Crash Cows

Are lots of US stocks overvalued at the moment? Probably. So should you listen to crashmongers, who use the 10th anniversary of the 1987 bungee-bounce market crash to panic you into abandoning careful saving and investing plans?

No. Just be extra careful to know as much as possible about the firms and funds in which you are filing away 401-k, IRA, and after-tax money for retirement, house buying, education, or emergency use. Make a resolution not to act on tips, even from your rich uncle. Tips tend to feature techie names with catchy suffixes, not solid facts on the future of companies.

Pay attention to supply and demand, demographics, the globalspread of retirement programs, and factors like productivity and energy costs. Noting when the first boomers near retirement (circa 2010) can help forecast which industries will gain or lose customers. It may also tell when a big chunk of investors could segue out of growth stocks into bonds.

If American savers stick to an informed, disciplined plan, they may become both less irrational and less exuberant. And that, in turn, would be more likely to produce markets whose valuations grow at something like the same pace as corporate earnings.

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