>On Behalf Of Rakesh Bhandari
>There is
> a shortage in supply of stocks due to buy backs (though NASDAQ will be
> flooded by insiders cashing in--is that what happened today?), gains tend
> to be wanted in the form of capital appreciation instead of dividends for
> tax purposes, and strengthened American relative position means that US
> companies are best positioned to fall softest as global average profit
> rate falls.
But that assumes that investments have to focus on industrial stocks; investments could easily move towards bonds, real estate and a host of other areas -- which is what is bound to happen if the stock market takes a dive.
If expectations of long-term profits are not justified, stock prices eventually have to come down to earth, since over the long term, a passbook account will pay better if companies cannot deliver the profits to shareholders. Ponzi schemes cannot survive forever, with new buyers paying off old sellers. Whether that dive has to happen this year or even in the next couple of years is an open question, but with the Net companies running out of cash and the first ones heading into bankruptcy court, this year does seem like a decent candidate for the bears to takeover.
-- Nathan newman