How long and far up can the stock market climb?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Just how long can this bull market go on before seriously feeling the effects of the y2k problem. From what I gather not one fortune 500 company is y2k compliant. What goes up must come down. But when and how hard. Comments please. My inlaws have 100% of there retirement savings in stocks and mutuals. They LOVE Clinton and honesty believe that he can do no wrong. Why does the market go up, up, up?
-- Greg Wiatt (email@example.com), April 24, 1998
This isn't the first stock market bubble and won't be the last. I'd suggest reading "The Great Crash 1929" by J K Galbraith for some insight -- although times and technologies change, human psychology doesn't. This book might just help with your in-laws. You might also try to scare them by pointing them at this web reference:
In short the market goes up because its going up; people buy because they believe they can sell higher. The higher it goes, the harder it'll fall, is about all one can say.
-- Nigel Arnot (firstname.lastname@example.org), April 24, 1998.
The simple answer to your question is greed.
Joe average has seen the market go up for several years, quite rapidly recently, and he wants some of these "sure" returns, so he is now putting his savings into the market in the false belief that there will always be someone he can sell to if things slow down.
Joe yuppie has been in the market forever, and he is putting in every extra cent he can beg, borrow, or steal because he's lived through it and "knows" it will last forevermore.
Joe fund manager is bailing out (as the April 20th issue of Forbes shows). Maybe Joe fund manager knows something everyone else doesn't.
Purchasing stocks at 25 times earnings is not a lot different from purchasing tulib bulbs just before the bubble burst.
"Just because it's not likely doesn't mean it won't happen."
-- George Valentine (email@example.com), April 24, 1998.
Once people realize the impact of Y2k conversion and problems on earnings, the market will head south fast. Federal Express is spending $1 Billion on the problem and Chase Manahattan Bank is spending $200 Million. With General Electic's major profit contributor, GE Capital, the result of many legacy financial systems you have to wonder what the impact will be on GE. Once we see a deterioration of earnings as a result of Y2k, the possiblity of panic and a run on banks is possible. With 90% of all financial transactions electronic, will there be enough cash to give to those who run to the banks? It is obvious that we are headed for bad times and shorting the S&P now is probably not a bad idea along with storing food and water.
-- Del Ball (firstname.lastname@example.org), April 27, 1998.
I watched in amazement today as Ron Insana of CNBC and Ed Yardeni discussed Y2K. Insana asked, "Why is the year 2000 computer problem still a problem?" Another man by the name of Jim Rodgers(sp.) of Rodgers Holdings said he was not familiar with the problem. I don't understand how people can still be ignorant of all this! Especially those who work on Wall Street or report about Wall Street.
-- Gail (email@example.com), April 27, 1998.