Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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From: energyplay	5/6/2005 2:36:02 AM
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From the John Rutledge Blog - May 05, 2005 GM/Ford Downgrade The stock market got it wrong today. The stock market fell sharply when S&P announced their downgrade of GM and Ford bonds to junk status. Should have gone the other way. I have been through enough of these crises to know that any event of this size which threatens to impair liquidity will make the Fed significantly more accomodative. (Bank Herstatt or LTCM) A benign Fed and the huge profit growth being posted for Q1 are very positive for the stock market. ******************** My commnet - You got to be pretty old to remember Herstatt... I only read about it ;-) If the FED has stopped raising, bank stocks, especially those paying dividends, will be a place to be. If energy prices drop, utilities using oil and coal might also do well. Spark spreads increase, and rolling over debt in the future will not be as hard as it would have seemed two months ago. Also, the dividend will look better if interest rates have peaked.

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