Thank The Grotto 6 minutes now past 11 business and economic reporting is supported by the law firm of Larkin Hoffman Daly and Lindgren providing solutions for days legal problems Chadwicks providing strategic public relations Council and Pantera Diversified company building shareholder value through focused industrial growth And good morning. Welcome to midday on Minnesota Public Radio. I'm Gary. I can glad you could join us as the 1980s were drawing to a close. Japan. Look Unstoppable really a really conomic Juggernaut. It was The Rising Suns time in the Sun. But that was then and now is now the Japanese bubble has burst and the American economy has rebounded with a Vengeance. However, however many Economist say that same bursting bubble phenomena that hurt Japan so bad May soon take its toll in America as well this hour we're going to take a look at this worried over the stock market bubble as it's called whether there really is a problem. And if so, whether among other things the Federal Reserve should raise interest rates to try to minimize the damage will be opening the phone lines for your questions and comments by first of all heroes, Minnesota Public Radio senior business and economics editor Chris Ferrell with more on the bubble to date in November 1995 the Dow Jones Industrial Average reach 5000. It hit 6,000 in October 96. 7000 in February 97 8000 in July 97 and just this month it closed above 9000. Is the soaring stock market like a balloon about to pop I think we are in a bubble run Roost Chief Economist at Piper. Jaffray to signs of excess are widespread. Stock prices are unbelievable Heights Mega mergers are all the rage individual investors are pouring money into Equity mutual funds. I see things on TV where the average housewife is just pouring money into the marketplace without any real discrimination as to where they're pouring that money. They may be putting it just into the S&P 500 and they're treating the market like a CD growing number of a condom is fear that the u.s. Is a bubble economy and especially dreaded phenomena in a bubble is a buying binge that sends the stock market or any other asset for that matter the heights far beyond the realm of reason when the bubble bursts wealth is destroyed in the economy contracts sharply for instance. Japan has been mired and stagnation ever since its bubble economy deflated in 1989 Ron Roost. Impact has been devastating on the average Japanese citizen your house prices down almost 70% from the peak in 1991. Your stock market is down to around 16,000 from 39000 a 1989 of 43% of your companies are 50% underfunded on the pension plans. Your banks are in Jeopardy Year's insurance companies are in Jeopardy. So you are just a nervous wreck about your the financial structure of your own country to prevent a japanese-style boom and bust in the US some Economist are calling on the Federal Reserve board to hike interest rates and prick the stock market bubble now. But not everyone agrees that the US has a bubble economy about to burst. No question. The stock market is high but those games also reflect Rising productivity strong corporate profits low inflation and economic expansion entering it safe year. It's a tricky business figuring out whether a stock market is over or undervalued Professor VV charging head of the economics department at the University of Minnesota says markets go up when they are undervalued and sell off from time to time when they are overpriced stock market goes up stock market goes down can get to Cadott away with that. It's not necessarily something to tell me what you want to pay attention to something necessarily that you want to get obsessed with the comparison to Japan is telling the Japanese bubble economy was fueled by debt. Japanese fancy is borrowed on their stock Holdings to buy everything from Van Gogh paintings. The u.s. Golf courses companies borrow to expand their manufacturing capacity with abandon leveraged-finance Japan's real estate speculation. The land beneath the Imperial Palace in Tokyo was estimated to be worth more than all of California someone Sun Chief Economist at Norwest since the US doesn't look anything like Japan in its bubble years how inflation rate is very very low the price of real estate has gone up but not that rapidly and we don't seem to have any measure imbalances around economy. So simply because the stock price of the high doesn't mean that we have a asset bubble and we about to see a correction. So should the FED force of Correction by hiking interest rate. The call is controversial after all the feds job is to be America's Guardian against inflation and Consumer Price inflation is running at very low levels for now members of the FED seem to have adopted and open mouth policy of warning against complacency and hoping investor expectations will cool down again Economist sun or west Long-term rates go up. Bond and stock investors are concerned so they bit prices down and they do it when they own with hindsight bubbles always seem crazy. How could so many people be so stupid with their money your bubbles often emerge for good recent during times a major Innovations and technological progress. It becomes increasingly difficult for investors to figure out the direction of corporate profits and other economic fundamentals string periods of Rapid change the bloom before the 1929 stock market crash was driven by the expansion of the Auto industry the emergence of a mass production economy and the spread of electricity in a sense. We never know whether we have been in the midst of a bubble until it's over but even then the aftermath does not have to be disastrous says Professor think is good evidence to suggest that it's not the financial crisis itself, but rather how governments respond to the financial crisis and what kinds of measures they After a natural crisis hits that determines whether the effects of the crisis are forklift or long left. The stock market will sell off at some point in the future perhaps soon. The Federal Reserve will someday make a preemptive strike against inflation by hiking short-term interest rates and recessions are part of a capitalist economy. The Great British economist John Maynard Keynes, once cautioned not to fret excessively about speculation when the underlying economy is strong. This is how Cain put it speculators may Do no harm is bubbles on a steady stream of Enterprise. But the position is serious when Enterprise becomes the bubble on a Whirlpool of speculation the US does not appear to be in a Japanese style bubble. The economy is strong the federal budget isn't balanced and unemployment. Is that a quarter-century low information technology the way we live and work a steady stream of Enterprise appears to underlie a once-in-a-lifetime bow market for Minnesota Public Radio. I'm Chris Farrell. Well, Chris has joined us here in the studio to talk some more about the stock market bubble. What's the weather supposed to be Beach re the chair of the universe Minnesota economics Department who you heard in Chris's story and we invite you to join our conversation. If you got a question or comment about this stock market bubble phenomena. And how it might affect you invite you to give us a call to 276 thousand is our Twin City area number to 276 thousand. If you're calling from outside the Twin Cities, you can reach us toll-free at 1 800 to +422-828-227-6004. 1 802-4228 to a gentleman. Thanks for coming in. But thanks for having us. All right, I hate to sound like a skeptic here, but we've got we got some more economic numbers out from the government today indicating that the economy is booming. Inflation apparently everything's under control. What's the worry here? Why that was my reaction. This morning was a good economy more people working incomes are up and at least it up with the benefit of hindsight, you know the benefit of hindsight. Do you have a monthly? You know, you keep looking back the games in the stock market don't appear irrational. Maybe we should be calling irrational exuberance as opposed to the irrational exuberance to make a little twist to Fed chairman. Alan Greenspan's phrase the 1996 the main source of concern here that the thing that makes people think that that we're in a dangerous situation is that historical measures off valuations of stock markets using those kinds of measures the stock market today appears to be highly valued and some would say over Battlefield 1 historical examples the price earnings ratio. That measure we are at or close to historical Peaks are price-earnings ratios now is about 26 its average over the last hundred fifty years more like 15 to 18 to 20 in. So in that sense, there are people who are legitimately cautioning investors that price-earnings ratios are extremely high second source of caution, which is well merited is that the last three years have been unprecedented in the history of the US Stock Market each year are the markets but not by more than 25% This is never happened in our history before so people who watee that this is a consequence of irrationality our wedding about those kinds of things. I think they are getting perhaps a little bit too carried away. Are people who argue and I am persuaded to some extent by those arguments that we stand on the verge of an e lire. We America the dominant power in the world. We are looking forward to a long.. Of relative peace and prosperity when you compare what we are looking forward to what the world look like in 1950 or even 1929. It's just a dramatic change Market markets have won the world over policymakers understand the importance of incentives understand the importance of getting policies, right? And so there are Pollyanna ISM amongst us who say we are on the verge of a new. But you always want to remember that the most dangerous five words are it's different this time because it never is so there are people who say that we are in for good times and so therefore what's there to worry and there are People who say we've said the same thing in the past when the Market's been very high. And so therefore there is something to what you meant. Well are the Federal Reserve policymakers stewing about this or are they going to raise interest rates? I guess that's one thing that the average person be interested to find out how we're getting a dramatic rally in the market today partially on the assumption that the Federal Reserve will not hike interest rates when they had their next meeting which is in early may but if the FED hikes interest rates to go after a bubble, I personally be really concerned because if the Federal Reserve gets in the business of saying the stock market is too high forecast in the stock market is really difficult. It's impossible in 1993. There was a lot of commentary the economy was growing too fast and therefore to my unemployment was dropping too low inflation had to be around the corner the FED needed to tighten. Well if now 1998 We still getting the same story but the economy is growing fast and inflation has come down in the stock market is going to be very dangerous for the FED to get in the business of saying stock market gains are enough with the FED has the concern about is inflation inflation is tame but it has a traditional indicator, which is the money supply, you know, this this thing that no one can quite the find but it's growing we're fairly rapidly. It's out there. That's what I think the fit actually is looking at and I don't think that will get a hike in interest rates. But when the FED does hiked interest rates I bet it doesn't cite the market it will cite the money supply a traditional Central Bank fear. One of the reasons that I think this story is it so much interest is so many people of course is that so many people are now invested in one form or another in the stock market much broader than it used to be you have your your retirement money being shuffled off their every month and so on so forth and it seems like the economy is moved Way Beyond the point where you Traditional investor is the only person affected. It's pretty much everybody is one way or another. I'm wondering if that very broad base doesn't the kind of provide a protection against the kind of crashes and Booms and end ups and downs roller coaster rides that have historically Mark the mark the stock market. One of them are a couple things of the stock market. The last few years has been the willingness on the part of investors to buy on dips when the market seems to decline temporarily people have stepped in a big way is absolutely right historical evidence. Is that the Federal Reserve pays Fiddle attention to the stock market for good reason besides there's a lot of volatility here. And so therefore it's not particularly reliable indicator things like the money supply and so on are the kinds of indicators of the FED historically has looked at and and to the extent that a big decline of the stock market creates real pain for ordinary people through their 401ks in the light as possible. The FED might do something in that event a shower about the stock market bubble. Yeah. The only do I like that came from which is you. Just as bubbles longest a streamer Enterprise or is it just a world full of speculation is look around in the internet stocks hear something like 70% They're selling it at Professor trimester price-earnings ratio. They're selling a price-earnings ratios of infinity. They have no earnings and they're they're trading at $70 to $100 a share Ministry. Pierce like a bubble biotechnology has been a bubble. I don't know what it's doing right now. But we've had that in the past and investors get overly enthusiastic and they did the sector's up. But that's not the same thing same the stock market itself as a bubble their sectors where enthusiasm to get out of control and investors, you know, if they start discounting the Hereafter and then they get a rude awakening when they find out that's as corporate earnings never do show up or if they're going to show up there less than expected. But that's not the same thing as saying the whole thing is a bubble and that everybody participating. It has just they just lost did it did it completely irrational if they've lost all grounding with what's happening up there. I'd like to meet the person that truly believes that the stock markets going to keep going up at 30% a Year everybody. I talk to you scared about the stock market's got to come down. I mean every time the stock market takes a dip half of NPR walks into my office and says his this is at what should I be doing? Choose to really believe these numbers. So I actually think that there's a fair amount of caution. It's sort of like going to the lottery when you go play the lottery, you know, you're not going to win that you'd like to win you. Hope you win so you play the lottery but you don't really believe you are nobody really believes in and get 3% returns in the stock market and like to but they have much low. I think they're the true expectations are much lower in some of this dialogue on Wall Street that would lead you to believe that everyone is just do you know floating in outer space? Let's get some callers involved here. We are talking about this phenomena call the stock market bubble are our guests this our Bebe chora who's the chair of University Minnesota economics Department. Chris Farrell is join us. He's Minnesota public radio's senior business and economics editor you here in every week on our sound money broadcast. If you got a question about the stock market and whether or not it's it's gotten too big for its britches. Give us a call to 276 thousand is our Twin City area number to 276 thousand outside. Twin Cities 1 800 to +422-828-227-6000 in the Twin Cities or outside the Twin City area one 800-242-2828 Dave your first place. I'm wondering what what your guests think might be the role of baby boomer investment in the increase in the stock market, you know, we've been told for years the best investment for retirement for long-term is is stocks. I know the record of purchases of mutual fund and events contributed to the rise in the market. Is that is that good? Is that part of the Bible related to the question I had weather in fact that serves as a stabilizing him back if you just automatically sending off a certain amount every month no matter what happens or how does that play into this bubble deal? Well as it as a practical matter, actually when you look at the savings rates of the Baby Boomers, they are today. Leaving less than their parents did as a fraction of their income when their parents were roughly the same age. So if there is anything to worry about there is something to worry about here. I was a lot more than the Baby Boomers are not saving enough now it is true that was extraordinary rise in the stock market. If it doesn't come down is going to have to provide a comfortable retirement for many baby boomers, but given that they're saving and given the the kind of historical returns in the markets. There is actually a source of concern weather. In fact, Baby Boomers will be able to retire quite as comfortably as they would perhaps like so I'd actually worried about things the other side. I'm not sure they're saving enough and there is some evidence to suggest a less than than their parents were up all your question, please Thanks for having me up your mess in the money supply through a cut my ear because I've been wondering why I don't understand the full relationship between money supply in the stock market and the economy, but I'd rather join the crowd joined the cloud go to phone out of touch because some of us, all right explain the relationship here on this money supply business Chris. You were the one that raised I raised that well, I think that in terms of the current focus on the money supply it is the reason why the money supply dropped off is it was and it was called deregulation or Savers have moved from your traditional savings account and your certificates of deposit putting more money in the stock market putting more money in the money market mutual funds all kinds of Foreign investment and therefore the traditional relationships between the money supply in the economy and the Vault and the Vault was called the velocity or how much money would turn over for disruptive and my spouse in a very good indication of what was going to be happening. There is an ocean out there that I think is a correct notion whether to time is right that you know institutions adjust and therefore a more stable relationship re-emerges between the money supply in the economy over some. Of time if you were saying this made me and we may be at that point through a lot of the unsettling is over and we're getting more stable relationship whether or not that's true. The number is big is growing at a bar if the you know, we can't be quite sure it's sort of like sending off the The Alarm bells and it's causing some discussion, but then you know whenever you look at the money supply and I'll do for you on this but Some people say what reflects the popularity of using the dollars to currency overseas to Anchor a number of countries that worried about inflation near the anchor their currency to the dollar part of his reflecting that so, you know, there's always this big debate. What is it really mean but it has definitely grab people's attention at this point in K. Just a quick 101 overview here. Why why should we care? How much money is just floating around the monetary aggregate he is a way of measuring how much assets people have and what are called transactions accounts. These are accounts that you can use in order to write checks and buy things relatively quickly. Now the amount of money that people have in these kinds of accounts clearly affect economic activity because the fact how they make their spending decisions and also affect interest rates and so therefore effects investment Decisions by firms and so on. And so that's a sense in which are typically pays an important role in determining the scope and scale of economic activity. One of the problems is that monetary policy measures which might undertake typically have their effects on the original eight. Of time. And so therefore it's not necessarily a good idea to look at the current inflation rate to figure out whether you're on the right trajectory for monetary policy because current monetary policy really tensed affect inflation rate an outfit and so on with the lag anywhere from one to three or four years and so you need to look at something else to figure out whether you are going whether you are on the right track or not. And so the money supply historically has been Fairly reliable measure to get some sense of whether monetary policies to easy or too slow, but there have been. Discuss was mentioning where this relationship seems to break down and the old certainties don't hold any more. And those kinds situations when has to use considerably more Jacqueline Michael your question, please really saving for retirement and I think God a rational approach to looking at the market is to simply not try to time it so you should really be looking more at your individual needs. How long will it be till you need your funds and are your assets properly allocated between fixed Investments like bonds and and the stock market? I think that's really the main thing to think about whether you going to use your money in 5 years or 25 years should be more of an indicator of whether you want to have your money you have fully invested or what percentage of it in the stock market that to me is really the main things for the common person to think about as far as where the money is and I think Chris has brought this point of banana and sound money shows in the past 2 good way to deal with it. I should say that I like listening to Chris Ferrell on Saturday mornings. Precisely because he keeps emphasizing that market timing is a very dangerous business. I don't believe that there is anybody out there who can successfully time the market so many people claim that they can buy that I'm very skeptical of those kinds of planes. So rather than stewing about this big macro problem going to look at your own DeLand and move ahead is a wonderful phrase by Paul Samuelson, which an asset allocation, you know, how much you have in stocks and how much having bonds and said look if you have to send send a little you want to move back a little bit. Okay, you want to move up a little bit? Okay, but you're going to send Justin a little we're talking to shower about the phenomenon known as the stock market bubble has have we gotten too big here and Market going to take a tumble our guests this our Chris Farrell who is Minnesota public radio's so senior business and economics editor and BV Charlie is with us. He's the chair of the University Minnesota zika. Economics Department. We invite you to give us a call as well. Join our conversation this first hour of our midday program 227-6020 area number to 276 thousand. I'll try the Twin Cities one 800-242-2828 business and economic reporting is supported by the law firm of Larkin Hoffman Daley Lindgren providing solutions for today's legal problems, providing strategic public relations Council and Pantera Diversified company building shareholder value through focused industrial growth will get the smart collars in just a second. It's a home sellers Market out there these days with Buyers having to offer more than the asking price just to beat the competition. So what can you do to get the home of your dreams by this is Bob Potter join us for some money this week. I will get some answers from the Alise glink author of pan steps to homeownership sound body Saturday morning at 10 Sunday afternoon at 5 here on Minnesota Public Radio k n o w FM 91.1 in the Twin Cities. Chris Ferrell, he's everywhere. He's everywhere. Invitation to join us over the noon hour here we're going to be talking about Israel. Israel is celebrating its 50th birthday 1948 according to the April 30th. According to the Israelite calendar. The state of Israel was created and we'll be taking a look back at that historical event and talk a little bit about what's happened since then and where we might be headed in the future. Look at the the state of Israel coming up over the noon hour today should be an interesting conversation and we hope you'll be able to join and also a reminder at 1 today. President Clinton has his first news conference of the Year scheduled and will be providing coverage is part of our Talk of the Nation broadcast. We can look for a Seneca partly sunny Sky through the afternoon and warm temperatures all across the area with highs in the seventies Twin Cities Sunny this afternoon with a high around 75 right now. It's 67 and sunny in the Twin Cities elsewhere. Saint Cloud sunny and 67 Rochester sunny in 60 to Duluth Sunny and 75 Fair Sky 71 Fargo signing in 71 Sioux Falls sunny and 62 again 67 currently in the Twin Cities. Lots of colors are on the line with questions about the stock market bubble. Phenomenon. Chris Farrell is here. RvB charry is here from University, Minnesota and Mickey has a question from Grand Marais. Go ahead sir. You keep saying that the market is kind of overpriced and hot but I just wonder like with I have my own little mini portfolio. So to speak and none of them. The highest I have is a PE of 23, even though some of doubled and some of them up, you know, the 60% in the last less than a year and I don't feel nervous. Should I feel nervous? What is probably the Pease are high relative to where they were in the past and they probably have gone up fair amount of me. The stock market is is is is very high, but would whether or not you should be nervous. I think you come back to the real basic. Why are you saving? What is the time Horizon that you're saving for? Are these good companies good management. You want to stay at the end of the original reasons? Why you bought them still hold and I just asked was very fundamental questions and remove myself from the the current hysteria because I really don't know whether stock market overvalued. There's lots of models out there that will tell you it's think there's one that's a German Alan Greenspan gave us a speech about a year ago our year and a half ago. And then there he kind of gave the stock market model. So it's been out there and buy that model the stock market currently / / 23% Now if interest rates drop, it's no longer overvalued. One factor that would change that overvaluation. So I still go back to just ask yourself these fundamental questions of why do you only stock how much are there your portfolio? How much are they at risk is your you know, you may be saving for your children, which case your time Horizon is a hundred years. You may be saving for retirement in five years and which you know, this is this has been an incredible market and I wouldn't be greedy and I'd read some games and take advantage of it. If you're like a lot of baby boomers you still have for 20-30 years and you know, if this is just your dollar cost averaging into this Market pressure you are noted in Chris's story that the real issue here is not so much whether the stock market bubble burst, but what government does after the after the drop occurs, what should government do to soften the soften the landing there? Well, that's that's a tough question to answer in general because depends upon the particular circumstances. I think there's widespread agreement that long ago Bunch of Dimensions at the Japanese government has handled the 90's about as badly as they handled the sixties in the seventies if their policies have been terrible in the sense that they haven't stepped in to make sure that the banking system is secure and a solid the contrast with the wig the United States handle the Savings and Loan crisis is instructive in the Savings and Loan crisis hit what we did was essentially convince the citizenry that we had to suffer this large short-term cost about $210 step been liquidated the assets and got the bank and Savings and Loan industry back in shape. They still haven't gotten the political will be able to do that. So that's an example of something that was mishandled the same sort of thing in Latin America in the 80s when the early 80s Latin America went through a They said serious debt crisis and they mishandled arguably the consequences of that debt crisis, since you're not getting their policies in order of increasing if anything trade barriers rather than using them and so on the contrast with how Mexico handle its natural crisis in 94 is again instructive again, that was the situation for the Mexican Government work very hard to restore confidence. And in fact would use trade barriers and provided strong incentives for people to expand their own economic activity. So so governments in bad times and good times to basically do the same thing that they that they should do all the time which is Trust in the typical person that leave leave the typical personal loan to try and pursue activities as best as he can and stick with the big issues today. I block these big Bank mergers. Is that something we should still about? What was the big Bank mergers Lee be called as far as I think they should not allow them to happen in the lobby is Big Bank mergers are not going to succeed unless the history of mergers and Acquisitions a couple will work and then most of them will probably be gradually the pieces will be sold off into surviving institution be slightly bigger, but they'll be hit taken by the shareholders. The government issue is more of the Federal Deposit Insurance system, the too-big-to-fail policy their regulatory issues that are that are important and we don't want to make some of the same mistakes the way that the Savings and Loan industry was deregulated in the early 1980s which led to a lot of problems. But as far as you know, bigger, B's management really believe that they can manage these behemoths off of the consumer better product and keep their costs down. That's fine because you're more power to them because there's a lot of players out there like the mutual funds that are already have a lot of investment technology know their customer service and are just saying hey, this is a good opportunity for me to increase my customer base. Tom your question, please yeah, I just want to make some comments are on these boom times here in the US Navy give a little reality check if the American economy is doing so good. Why is the US the largest debtor nation in the world and now the income gap here is is reached obscene levels and When you when you consider there's over 40 million working Americans who have no health coverage and that the top 1% of Americans. The income is greater than the bottom 40% and the average CEO salary is more than 149 times. The US worker as in Japan is what 32 or some like that 3 2 1 I just like to get the comments on how do you explain that if we're all doing so well? Well, I have a couple things when I never believed the Japanese number on 32218. Do you have to start pricing in perks and and and various other things and they tend to think that you'll come a lot closer but we talked about the economy and economic growth rather talk about Nirvana. I mean, this is the real world this isn't this but I can't complain about an economy where unemployment that a quarter-century low and looks like it's going lower where you have an economy that is more open to two women and two elderly people and it's it's really in the unemployment rate among High School dropouts, which is really one of the you know, it's been high school dropouts at a terrible time has dropped from 12% to 7% No 7% is still way too high, but the trend is going in the right direction. So when we talk about the economy It's not there's always this thing about you can't you want things to get better? You want things to be improving but if we're talking about social security the healthcare dollar a lot of unemployment what's been going on the Intercity the backdrop of a strong economy really is important. It's fundamentally makes a difference pressure. We hear a lot about this income gap Beckley. A lot of programs about that. Is that something that bears that kind of planting the seeds of our own destruction here unless I get sad rest. Well it again it helps to take get a reality check on the income distribution. Close at analysis of the income distribution shows roughly the following kind of pattern in the early part of the twentieth century. We had a fair amount of dispersion in distribution starting in the late thirties, especially in World War II we experienced what was essentially an unperson to unprecedented reduction in distribution of in the valley of variability of distribution of income more recently. We've seen it go back but it's going back basically to the levels that prevailed in the United States in the 1920s or earlier now, Is that where we in trouble in the 1920s? Not really. So I think that this is something for us to be concerned about in for us to think about and think about remedies like Education and Training and so on and so forth, but I don't really see us degenerating into a Latin American Elite American kind of society where you have a small Elite witches credibly rich and the vast majority of people are relatively impoverished. Right look very simple half. The rest of the world wants to come to the United States and half of those people will be perfectly happy to live the way the bottom 20% off the of Americans Left 4 Dead relative to any. Of History. We are providing American society is doing better by even it's most unfortunate most impoverished people that sent you any other Society in history. So that's a huge Advance. Should we do better? Of course we should do better. Is it possible that are desirable to eliminate all inequality? Obviously, not the basis of market economies that some people are going to do better than others. If you didn't provide those kinds of incentives went well. We tried the experiment in the Soviet Union for 70 years. I think we've learned that doesn't work. So I think it's important for us to grow up and recognize that little bit of inequalities necessary Ronald. You're a question, please Don't seem to be affected her lie At All by the job the Dow Jones swings and I may be the change that plus or minus 1/8 of 3/8 cents per day create and I'm getting return of around 7% at the present rate when I first bought him as be getting more than that, but maybe the Dow Jones is just a big boogie man. It gets the general public all worked up and they will Market if maybe it's just a maybe it's just a few stocks in the Dow Jones that are really affected with the 30 stocks are big multinational corporations and linguistic convenience. Can I say, you know, you say well, how's the market doing today? And I'll tell you what the Dow is doing one of the broader indexes the Wilshire 5000 which is 5,000 publicly traded stocks. Great popular indexes the Russell 3000 in a growing number of 401K plans. I'm as much more representative of what's happening the market but there was a 1984 people tried to turn it into at least the Standard & Poor's 500. How is the Standard & Poor's 500 commercial capital and we'll say what what's the Dow doing today? So it's become a convenience, but and I don't know how many publicly traded stocks are on the u.s. 77,000. So if you have three stocks that are lagging the Dow hit me the odds are you going to have three stocks that are going to be performing somewhat differently case your question, please. Read something around the beginning of the month or something about how there's a possibility that the one that doubt does hit 10,000 that it could mess up some Financial software because it's not programmed to take a a five-digit doll report. That's interesting. That's kind of a kind of a new Twist on the Millennium everything about that are computers to equipped to deal with this. I don't see why not but I'd imagine so if they aren't I want to fire the people who program those things. Yeah, I'd be surprised. How high is the Dow going to go before the bubble burst? If I could answer that question, I'd be able to Richmond. I said that I'm not really familiar with anybody who's been successful at timing the market I speak from painful experience. My wife has strictly forbidden me to time the market and I listen to my wife so I have no intention of timing the market. So the short answer is I don't have a clue. I don't believe anybody who says that they have a clue Parker. You're next, don't respect what the professor was saying about the successes in in government getting involved in the economy. And I think we've got to keep some perspective on this and as a Mexican worker that was the devaluation of the peso and watching their their wages get cut in half was not exactly a success. In fact, we got an ongoing Revolution going on in southern Mexico that has do precisely Economic situation in that country and is as far as our own Savings and Loan deal goes we bailed out a bunch of millionaires with taxpayers' money. And then I don't know that that wouldn't necessarily be categorized as either. What I am wondering about is the stopgap measures that have now been put in place in the stock market if it falls precipitously and if your commentators think that this will be a success and stopping a stock market crash great question the so-called circuit breakers, which were I guess developed after the 1987 crash. Yes, are they helpful? Will they work? I think the consensus amongst most Economist is that they are in some ways in you since that is an argument that the fact that the circuit breakers are available actually causes larger fluctuations in the market then might exist without them and I take that kind of argument very seriously. I don't think that's there's really any evidence to suggest very strongly that the circuit breakers will play an important role in reducing the size of the crash if and when it occurs, so I'm somewhat skeptical about about those kinds of things. Doesn't it by people a little time though to take a deep breath and say well it looks like we're headed down now the problem the problem is that the extent that the circuit breaker The training is going to be stopped. Then you have an incentive to try and trade just before the circuit breaker hits right so that since it could potentially exacerbate downward pressure in the in the market just before so that people are trying to get in before they're there timed out to the market and we had an example of this in October when the stock market fell by 550 points since you be watching on the TV screen, I mean the the Wonders are Graphics now and you could be watching it and you have the squiggle line heading down but it will upload download up and you get right around window circuit breakers and it be a straight line down and then when trading opened again to get your squiggle still heading down, but once again, you get close to one the circuit breakers there was no squiggle it was straight down and there was a statement made afterwards by Professor Glover who was one of the designers the circuit breaker and he said looking up circuit breaker. So only work during a market panic. But the problem is you can't tell when people want to sell and when they're truly panicking and the ability not to know what you're really doing is you're in a way you're sort of encouraging more people to sell and you would like that's going to least one more call her on here Dale quick response to a financial packages and humoral response. One of the things that I would never get over a thousand dollars per share in Berkshire Hathaway blue AR software is built into mini software packages of financial companies, and those limits are in there. They're not necessarily check for but that's Because of our fight storage considerations that is a limit exists in the records know a lot of the stuff that I work for. This is charting software and things like that. So lit it gives you off bed charts. So it may be that are artists will I start making cold will anyone noticed quickly L quick question. This is directed to Professor Charlie effect if China follows the rest of Asia in its banking system. Falling apart and what the effect does this have on stocks when I trading partners are going through readjustments and does the 50 billion dollar trade imbalance between China and the United States have any effect on our own stock market give you a little bit of time if China is go to serious trouble. The world is in is in some trouble because it's a big economy. That's so that's something that we should we should keep in mind as far as things go back to the issue of whether whether it has any special impact because we have a 50 billion dollar trade deficit or Surplus with China is is Iran a huge trade deficit with my barber right not often enough. That's what people tell me about, but I still do it on a large trade deficit with lots of people who just don't want to listen to lectures. So does it bother me? It doesn't really bother us that we're running a trade deficit or Surplus with a particular country know and it bother us if we are running a trade deficit with the rest of the world only to the extent. That's a signal that we are not accumulating enough wealth to find ourselves in the future to that extent that does matter but other than that he's bees considerations are all minor in secondary Chris before I run quick tip for people who we managed to scare the shower or to protect themselves from the stock market bubble. Relax just do what you're doing and assume that you're going to participate in an IRA 401k and the biggest risk that is out there. The biggest risk is not saving. Thanks a lot for a joining us today. Thank you. Appreciate a good discussion. I guess this our VP Charlie was the chair of University Minnesota economics Department. Chris Farrell join us course, he's Minnesota Public Radio senior business and economics editor here in regularly on our sound money broadcast. This is midday coming to you on Minnesota Public Radio and will continue in a moment. Playwright Kevin claims as many people assume they know all about it when they see his plastic arm brace in one short arm. There's a lot of power in someone thinking they know you because you have what's considered a handicap and because of that you ultimately have the power over then join Kevin Kling and other performers with disabilities Sunday, May 10th 7 p.m. At the Fitzgerald theater for the closing event of Beyond affliction. Call to 901-2214 tickets couple of other program reminders over the noon hour. Today. We're going to talk about the 50th anniversary of the state of Israel today. The Israelis are celebrating independence. That's at noon at 1 we will go off to President Clinton's press conference right now. It's time for The Writer's Almanac.