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to keep this board from being mothballed i throw out the following
four risks to US stks that i see on horizon
1. terrorism / unforeseen conflict
these days this one is self explanatory. but in case of a 5-10% hiccup from an attack - the resultant dip would probably be brief and buyable.

2. interest rates rise
this one depends on what the dollar does i think. if the dollar is flat or slightly up while interest rates go up and stock earnings continue up, it probably is a non event and stocks, confoudning the chronic bears, might actually benefit from a rotation out of bonds. but if any 2 of those three factors get simultaneously weak it seems to this observer that the stocks could be in for an air pocket later this year or early next.

3. oil price spike.
sustained high energy prices are effectively a big tax on goods consumption. stocks have been knocked off kilter three times in the past by oil price shocks. if oil continues to go up 2004 could be the fourth.

4. china bust. every boom is followed by a bust. the asian rim countries boomed in the 90's then busted in 97. the US as an emerging market economy was boom/bust. even japan had its boom/bust. china is no different. when china goes bust, the ripples will be big. the timing is of course very uncertain. but this one is an inevitable.

any and all thoughts welcomed
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Do you believe that the upcoming presidential election will create change or risk to the stock market, regardless of outcome?

Convential Wisdom states the stock market goes up in election year but its not clear to me what statistics show happens after.

Sally
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i think the election is a nonevent for the stocks but could have a big impact on the $/euro and the bonds. however, i'll admit that the rise of kerry and the demise of dean has coincided with what seems to be an air pocket for the stocks of late. or is it the oil. tr
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solasis,

1) I agree that an airliner taking out the Statue of Liberty is probably a brief hiccup that translates into a buying event (who cares about an historical gift from "old Europe" anyway), but I'm far less certain about a dirty bomb going off in a container ship in NY, SF, LA or Seattle.

2) The U.S. $ certainly complicates everything. On the face of it all, U.S. stocks would seem to be on a 37% tear since a year ago. Unless you're an investor from Canada, Australia, Britain, Europe, or Japan, where you have to carve off anywhere from 10 to 28% of that gain to account for currency losses. The "invert, always invert" mentality reminds me I'm not short U.S. stocks, I'm long U.S. cash, and that scares the bejezus out of me.

3) I agree about an oil price spike. Especially if your "cost ledger" adds in $666 per taxpayer per year to pay for Iraq (a coincidentially devilish number obtained by dividing $87 billion by 130.5 million U.S. taxpayers).

But my number one risk doesn't even have a name, as far as I'm aware, but I'll dub it "The Great Unraveling". And even though Thomas Malthus predicted it slightly more than 200 years ago and it still hasn't arrived, or that optimist Julian Simon and pessimist Paul Ehrlich wagered about it 24 years ago and Simon won handily, it doesn't exactly make me cocky about the future.

It asks "How can stock markets return 11.0% over the last 62 years while GDP has only gone up 6.3%?" (CPI up about 4.1% annually over that same interval, subtract off if you want to express those as real rates).

It asks how can you lose 12 pounds of topsoil for every pound of wheat produced on the Palouse, or 5 pounds for every pound of corn from Iowa, yet not factor that into GDP. (This as but one anecdote for a host of things representing non-sustainable growth subsidized by one-time gifts of natural resources, minerals, and fossil fuels).

It asks how we can, as a consumer-driven society, work less, earn less, save nothing, and yet somehow spend/grow our way to prosperity. Like a Jimmy, nearly out of gas, buried up to the axles out on the Mattole estuary watching the tide come in. With the pedal to the metal and wet sand spraying up like confetti. "Don't worry, America. Buy more shoes. It's morning in America."

That's mostly what I worry about.
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productivity, or haven't you been listening to the fed head the last 12 years.
haha.
tr
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I'll address your following concern:

>>
4. china bust. every boom is followed by a bust. the asian rim countries boomed in the 90's then busted in 97. the US as an emerging market economy was boom/bust. even japan had its boom/bust. china is no different. when china goes bust, the ripples will be big. the timing is of course very uncertain. but this one is an inevitable.
>>

Ain't gonna happen anytime soon.

There may be some risk involved with the 'busting' of China's economy, but only after there is a considerable ramp up and saturation, as had been seen with most of the other Boom/Busts you've mentioned.

Each of the various cycles you mention had specific causes that drove the economic conditions to tepidness - at which time triage and circuit breaker style mechanisms kicked in, providing for a softer landing.

China, although growing rapidly, has not even come close to the extensive heights that the Asian Tigers had risen to. In addition, most of the issues in both the Asian rim countries and Japan were both in the financial services sectors. The driving force was extensive leverage, isolationist and protection economic policy, and a 'we are invincible' attitude that hit these economies. Nonetheless, these economies are recovering steadily and will be mainstream again in the next decade - at least to the level of the EU.

If you've ever had a chance to read the Rise and Fall of the Roman Empire, you might understand that China is still very much in it's infancy with respect to it's market power and growth potential. It will be a significant influence in the future markets of the world - if not only for it's enormous population. Several factors to consider include the difference in China's ability to separate economic influences from political ones (at least in the public mind), population, outsourcing growth, credibility, physical resources, regional political influence, external diplomatic relationships, GDP (1.2 Trillion USD in 2002), and it's rapid technology advances.

The risks associated with this emerging powerhouse has also been curtailed by many of the causes of earlier busts being dealt with promptly to prevent further economic damage.

Take a look at the following article on Fool:
http://www.fool.com/news/foth/2001/foth010907.htm

Great article on Japan's situation and where they went as well as the US situation. None of these things apply to China's case.

There may be some hidden crash-inducer for the Chinese market, but with all due respect, let China first be seen as a champion before taking punches. There's still considerable room to grow, and many years before we see any effects of a Chinese crash. Now where did I leave that translation dictionary...

Ananda
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