The report was written by Paul Summerville, chief economist at RBC Dominion Securities. Here are some excerpts: "Booms in luxury goods, wars over nannies, unheard of sums being paid for weddings, bar mitzvahs, sweet sixteens, and everyday sporting goods at charity auctions, confirm that the magic has leapt from the financial markets to the family rooms of middle America. We are told that the pace of mansion building (the 20,000 square foot home) now rivals the late 1920s, and in fact, that more mansions have been built in the last five years than in the previous 65. At the same time, day-trading waiters and waitresses, truck drivers, secretaries, economists, journalists and -- well, just about everyone -- is trying to get their very big piece of the American pie. And for just $19.99 a trade.

"Maybe one of the best examples of the excess that has gripped the imagination of the American investing public is the TV commercial for an on-line trading service that shows an everyday Joe in a beat-up pick-up truck explaining to a neatly dressed but decidedly middle-class businessman that he has just picked up hitchiking, how he has made a fortune day-trading, and has his own island to show for it. His own island. I WENT INTO THE JUNGLE A YOUNG MAN AND CAME OUT RICH, FABULOUSLY RICH. "The remarkable message of this commercial is that it is only the cost of the trade and not the analysis that went into making the correct trade that is the difference between great wealth and getting by. Anybody can do it. We live in a new era, it will never end, make sure you are fully invested, be smart and do your trading on-line, the economy will never slow, Greenspan is God, buy bigger, make sure you get your piece of the action. And so on. THE WONDER OF IT ALL....

"The language used to describe the current and future state of the US economy and markets seems firmly rooted in wonder, blind to the siren calls of skeptical economists, how few there may be. Nevertheless, if one is prepared to believe in the scientific method as it applies to the study of economics and markets, there is ample evidence of tremendous risks in the US economy today, enough to forecast a recession as soon as next year, with or without Y2K turmoil, most likely without...

"Leaving science behind for a moment, let me share a personal story. One that you're more likely to remember than the depths to which America's private sector savings rate has plummeted but thankfully makes more or less the same point. The names have been changed to protect the innocent. "Recently, a 40-something rent-pocketed music teacher in New York borrowed $30,000 (real dollars) to build a music studio in his apartment, financing it on a number of credit cards. Credit cards?! Cash balances at 17.5%?! No, this teacher was smart enough to collect the six-month credit card company introductory offers of 5.0% on credit card cash balances and flip one cash balance to another card as its time came due. That, unfortunately, is not the punch line. The punch line is that EVERYONE is doing it. Everyone, like all the music teachers, and taxi drivers, and social workers, and secretaries, and coffee shop owners, and, and, and.....

"In Latin America in the early 1980s, they called this form of financial sleight of hand the "bicycle" and, like all bicycles, once the breaks are hit they slow down very quickly, and often even fall over. In the last week of June, with the world apparently out of danger, the Fed started to apply the breaks by raising rates. It appears that later this month the Fed will lean even harder on the breaks of a bicycle that is heading at breakneck speed down a mountain full of potholes. "keep you're eye on the bicycle"

-- Drken (Drken@bubble.gone), August 14, 1999

Answers

Drken: Did Mr. Summerville read George Reismann's article "When will the Bubble Burst?" and then write his paper? I mean they sound almost identical.

http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=001EWx

-- bardou (bardou@baloney.com), August 14, 1999.

I thought it was another post about the "spoon"

-- Johnny (JLJTM@BELLSOUTH.NET), August 14, 1999.