sunnyday wrote:That's okay, Stormchaser. The "booming" Bush economy is a pet peeve of mine. How do you explain the stock market?
Did you read my post? Look at the market and consider this scenario:
1. Explosion of Information Technology fuels sudden expansion of a vast new economy.
2. Internet explodes and the PC becomes a common household device.
3. Venture Capitalist invest in new ideas as dot.com companies spring up overnight.
4. New business fuel expansion of value in market. Blue chip companies such as IBM, ATT baby bells, and a small expanding company call Microsoft increase value in the DOW.
5. Lower Capital gains and an exploding economy along with new tax law and the advent of 401k explode mainstream involvement in market.
6. Growth in market explodes. Grows at a rate of 300% from 92 to 97.
7. Capital Gains tax increase reduces profit taking increasing over-value of stock market.
8. Venture Capital pumped into over valued dot.coms increasing their value in market.
9. Dot.coms begin to fail. Market over-valued.
10. Venture Capitalist begin calling in loans sensing failure in their investments in weakening dot.coms.
11. Bubble burst and VC run from market.
12. Accounting scandel furthers wariness in the market.
13. Bankruptcy rate doubles in late 90s.
14. 9/11
Andrew Cassel | Corporate trauma today rooted in '90s market bubble
By Andrew Cassel
Inquirer Columnist
In early 1999, I wrote about Verticalnet, a local technology company that had gone from a wild idea to Wall Street in just three years.
The Horsham-based company's stock-market debut lit up the charts on Feb. 11, 1999. Verticalnet stock jumped 184 percent on its first day of Nasdaq trading. That day investors valued the company at $738 million - an amount that would more than triple before the bubble burst.
Verticalnet's initial public offering, or IPO, made its founders instant multimillionaires and offered a tremendous example of the rewards that were out there for creativity, energy and enterprise - all qualities the Philadelphia region could use more of.
Or so I was thinking when I wrote:
"The fact that it was astronomically successful we can attribute to the market's current rage for Internet-related business ideas. Dot-com stocks may be a mania, our own version of the 17th-century Dutch tulip-bulb craze, destined to wilt whenever investors sober up or the Fed raises interest rates - but so what? Unless you've mortgaged the kids to invest in one of these babies, it's not really something to worry about."
Mea culpa, mea culpa.
It's some comfort to be able to claim I wasn't totally swept away by the hype - there is that timely reminder about tulips, after all. It's the "so what?" that haunts me.
With every new business scandal that hits the screen - tax-cheating CEOs, book-juggling accountants, investor-scamming stock analysts or asleep-at-the-switch boards of directors - a voice in the back of my head whispers, "So what? This is what."
Turns out the irrational exuberance of 1999 was really something to worry about, very much so. And not just for the relative few who bet on those skyrocketing dot-com stocks.
Yes, about $6 trillion in paper wealth evaporated when the market turned. Verticalnet itself today sells for about 25 cents a share, putting the company's total market value around $25 million - less than 4 percent of its level on that golden day in 1999.
But that's only money. The real loss turns out to have been slightly different. With all that wealth sloshing around, responsible people lost their minds, and irresponsible people lost all restraint.
Both rewards and expectations were extraordinarily high in the late 1990s. Executives found that dancing to Wall Street's tune could produce riches almost literally beyond their wildest dreams - although those dreams were scaled up pretty quickly as well.
The atmosphere produced a range of behaviors from the merely silly - stodgy Old Economy firms promised to grow earnings 15 and 20 percent per year ad infinitum - to the borderline crooked and beyond.
As we now know, executives at Enron and elsewhere "managed earnings" - a genteel term for cooking the books - to inflate profit and hide losses, all to keep their stock prices rising. On Wall Street itself, brokerage-house analysts flogged shares they knew to be shaky.
And the accountants and others who were supposed to be watchdogs instead became enablers. At Andersen and other firms, the focus was on devising new and clever ways to dodge in the present, rather than on bringing problems to light and preserving the enterprise into the future.
It's important to keep in mind that very little of this was new. Every decade, and certainly every big bull market, has produced its share of swindlers. Yet if the indictments, earnings restatements and other revelations to date are any gauge, the '90s excesses may have been broader and involved more players than past blowouts.
What went wrong? Is this generation of American managers and professionals greedier than its predecessors, or was the recent boom just bigger and more conducive to moral slippage? Are the institutions that make and enforce business rules - many of them created in the Depression - outmoded or inadequate? Can government be trusted to fix things?
Certainly there is more than enough blame to go around. Some might even belong to otherwise skeptical columnists who were too quick to say "so what?"
Market was over-valued but has begun a slow rebound. The market like the economy is cyclical and must be corrected to account for emotion that feeds the Bear and Bull markets. Again...I am not making a personal attack and I respect your ideas. This is just way I feel.
The posts or stuff said are NOT an official forecast and my opinion alone. Please look to the NHC and NWS for official forecasts and products.
Model Runs Cheat Sheet:
GFS (5:30 AM/PM, 11:30 AM/PM)
HWRF, GFDL, UKMET, NAVGEM (6:30-8:00 AM/PM, 12:30-2:00 AM/PM)
ECMWF (1:45 AM/PM)
TCVN is a weighted averaged
Opinions my own.
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