Show 8F The Salt Lake Tribune Sunday August 9 1987 Bull Market Created $2 Trillion in New Wealth and Some Mixed Blessings 5-Y- ear By Chet Currier AP Business Writer NEW YORK — Five years ago this week the stock market embarked on a rally that has created $2 trillion in new wealth As the Dow Jones average of 30 industrials the best known measure of market trends soared from 77692 on Aug 12 1982 to new highs above 2500 this summer the rewards available to investors in the market were plain to see But what has the bull market accomplished for the economy as a whole — in particular for the three out of every four Americans who acto the results of the New ' cording York Stock Exchange’s most recent shareholder census own no direct ' stock investments? On the evidence not very much to date Certainly not as much as one might expect from a textbook bull market in which the creation of new capital is supposed to spawn increased production new business ' ventures and widespread prosperity “I’ve been calling it the eerie boom" said Raymond F DeVoe Jr a veteran financial analyst who works for the investment firm of Legg Mason Wood Walker Inc "It’s seemingly unrelated to what’s going on in the rest of the economy” Of course $2 trillion in paper profits in the stock market isn’t the same thing as $2 trillion in spare cash If everyone tried to take their gains out of the stock market at once a lot of the money would vanish “Any idea that this is all there to be is nonsense” observed David tapped ' Levy an economist in Chappaqua NY es that serve the investment industry such as law firms and financial printers In the brokerage business itself according to the Securities Industry As- has been erratic and sluggish Consumers by all accounts have typically relied heavily on debt rather than any huge harvest of investment profits to finance their spend- from about 201000 as of Jan 1 1983 to about 277000 four years later However those numbers don’t make much overall difference in a civilian labor force of more than 119 million people The onset of the bull market true to tradition helped usher in an upturn in the economy that began in late 1982 and still continues with few economists predicting a recession in the immediate future But in contrast to the financial boom the expansion of the economy outstanding as reported by the Federal Reserve jumped from $355 84 billion at the end of 1982 to $57778 billion four years later As for their investment behavior the NYSE acknowledged that from 1983 to 1985 the increase in the number of individual investors was concentrated in mutual funds During that period the census actually showed a slight decline in the number of people who owned stocks listed on the NYSE The theory has been widely ad- sociation money-manageme- ing Their debt installment vanced that individual investors Bull Market’s Roar Heralds Economic Record The United States is vastly different from what it was in the 1790s and from 1848 to 1853 when Wisconsin and California were admitted to the union and the White House was occupied successively by James Knox Polk Zachary Taylor Millard Fillmore and Franklin Pierce Long expansions are easier to achieve now The last long one 58 months occurred as recently as 1975 to 1980 That 20th century record should be passed in NEW YORK (AP) — The US economy is a few months away from achieving the longest peacetime expansion since the earliest years of the republic With no sign of recession on the horizon the economy the five years of appears likely to pass in peacetime growth set in the westward expansion years of 1848 to 1853 That would move the expansion that began in Novemr ber 1982 into second place behind the growth to 1796 of when 1790 George Washington was period president and Alexander Hamilton and Oliver Wolcott Jr were secretaries of the Treasury “We’ve got a long way to go to beat our forefathers" said Geoffrey Moore director of Columbia University’s Center for International Business Cycle Research The current expansion partially accounts for the explosion in the stock market whose bull market began a month against more than 55 percent m government securities and municipal and corporate bonds inThe philosophy of growth-stocchannels which theoretically vesting capital to rapidly expanding businesses was a predominant theme in Wall Street's last big bull market in the 1960s In the current upsurge growth scarcely gets mentioned Instead corporate America's emphasis has shifted to “restructuring” and "enhancing shareholder value" through earlier But economic growth has not been as healthy as the expansion might indicate In fact the sluggishness of the growth may be one reason it has lasted so long The economy has not had a chance to overheat and crash The consensus view of economists surveyed by Blue Chip Economic Indicators of Sedona Ariz is that the economy will continue to grow slowly through 19! 3 and that the next recession will not strike until the beginning of 1989 g rate raider Whatever their origin most of these efforts arose from what Merrill Lynch one of the giants of Wall Street described in a recent study as "a growing awareness that the strategies that enabled them to compete and prosper for most of the time since the end of World War II are no longer appropriate "The deregulation of large segments of the economy the loss of major markets to foreign competitors mid-point- and the transition from an environ- ment of rapid economic growth and high inflation to one of slow growth and subdued inflation have made it far more difficult to show profit gains" Critics have decried the wave of takeovers buyouts stock buybacks and other deals that came with the restructuring movement as little more than a fast shuffle designed to enrich the dealmakers without adding much value to the economy If Merrill Lynch's analysts are correct however there is reason for hope that broader benefits may be in the offing The firm titled its study “Corporate Restructuring Begins To Pay Off” It notes that many companies that have undergone this treatment often accompanied by a painful upheaval for their employees and the communities in which they operate are now starting to report stronger earnings And it concludes “They have been able to do so at a time when the economy continues to show little in the way of growth suggesting that even greater gains could be forthcoming in a more favorable economic A PROPERTY TAXES TOO uij) HlG nls Your Best Defense Is A PERSONAL APPRAISAL CALL TODAY non-prof- it month-to-mont- im- proved efficiency and competitiveness Some restructurings have been undertaken voluntarily Others have been forced by buyouts takeovers or the threatening presence of a corpo- “Expansions in the economy have become longer and recessions have become shorter than in the ‘good old days’ prior to 1930 which is a good thing of course" Moore said "Service industries have become more important and they help to sustain an expansion and abbreviate the recessions” he said “We have a lot more safeguards against loss of income such as welfare unemployment compensation social security All those things help to sustain incomes “Finally the government’s policies both monetary and occasionally fiscal have helped to abbreviate recessions when they get started” Moore said For the record the beginnings and endings of expansions are measured by the National Bureau of Economic research group based in CamResearch a bridge Mass whose determinations are accepted by the government s of months — Expansions are measured from or years in the case of the ones of the 18th and 19th records were not kept centuries when six-yea- record-settin- The ripple effects of the historic rise in stock prices can by no means be dismissed For example it has helped create strong markets for residential real estate in areas where the brokerage and industries are concentrated such as New York City and its suburbs It is a boon to the satellite business employment increased wishing to avoid the vagaries of pickhave ing stocks for themselves turned to mutual funds for diversification and professional management in the stock market One problem with this interpretation however is that most of the fund industry’s spectacular growth in recent years has occurred in funds that don’t invest in stocks at all but rather in government securities and other types of bonds At the end of 1982 according to statistics compiled by the Investment Company Institute the fund industry (excluding money market funds) collectively had 621 percent of its assets invested in common stocks By the end of 1986 even with the sharp rise in stock prices that percentage had dropped to 362 percent MULCOCK APPRAISAL 487-388- or 3 h £tes posr 487-388- 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