9/01/2004

9-01-04 - 2

9-01-04

I'm very torn about where the American economy is going. Here are the positives - 1) after the election, no matter who wins, the economy will calm down and stocks will rise; 2) the current high oil prices are a totally artificial creation due to speculators, they will come down soon, related to #1, which will boost the economy; 3) as China and India and Brazil and other countries develop, international demand for our most lucrative products (entertainment and knowledge) will balloon which will give us another brief bubble (that bubble will collapse when those countries replace us as the suppliers of those products).

Here are the negatives - 1) The American economy is largely driven by consumerism within America, which requires strong buying from the average person, which is in major trouble. Income inequality continues to grow, which is driving down the real wealth of the average person; the number of Americans under the poverty line is now 36 million and it keeps growing (many of these people work full time). 2) The housing market is dangerously close to exploding; people who can't afford it have bought in heavily, and then have re-mortgaged and taken even more debt to get more cash; any sort of down-turn could make this system explode. Already forceclosures are occuring at a record rate. 3) American consumerism is heavily driven by debt spending in general, related to #2, again this is trouble. Especially as interest rates begin to rise back to normal levels, the heavy debt of many Americans will destroy their spending power. 4) As mentioned in #3, interest rates must rise, this will slow the economy.

So, I have no idea really if stocks will rise in the next few years.

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old rants