Probably the major cause of the growth of the stock market "bubble" over the past 15 years has been the accelerating pace at which money has flowed into the stock market from tax-deferred retirement plans---most of which limit one's investment options to stocks, bonds, and money markets. With all that money chasing fewer and fewer stocks (as companies buy back their own stock) it is not surprising that the U.S. market has become vastly overvalued by historical standards.

My question concerns the degree to which this may be happening in other countries for the same reason. That is, are other stock markets also "overvalued"? And, if so, can it be correlated to massive inflows of tax-deferred money?

Of course, many investment plans in the U.S. can own foreign stocks, which would tend to export the bubble, but the effect seems to be much greater here in the U.S.

Any comments?

-- Y2K Pioneer (Pioneer@aol.com), September 20, 1999

Answers

Europe and Asia for the most part are just getting 401(k) type plans in place, or thinking about it. Latin America is actually much further along. Europeans are historically very conservative investors, and few own stocks. But social security systems around the world are in the same boat as ours--with a ticking demographic time bomb--so the retirement savings business is only going to get bigger.

-- Thinman (thinman38@hotmail.com), September 20, 1999.