It's U.S. Investors, Not the Economy, That Worry Europeans

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PARIS -- Some analysts here are telling would-be European investors to be wary of America's high-flying stock market because of the lack of sophistication among many of those who have recently bought shares for the first time.

U.S. economic conditions could hardly be better, they say, but the psychological danger signals are starting to flash red.

Paris financial consultant Frederic Luizet said he is most worried by the fact that "Wall Street has entered the phase when neophytes have started to play the market, lured by the prospect of quick, ever-growing profits. In the past, that traditionally has been the moment when the markets begin to go sour." Specialists have taken note of Federal Reserve Chairman Alan Greenspan's repeated warning last week that the record high level of U.S. stock prices may be "unsustainable" because the pressure of rising labor costs might trigger inflation that could put a brake on expansion. European experts agree with Greenspan that there is little imminent threat of a significant economic downturn in the United States. But many are concerned about the danger of "some unforeseen event panicking investors," according to Geneva-based economist Jean-Luc Pinault, a specialist in stock market fluctuations. A "troubling" development -- a war in an economically sensitive region like the Middle East, the sudden death of a major political leader, a jarring economic row between the United States and Japan or the European Union -- can never be wholly discounted, Pinault observed. "Lesson number one in considering the stock market is that sooner or later something unwelcome will happen," he said. And the higher the American stock market goes, the less it will take to push the panic button, he added. Pinault pointed out that the "investor base" in the United States is vastly broader than in Europe, where dealing in stocks and bonds remains the preserve of a comparatively small and distinctly affluent group of people. …