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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 83.12+3.1%Feb 3 3:59 PM EST
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To: chic_hearne who wrote (45981)1/4/2001 10:28:53 AM
From: The Phoenix  Read Replies (1) of 77400
 
NAPM at 42 - the lowest level since the 91 recession is probably the catalyst. The Fed new things were going badly for a couple of months now... they waited for the NAPM numbers - they sucked - surprisingly so - and they acted. In fact the fed acted too late - by their own admission or they would not have acted mid meeting. THey new, and said as much, that the economy was weakening during their December meeting. They have had an overly hawkish view and rose rates in the face of a phantom inflation that not only never materialized but there was never any indication that there was inflation. They pointed to tight labor markets as a catalyst but productivity improvements outstripped any rises in labor costs. Yes, energy prices have had an impact but monetary policy has zero effect on energy prices.

Now the fed, in the face of actual data showing slowing has waited for months to act.... unlike their pre-emptive attack on inflation they have been late to react to recession fears. They had to act and act decisively. The issue is however, that these rate reduction won't have any material effect on earnings for at least 2 quarters.

The recent slow down was fed induced (and yes, market bubble induced) as a reaction to fear on inflation and an out of control wealth effect (which I believe is the real reason).
This recent action is required to solve the problem that the fed created as a tool to get rid of the craziness in the markets - although they'll tell you it was done to fight inflation .... that was never there.

One thing is certain... there is nothing sinister here.. there is no conspiracy... there is no masking of bank failures. The fed is acting to keep the economy from a hard landing. Will it work? Only time will tell.

OG
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