From: Max More (max@maxmore.com)
Date: Thu Dec 30 1999 - 12:30:26 MST
At 09:25 AM 12/30/99 -0600, Eliezer wrote:
>John Clark wrote:
> >
> > Eliezer S. Yudkowsky <sentience@pobox.com> Wrote:
> >
> > > Speaking personally, I've been expecting a stock market crash any day
> > > now since 1994. I still do.
> >
> > Why?
>
>Because I don't care what Greenspan says: This year's 80% rise in the
>Nasdaq index was not caused by an 80% improvement in productivity.
>Stocks are ludicrously overvalued and everyone knows it.
I'm puzzled by this. What does Greenspan have to do with this? He has never
claimed that the rise in Nasdaq is justified by productivity gains.
Although he's a partial convert to the "New Economy" view, he's also been
trying to talk the stock market down for years. (Remember "irrational
exuberance"?)
Also, you seem to think that stock prices must closely track productivity
gains. The stock market has averages gains of about 11% annually for the
last fifty years, but productivity has never grown at that pace. Doesn't
that tell you that you're missing something?
Perhaps Nasdaq is due for a correction. You've been wrong for five years
now, but if you keep predicting a crash, you have a decent chance of
eventually being right... On the other hand, Nasdaq is home to many
companies growing earnings at a high rate. Prices are high right now
because investors, given the strength of the economy, are looking beyond
2000 and pricing based on expected 2001 earnings. Risky, but not crazy.
Some stocks will justify their current prices, others will not. I'm betting
that you will be wrong again this year, though I don't rule out a
short-lived correction (such as the one in 1998 that some of us rode out or
profited from).
Whether current prices are sustainable depends on much more than
productivity gains. Other factors include the level and direction of
interest rates, profit growth, demographic trends (more money entering the
market from baby boomers), and so on. If you're making your predictions
based simply on productivity gains, you might want to learn more about how
the stock market works. At least (as far as I know) you are not shorting
the market. I've seen people lose huge amounts of money because they
shorted high momentum stocks that they thought were overvalued.
Onward!
Max
Max More, Ph.D.
President, Extropy Institute. www.extropy.org
CEO, MoreLogic Consulting. www.maxmore.com
max@maxmore.com or more@extropy.org
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