Posted by
Bob B on Wednesday, October 22, 2008 2:27:19 PM
How about a brand new Mercedes R class Sports Tourer, for $20,000 ? Or can I interest you in 100 shares of AFLAC common stock at the current market price with a chance to have a private lunch with the Duck ? Same value each offer, except for the Duck.
It is said stock prices discount future value. That means they sell for the value they are expected to have in the future, not the value represented by present conditions. So why are stocks selling for half their present value? I submit there are only two possible reasons to justify current stock prices, and I speak with the humility of a professional in stock portfolio management. The possible reasons are, first a really severe recession is facing us, and second the market is discounting an Obama election with all its Socialist implications for free market enterprise.
I have studied '29, lived through '74 and '87 and the dot com bust. Lack of government regulation was a significant factor in '29, FDR's action prolonged the recovery, 74, 87 and dot com were cyclical normalities within a free market system, 2008 is yet to be classified.
Un-notated End Notes:
1. If you did a doubletake on the FDR comment you need to read Amity Shlaes book 'The Forgotten Man".
2. Free markets get you farther, albeit with occassional bumps along the route. Bumps and all it beats Socialism which Winston Churchill
described as an "equal sharing of misery".
3. If you win lunch with the Duck be aware of what you order. He is sensitive about such things.