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------- Forwarded Message Follows -------
From: "Ed Yardeni" <yardeni@xxxxxxxxxxx>
To: <econews@xxxxxxxxxxx>
Subject: New On Dr. Ed's Economics Network
Date sent: Sun, 28 Nov 1999 18:40:50 -0500
Send reply to: econews@xxxxxxxxxxx
COMMENT: As we enter the holiday season, I am feeling more optimistic and
bullish about the future beyond the Year 2000 Problem. At the start of the
decade, I argued that the end of the Cold War between the United States
and the Soviet Union was a wildly bullish development. It marked the end
of the greatest trade barrier of all times. Markets became truly global
and much more competitive. Competition has kept a lid on prices forcing
companies to cut costs, increase productivity, and to innovate. Now, at
the end of the decade, China has agreed to join the World Trade
Organization and open its markets to free trade for the first time in
history.
SUBSCRIBERS: In the latest GLOBAL ECONOMIC ANALYSIS, I discuss my
long-term optimistic outlook in "Thanksgiving." I conclude we have nothing
to fear but greed itself...and Y2K, of course. Traditionally, the spirit
this time of the year tends to focus on giving to others. In Silicon
Valley, the spirit remains one of getting lots of stock options and a
double, triple, or a quadruple on their IPO's offering price. One wise
observer observes that Silicon Valley has outsourced compensation to Wall
Street.
In the stock market, the spirit is to get into the few stocks with soaring
prices. Institutional investors seem to agree that the tech sector is
overvalued, but they continue to buy more. They have to do so because the
individual investor is giving them more money to invest in growth stocks.
The individual investor is mostly uninterested in valuation issues. The
authors of the recently published "Dow 36000" contend that stocks are much
less risky than bonds if held for a 20-year period. They may be on to
something. If individual investors don't mind overpaying for stocks today
because they expect they will be much higher in 10 to 20 years, then
traditional valuation models may no longer be very useful for market
timing. Of course, everybody is a long-term investor in a bull market.
Let's see how committed they are to the long term in a bear market. For
more on the overvaluation of tech stocks, see my latest TOPICAL STUDY,
"The Technology Lottery."
PUBLIC: GLOBAL ECONOMIC INDICATORS now includes a
comprehensive tracking
of key stats on the US, Europe (and EMU), Asia, and Latin America.
Y2K: On Monday afternoon, November 29, see the results of the third Y2K
Experts Poll at www.peoplepolls.com. The experts are remarkably optimistic
though many admit that they are still not quite finished. Look for my next
YEAR 2000 REPORTER later this week for my last pre-Y2K assessment.
MOVIES: "The World Is Not Enough" is Bond, James Bond. I've seen them
all.
My favorite is still "Goldfinger," with the best 007 and car. A truly
impressive movie with an impressive story and acting is "The Insider."
Dr. Ed
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******************** Home: http://www.yardeni.com Weekly Audio Forum:
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Year 2000 Reporter: http://www.yardeni.com/y2kreporter.html
People Polls: http://www.peoplepolls.com/
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