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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Earlie who wrote (54342)	1/4/2001 9:25:05 PM
From: UnBelievable	Read Replies (2) of 436258

More Seriously Other than a general crisis in confidence, its hard to imagine exactly what specific problem this action, which truly is more symbolic than substantive, especially since the Fed has never been hesitant about increasing liquidity even when it was raising rates, would actually help. I'm sure the wild swings in prices played havoc with all sorts of plans, portfolios, loan covenants, and what not but I've found that additional confusion and diversion are usually not helpful when attempting to address a complex and sensitive issue. The fundamental problem is that the market can only increase at a rate significantly faster than the economy is growing for a very short period of time. Exponential growth gets impressive very quickly. There are a number of things to think about and that clearly have never been honestly addressed. One of the most obvious is what would an acceptable and achievable solution look like. It seem to me that any landing that does not include 20 to 30% annual increase in equity prices seems like it will be considered a hard landing. If the Chairman were to get on TV and say that the Federal Reserve can intervene to help prevent further erosion but that it will be unreasonable for people to expect stock prices to increase at a faster rate than the economy is growing over the next decade, which at best is going to be 6% per year, would that staunch the outflow of money that was invested based on 50 - 100 % year on year growth? It is also unrealistic to think that the market started declining due to a lack of confidence and that if we restore the confidence the growth will continue. The slowdown is due to the most basic laws of physics and will no more be changed by changing beliefs and expectations than terminal velocity. It also is not clear who, with the exception of the most CNBC addled could actually believe that unlike Tuesday, and the months which preceded it, given the Feds action yesterday the market is now a safe and secure place to invest money you are going to need. Common sense may be rather uncommon but I think that the dangers of the market have been made clear and that many normal people may reasonably conclude that whatever the Fed did may have fixed the problem but I have enough doubts about the government actually fixing anything that I think I'll take my money and put it in the bank and if things really are OK in 6 or 8 months maybe I'll think about putting it back in. Which brings us to the most troubling possibility. Since the Fed did not actually change anything that really was responsible for the market meltdown what happens once it becomes clear the market is still melting?

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