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Strategies & Market Trends : Sharck Soup

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To: velociraptor_ who wrote (10131)	2/24/2001 1:55:40 PM
From: Mike M	Read Replies (1) of 37746

I'm not convinced that the FED is as stuck as you say it is. There was plenty of liquidity at the turn of the century and the dollar held up fine. I don't disagree that there may be some adverse reaction to rate declines, the dollar is overvalued, but the follow through will depend on what other central banks do and some of them may also be inclined to stimulate. This is especially so if they are encouraged to do so. Remember a reasonably strong dollar remains in the interest of more countries than just the U.S. If the perception overseas is that these declines are taking root then some money will remain in the U.S. While I agree that Friday did not serve as a defining bottom, I am more hopeful than you seem to be that we needn't crash. Rate cuts should not be market driven. However, the market and the economy are inextricably intertwined. A third rate cut has historically been a significant booster for the markets and it would certainly normalize the yield curve. Thus far the bond traders have not been spooked and I doubt they will be unless the economy begins to heat up again. Normal yield curves are attractive to the stock market. Lets try not to use the Japan card. The demographics of the two countries are so completely different that there is little basis for real comparison. As bad as our bubble was, and it was pretty bad, Theirs was far more dangerous from a structural nature and they had no baby boomers to pull them out of it. We will need a more clearly defined bottom. I suspect we may have that by March. There could be other opportunities to test it later this year and possibly again next year. The world doesn't have to come to an end, in my book. I think the FED has options, fiscal policy has options and the investment community has options. We can easily screw it up. But it isn't necessary and I sure hope we don't. P.S. I think brokerage houses have a clear understanding that the investors financial health is in their best interest. That we are all pitted against one another in a buy sell or hold paradigm makes each of us friendly competitors not arch enemies. We all need someone to sell to and we don't always buy things back at lower prices. I have no interest in defending brokerage machinations but nobody's crystal ball is that clear. I wish you well in your trading.

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