Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: SouthFloridaGuy who wrote (1642)	1/3/2001 9:34:47 PM
From: tradermike_1999	Read Replies (2) of 74559

What a wild day. I stepped out to lunch and when I got back the Nasdaq had exploded and had melted up over 100 points in just a few minutes. My initial reaction was to think something was wrong with my monitor! But no, Alan Greenspan panicked and decided that he had to bail out the stock market and the economy with an emergency interest rate cut. Underline the word PANIC here. If you read in between the lines of what I wrote this weekend you could see that not only was the US economy on the verge of a recession, but there was a possibility of a full blown global financial collapse. Indeed, the next day George Soros, the world’s greatest financial speculator, made comments to the same effect. Usually when Alan Greenspan has made interest rate changes he has begun with 1/4 point moves and then used a 1/2 point move as the last one. The fact that he couldn’t wait until the regular Fed meeting or at least until Friday’s employment numbers is a signal that for whatever reason Alan Greenspan was in a complete panic this morning. I don’t know if this was because the stock market was crashing once again, a large Wall Street bank is holding junk bonds about to default(one of the current rumors), or there is an unseen crisis around the corner. Whatever the case lets hope that this new round of easy monetary policy will make his fears disappear, spur economic growth, and mark the beginning of another bull market. But I want to emphasize that you should still be cautious. I plan on doing some selective buying the next few days, as I do expect this rally to continue - but we will need to see further consolidation in the Nasdaq before it can begin another bull market. And there is a possibility that there is something out there that Greenspan is worried about and we don’t know about that could cause the economy and the stock market to tumble. The worst thing that could happen is if the Nasdaq makes a new low again, because Greenspan will have already spent his magic bullet and there will be no way to recover it. I don’t see any reason to think that is going to happen now, but if the market lines up to dump in the coming weeks I will be very worried.

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