Joan, I believe we have entered into a period similar to the 1966 to 1982 where the dow was bound between 500 to 1000 for 16 years, I think that this time it may be shorter, for a variety of reasons (and I think we might already be in the second or third year of such period). The range I had (for quite sometime is 6000 to 13,500 on the Dow and 1900 to 5300 on the Naz. We may simply have a series of bulls and bear market following each other in rapid successions, some of the bears will be associated with a real recession, some may not. As for Washington and the Feds, I am not sure yet what they are going to do and how it will impact the economy, the current lower fed rates will help liquify the system, as I have mentioned earlier. Hopefully some gradual tax cutting will also help reliquify corporations and consumers. If these are done without shocking the economy into either inflation (by having too rapid or steep a stimulation) or deflation (by keeping budget deficits excessively high, or interest rates too high), I think that we could get the balance sheets of both consumers and corporations in a better shape.
Many companies are still running with too little debt, take for instance that maligned company INTC, it has a pristine balance sheet, and they throw enough cash to increase this year their capex without impacting their balance sheet (I think they have a cool $4 B in depreciation per year and they plan to spend all of it and another $3.5 B on capex). Not too shabby, IMHO.
Zeev |
