From: Robert J. Bradbury (bradbury@www.aeiveos.com)
Date: Thu Dec 23 1999 - 09:53:53 MST
On Thu, 23 Dec 1999, Robin Hanson wrote:
>
> The new economy could well be stable and strong over a long term, but that
> doesn't mean current hitech stock prices are reasonable. The stock market
> could crash, and the economy could hit a recession or worse for a while, even
> though the new economy continues fundamentally to get more efficient, etc.
>
Robin, I tend to agree with the problem of hyperinflated stock prices
but am wondering about two things:
(a) how much of this is due to the fact that the baby boomers are in
their pre-retirement "saving" years and you have all those IRAs
and 401Ks and that money *has* to go someplace?
(b) If the Fed thinks there is a bubble (in the stock market) and
wants to take it down slowly, would one way to do this be to
ratchet down the allowed stock margins? You could do something like
a decrease of 1%/month on the allowed margin borrowing values
and slowly decrease excessive risk taking. As things stand
now, the market increases strongly encourage you to margin
to the hilt. (Or are the margin requirements controlled by
law or the SEC and the Fed can't influence them?)
Robert
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