i think they specifically targeted the stock market. it looked as though the market was close to a capitulation panic, and they wanted to avert that and succeeded. i'm not sure yet what it means. normally, after the first cut, the market declines a lot more in the medium term. but we're not living in normal times. it is just as well possible that speculation will now return with full force, and the bubble will expand again. i've learned to never underestimate the greed ruling in the biggest casino on earth.
just think about this for a moment: here we are, a day after a PANIC rate cut by the Fed, on the brink of a recession, and the Dow is 5% below a new all time high. fundamentals count for nothing...
it will be interesting to see if we now get 50bp. cuts every time the S&P approaches 1270. in any event, the frantic waving of the Greenspan put is like telling speculators once again that there effectively IS no risk in the market (tough luck of course for people that were long dotcoma stocks, but those were mainly small traders/j6p's, so no problem), that he will forcefully intervene whenever the S&P threatens to break the prior year's low.
this renewed assurance that the Fed will stop every stock market decline in its tracks has cemented the moral hazard problem, so i guess we will not see a true capitulation on Greenspud's watch, ever. unless something outside his control happens, like a comet striking the earth.
btw, an e-wave case can be made for the Dow to be entering a primary fifth wave up. if it is correct, one would expect to see Dow 14,000 by the end of this year. i know this sounds inconceivable and illogical, but the entire bubble has sported these attributes.
and yes, the Euro continues to look quite strong. already recovered the bulk of yesterday's losses. |
