Joseph, like it or not, Greenspan will have to get help from the fiscal side as well, if we are going to go into a liquidity trap. I don not think we are even close to one. However, the fact that we are running a sizeable budget surplus is part of the reason we might be heading into a recession. Hopefully, there is enough 'consumer confidence" out there that the monetary steps taken (and future rates reductions) will get the consumer back to spending. For one, lower mortgage rates release a lot of buying power into the economy. Furthermore, the housing and automotive industries (major beneficiaries of lower rate in our economy, but not in Japan) could by themselves counter reduction in capital investments by industry.
I for one disagree with Fleckenstein (sp) and think that the Fed's move is the right one here and now. I have turned much more positive on the market. I do not see new highs in the Dow in the near future, but the trading range could re-expand back to the low 9000. It will be interesting to see if the soldiers follow the Generals. If they do, we might even have a resumption of the Bull market, IMHO.
Zeev |
