The year 2000 has quite an act to follow but any euphoria you might have for 1999's extraordinary results should be tempered with caution about some disturbing developments.

The technology-sensitive NASDQ Index was up over 85% last year, yet one of the broadest measures, the ValueLine Geometric Average, was down -1.4%. This is one of the most pronounced differences since the mid-1970s bear market. Equally excessive has been the rapid rise in stock values in relationship to the overall U.S. economic growth it should represent. Ten years ago, NASDQ stocks were worth about 5% of GDP (Gross Domestic Product); today it is 55% of GDP, and even more alarming, the total for all U.S. stocks is now over 170% of GDP.

What we are seeing is a period of intense financial asset inflation almost to the level of a mania. This is especially true since most of the fast rising indexes are being driven by a handful of popular issues and pure speculative greed. The U.S. Federal Reserve Bank (the Fed) has raised interest rates four times in order to pre-empt a possible shift away from financial asset inflation to more conventional wage or commodity forms. The bond market's current price strength is probably reacting to the increase probability of an economic recession (good for bonds) now that we have had a record 107 consecutive months of economic growth.

Bubbles always burst when you least expect it; so keep your expectations in line with more temperate long-term trends and watch out for continued market volatility (price swings). Keep calm, you're in this for the long-haul; besides, your future retirement depends more on how much you contribute and how long you are invested than occasional swings in market prices.