Some comments from Alan Abelson:
What prompted the Fed's half-point rate reduction last week was not fear that the economy was going into a tailspin or Nasdaq was going to zero. In fact, fear played no role whatsoever. Quite the opposite, the inspiration was purely festive: It was Mr. G's way of saying "Hi and have a nice term" to the new President.
Although his innate courtliness and good nature would in any case have prompted Mr. Greenspan's welcoming gesture, conceivably he was also influenced a tiny bit by an unannounced visit from three strangers who introduced themselves as Killer Cheney, Ax Ashcroft and Bruiser O'Neill and who, without much ado, suggested it was cut or be cut.
Gracious as always, Mr. Greenspan acceded to the subtle hint, and, just like that, a weight was lifted from the world, and, even more impressive, the Dow was up 300 points, while Nasdaq vaulted to its biggest gain ever.
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In truth, Killer was on to something. For what was noteworthy about the rate reduction was not so much what was done but how it was done. The half-point chop was a given. And even that the move came several weeks ahead of the Fed's next scheduled meeting was not entirely unanticipated. But to do it in the middle of a market session, as Barton Biggs observed to us, was a rarity of rarities that, in Barton's recollection, happened only once before: during the Big Crash of '87.
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Even though we think this bear market has capacious room to run and won't be over until the Dow and the S&P crack and join Nasdaq way down there below, we must own up to being taken aback by the latest demonstration of just how sick the market is. That the Fed's move, made with maximum flourish and fanfare and gilded with implicit promise of more to come, could produce only a one-day-wonder rally is frankly a shocker.
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We hate to close on such a dismal note. So perhaps we can offer a crumb of comfort by directing your attention to the latest Time magazine cover. The theme of which is spelled out in big bold letters thusly: "How to Survive the Slump." Time's cover is a famous contrary indicator, of course. Hey, we said it was a crumb.
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