In article
<4dbd8a6e-0bd3-4b0b-8f7a-142036d6a9ab@[EMAIL PROTECTED]
>,
V <vfr44@[EMAIL PROTECTED]
> wrote:
> Is the stock market a mega Ponzi scheme built on the constant creation
> of new equity funds?
>
> When I look at the massive growth of equity funds over the last 15
> years I wonder how much of the stock market is pumped up by the
> creation of these fund buying stocks to outfit their ****tfolios.
>
> They say that 70% of the GDP is based on consumer spending. Without
> the constant creation of new funds to keep buying stocks, what would
> happen to the stock market?
Lets suppose for a moment that you are correct. If what you
describe was happening, stocks prices would increase without
bound while the value that they represent would stay more or
less the same. The way that this can be measured is by looking
at the P/E ratio. That is the ratio of the price to the earnings
of the stock, and earnings represent the true value of a stock
over time. If what you say is true, the P/E ratio of the entire
market should be at record levels and be increasing at a very
large rate.
What we actually see is a P/E ratio that is higher than its
traditional average, but also one that is relatively stable,
and is actually down from a year 2000/2001 peak.
Since we are not seeing the behavior that would be required
for your statement to be true, we can conclude that your
statement is false.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@[EMAIL PROTECTED]
Newave Communications http://www.johnweeks.com
======================================================================
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.
|
