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Source link: http://archive.mises.org/4223/dow-40000/

Dow 40,000

October 17, 2005 by

The super bulls are back. Apparently they weren’t optimistic enough with this or this.

{ 6 comments }

Dennis Sperduto October 17, 2005 at 2:51 pm

“driven by…the deployment of vast quantities of hoarded cash by companies and individuals.”

I am not attempting to forecast the magnitude of any changes in the market averages, and I don’t have a reasonably good idea of what the cash position of the average corporation or foreigner is, but does anyone honestly believe that the typical American has large amounts of hoarded cash?

Jonathan Goff October 17, 2005 at 3:52 pm

No worries, when they’re proven wrong, they’ll just go form a website full of warmonger faux-libertarian, Reaganite hacks, and keep on posting as though they were never wrong…..

~Jon

Crosbie October 17, 2005 at 3:57 pm

The Wiltshire 5000 total market capitalization is around $13 trillion. According to the The St. Louis Fed, there are $10 trillion dollars held in cash or short term funds. Exactly who is holding all this money is a mystery to me. The economic consequences of these holders attempting to trade their dollars in for shares is also beyond me. An inflationary spending spree of newly rich investors? Can anyone explain the meaning of these numbers?

Vince Daliessio October 17, 2005 at 4:19 pm

If, as these dodos claim, there is that much real cash out there just waiting for some stimulus to be spent, the enormity of the resultant catastrophic inflation in commodity prices will drive the world’s economy off a cliff from which it will take years to recover. One hopes these knuckleheads are wrong!

Dennis Sperduto October 17, 2005 at 7:42 pm

Not only is the phrase “large amounts” problematical, but so is the term “hoarded”. In addition to being subjective and usually used pejoratively, the fact that individuals hold (“hoard’) cash balances can well be a part of a deliberate asset allocation strategy that attempts to reduce risk. In particular, for funds that may be needed in the short-term it is not prudent to have these funds invested in stocks or bonds due to their price volatility. For “commentators” to state that this cash or investments such as money market funds represent an untapped source of funds that would readily be shifted into equities is not correct.

I also remember reading somewhere that corporations do have comparatively large cash balances on hand currently, their balance sheets having been somewhat repaired since 2001-2002. Possibly, corporate cash holdings represent most of this alleged large cash hoard.

Doug October 18, 2005 at 9:18 am

Very apt comments on this thread. The Dow will definitely hit 40,000, perhaps in my lifetime. And a bag of groceries will cost $1,000.

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