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Thursday, October 28, 1999

Countdown to disaster overblown

By Garth Turner, Freelance writer Inside the lobby of the Hotel Vancouver, where I lived last week (when not sliding through ice-covered mountain passes), there is a digital millennium clock.

In bright yellow numbers, it counts off the remainder of 1999 in tenths of a second. It's irritating and disturbing, forcing you to believe something will go Bang! when all the numbers hit zero.

In that, it's just like the media misfits I wrote about last week.

The life-is-ending journalistic crowd has been using Y2K as a symbol for what many of them see as a society out of control.

Software companies making no money have initial public offerings that net their founders billions. Martha Stewart, for heaven's sake, becomes a billionaire after launching stock in herself.

Meanwhile, Corel's exuberant boss, Michael Cowpland, is charged with insider trading and it confirms the scribes' suspicions that wealth is not created, but taken.

The truth is, however, that we are living in a time of incredible growth and expansion and it kind of defies the truths most of us grew up with.

All the rules have changed. For example, if you play it safe, buying risk-free GICs and paying off our mortgage, you come out behind the guy who rents, borrows money and puts it all into Microsoft stock.

He even ends up paying far less tax than you.

Today, we have an incredible combination of events.

- The absence of any real inflation and very affordable interest rates.

- Stock markets which, during the last five years, have given a 30-per-cent annual return while Canada Savings Bonds yielded five per cent.

- The ascent of the Internet, which in seven years penetrated 30 per cent of North American homes, to become the fastest-spreading technology in history.

- Layered on this are governments struggling to cope with budget surpluses, not deficits. The U.S. will be debt-free within 15 years.

- Meanwhile, some 90 million baby boomers are entering their peak earning and spending years, ready to invest billions and billions in financial assets.

All of this makes me shake my head at millennium clocks and Chicken Little media commentators.

Last week -- containing the 12th anniversary of the 1987 market crash -- was supposed to be a pivotal one for the Y2K media extremists.

But, as a disaster, it choked. At the end of another exciting and volatile week, the Dow was ahead by 4.2 per cent, the technology-laden Nasdaq was a 4.5 per cent winner and the TSE 300 gained almost 90 points on Friday alone to zip past the 7,000 mark once again.

There is more to come. With economic fundamentals like we have today well in place, there is no reason to believe the next five years will not be similar to the last five, if not better.

Between the fall of 1995 and the autumn of 1999, the Dow increased by close to 300 per cent, from below the 4,000 mark to more than 11,000.

If the same pattern is repeated between now and 2005, the index could be sitting at something close to 30,000.

What would change that? Certainly, a return to double-digit inflation and interest rates, a new round of government overspending and deficits, or perhaps a nuclear war between India and Pakistan.

You can gauge for yourself the odds of those events taking place. On my gauge, it reads zero.

So, while the millennium crowd is mesmerized by the countdown to nothing, those who have faith in the future are being massively rewarded.

A share in Microsoft four years ago was worth $8 US and today, it's 11 times higher.

Investors in Templeton Growth Fund get a steady double-digit annual return. A unit in Trimark Fund has gained more than 20 per cent this year. Ditto for funds run by AIM, Investor's Group and Mackenzie.

The Canadian banks right now are a screaming buy.

So, it's a pretty clear choice -- wait for a non-event and sit on your cash or buy when markets wobble and enjoy the ride into space.

The media pundits who told you things had topped out in 1995 and every year since have been proven utterly wrong.

They will continue to be wrong for years to come.

-- Homer Beanfang (Bats@inbellfry.com), October 28, 1999

Answers

The US is going to be debt free within 15 years? You are either having an opium dream or you are a gullible moron. Nuff said!

-- lc (lc@gimmeA.break), October 28, 1999.

I dunno, stranger things have happened.

-- (_@_._), October 28, 1999.

Gar,

Slowly, push away from the keyboard, now, stop inhaling that white powder with your straw and go lie down. Your having a terrible "yuppie" delusional dream !! Don't worry, it will pass as soon as you step back into REALITY!!!!!!!!!!!

-- livin in the real world (good ship lollipop@oversoon.com), October 28, 1999.

Why Homer, are you some kind of Polly?

-- (miserable@loving.it), October 28, 1999.

Homer,

You do nice work on your posting, but don't clog the server up with this fuzzy-logic polly crap. It's obvious this pinhead is at pre-nursery school level in his Y2K knowledge. It's depressing that he's influencing people.

-- PJC (paulchri@msn.com), October 28, 1999.

I'll bet you a gold eagle that Homer didn't post that. :)

-- (ISPbuster@internet.com.net.com), October 28, 1999.

I thought you said no inflation. Apparently the only inflation the fed will allow is in stocks. Triple digit inflation in 5 years. That has to hurt us some time.

i am prepared to be wrong. Are you?

-- tree (thetrees@bigfoot.com), October 28, 1999.

Sure hope this article is written by a different "Garth Turner" than the one I know..he's considered one of the Canadian mutual-fund "gurus" here, and he sells a lot of books telling people to BUY, BUY, BUY.

Of course, what is never mentioned is that unless you are very LUCKY, your mutual fund over the past 5 years had about a 95% chance of SEVERELY UNDERPERFORMING the stock market averages! Note how the article mentions a few SPECIFIC mutual funds...there are THOUSANDS!!!

Hindsight is 20/10. This article could have just as well been dated 1929, with "radio" substituted for "Internet".

Meanwhile, tell the majority of farmers who are in severe financial straits due to a continent-wide decade-long depression in farm prices that this is a NEW ERA.

EXACT same thing happened in the 1920's.

EXACT same thing will happen again very soon. Call it the Kondratieff cycle, or call it the fractal Supercycle(they are the same period), but no-one, by edict or wish, has yet repealed this basic pattern.

A thousand King Canute's cannot stop the tides from coming in. Same for this.

-- profit of doom (doom@helltopay.ca), October 28, 1999.

The US is going to be debt free within 15 years? I think its more like the US will cease to exist in 15 years.

-- a (a@a.a), October 28, 1999.

Now go hunt through the archives and read the 1929 press releases. they woill look almost identical, starting at "The rules have changed"......

Chuck

-- Chuck, a night driver (rienzoo@en.com), October 29, 1999.