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To: Lucretius who started this subject1/27/2001 11:39:58 AM
From: sun-tzu  Read Replies (7) of 436258
 
An open question:

I was wondering how this thread would address certain specifics regarding the market. From my perspective, this whole process began in October 1998 with the collapse of LTCM and the Russian banking crisis. Three successive rate cuts of 50 basis points helped to propel us towards the "irrational exuberance" culminating in the March 2000 double top.

Finally, the policy of monetary tightening caught up with the US capital markets, particularly the technology issues, and we have had a prolonged downtrend as the excesses were worked out. Recent action suggests this downtrend to have been reversed.

My questions are:

1) Clearly we are an example of the Austrian Liquidity Cycle. Now that we are in an aggressive easing environment, how do you justify a continuation of economic demise?

2) From a technical standpoint the 2200 low was retested after Greenspan's rate cut and held. In addition, the Nasdaq downtrend line has been broken. The market held Friday and technology reversed despite tremendous negative news. What technical means to you currently employ to offer an argument to support your alarmist mentality?

3) My analogy to the market is the car that slips on ice and continues to overcompensate until it spins out of control. The alternating rate cut / rate hike / rate cut fed stance is the driver spinning the wheel in an attempt to gain control. My understanding of October 1998 is that it could have precipitated a worldwide economic crisis, thus justifying the initial rate cuts. At this point what type of scenarios do you offer to support a continuation of the car spinning on ice? Can you give me any rational argument that doesn't sound like it came out of a Ted Kazcynski pamphlet?

It seems to me that the bad news is out. The excesses have been 75% worked out. The Fed is easing and we can now return to a more rational market. One that is based on appropriate multiples as a function of earnings and growth rate.
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