the prices to go up. Of course, the total value of the stock owned by all those new stock-holders, rather than their number, is what would drive stock price inflation; even if there were, say, twice as many stock-holders in 1999 than in 1984, you wouldn't expect that inflationary effect if the new 50% of stock-holders only owned, say, 3% of the total value of stock.
Have you, or any other list readers, any figures on the distribution of the value of holdings by stock-holders, particularly as it has varied over the last couple of decades? Something like, say, in 1980, the bottom decile of stock-holders owned 1.0% of the total value of stocks, the second decile owned 1.9%...the top decile owned 42.0% - that sort of data.
Another chart which would be interesting (and useful for political exhortatory purposes) would show the distribution of stock against the distribution of incomes, like the bottom decile of incomes owns 0.02% of the total stock value, the next decile 0.04%...the top decile owns 65%, the top percentile owns 51%, that sort of thing. I saw that chart a few years back but I forget where.
Yours WDK - WKiernan at concentric.net
ps: If the graphs I attached choke your mail-list server, I could put them on a web page and resend this with links instead. -------------- next part -------------- A non-text attachment was scrubbed... Name: 90-20log.GIF Type: image/gif Size: 7043 bytes Desc: not available URL: <../attachments/19990516/47a76385/attachment.gif> -------------- next part -------------- A non-text attachment was scrubbed... Name: 90-20lin.gif Type: image/gif Size: 6837 bytes Desc: not available URL: <../attachments/19990516/47a76385/attachment-0001.gif>
