Some Doubt Stocks' Value as Prices Rise

[Dover]

Some Doubt Stocks' Value as Prices Rise
Sat Nov 20, 2004 07:45 AM ET

By Richard Satran

NEW YORK (Reuters) - Stock prices are near the highest level ever, but instead of triggering giddy euphoria, the rise is inspiring doubt and concern that stock values might be too high.

This rally displays little of the irrational exuberance that marked the late 1990s and led to the stock market bubble. Call it "Rational Non-exuberance."

Instead of relentless buying and predictions of ever-higher prices, this rally is sparking a debate over whether stocks should even be as high as they are.

Even the most bullish forecasters are looking for small gains in the next year, and traders these days often say the market feels overextended and trading is prone to slowdowns.

"People are very conservative in their outlooks," said Ned Riley, chief investment strategist of State Street Global Advisors in Boston. "There is not much excitement about the prospects for next year."

Still the market is moving higher, and the most broadly based averages are now at record levels. The Dow Jones 5000 Composite Full Capitalization Index was hitting all-time highs all week prior to a decline on Friday. The Russell 2000 also has hit record highs..cont'd

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=6874064

[PROGRESSIVE1]

1. This is an artificial rise due to Bush getting a second term.

There is nothing to justify these absurdly high prices. There are many problems with the economy including the twin deficts.

[central scrutinizer]

2. stock prices go up, the dollar goes down

in a global sense, it is a wash at best

[daleo]

3. "the most broadly based averages are now at record levels"

Is this true? I find it hard to believe, considering the Dow was near 13000 when Clinton left office and is about 10,500 now. Did someone just cook up a new index, to be able to point at something that is higher under Bush than Clinton?

The Dow Jones 5000 Composite Full Capitalization Index - never heard of this before now.

Russell 2000 - I have heard of this, but find it hard to believe that it is higher than in 2000.

[Voltaire99]

4. "An absence of moderates..."

"An absence of moderates is often the prelude to seismic events."

- Fund manager John Hussman

[wiggs]

5. Could go either way

I'm torn between thinking the market will tank as baby boomers start to pull out their investments for retirement...or, thinking the market might boom if Bush gets his silly health and retirement private savings account programs.

[Dogmudgeon]

6. It WILL tank, sooner or later

By "tank", I mean a complete wipe-out.

There is too much of the US economy that is being kept going by financial fraud, whether it's overvalued assets, paper, the use of the US Dollar as the reserve currency for most of Asia and for OPEC, trade deficit, breakneck outsourcing, or out-and-out currency manipulation by Alan "Ayn" Greenspan and the Federal "Objectivist" Reserve.

At some point, the system is going to collapse.

I personally think the economy will hold together until the first or second major post-Peak-Oil price increase shocks hit: 2006 (early) to 2010 (most probable) to 2020 (wildly optimistic).

After that point, it's Socialism, neo-Feudalism, or extinction. Under any of these scenarios, your investments will be worthless.

--bkl

[Kolesar]

7. My hunch is that the stock market is overvalued

I understand equities investing pretty well. However, I cannot comment on financial fraud and "money" issues. What you describe sounds bleak.

[teryang]

8. How many baby boomers are still in the stock market?

After losing billions in the melt down a few years back, I think many got out and didn't go back.

Every one talks about real estate now, which I feel is a similar trap, but this may go like the Vietnam era real estate market. A spike with real estate prices flattening out with increased interest rates. I have a friend with a math degree who invests heavily in commercial real estate who thinks the sky is the limit. As far as he is concerned there is no other investment. I think commercial property is way over valued. It is in my area anyway. There is no way it can generate the income necessary to pay for it.

Just looking at local residential prices, I notice some neo-feudal tendencies. Former middle class housing is slowing down, while working class units now selling for middle class housing prices. The author of the millionare next door says that the 500K plus market always has liquidity because the truly well off never have liquidity problems. I'm observing this locally, with those trying to sell from 200K to 500K having problems, particularly with the middle class under corporate attack. Theoretically, the middle class units should now be selling at over 200K. They are not selling much compared to "lower value" properties which now cost as much as better homes prices two years ago. Some feel that if they sell they won't get fair value for their property relatively speaking and won't be able to buy similar quality housing when they move.

I've noticed an inordinate number of non-qualified transactions which means that people are quit claiming the middle class property as an alternative to sales to retain tax valuation benefits. I assume that they are keeping the properties in the family rather than give up something which cannot be replaced at a fair price in this market.