Greenspan and Bush have apparently agreed to do something forceful about this slow-down (possible recession). Greenspan agreed to reduce rates into the spring and Bush is going to cut taxes which will be in effect by summer. The money flow will therefore greatly increase and save a lot of companies. It will also reduce debt costs, improve purchase and sales, housing and generally give this economy the boost it needs to go into the 2nd half in fairly decent shape. There is definite risk in buying stocks now but when wasn't there? The key I think is to avoid getting too emotional either long or short and take advantage of others irrational mood swings. That means buying the bad news and selling into the exhuberance.
Watch closely tomorrow for the moment when the guys on CNBC ask the audience "Is this the time to start buying some of these technology stocks?" That is always the moment when the buying resumes. And yes Greenspan may cut again this week, but only if the bears start getting too aggressive. He has 1 1/2 points left in his bag of goodies and will use them in increments over the next 3-6 weeks. By then the news will be about tax cuts and the market will start pricing that in. Should keep us in this general trading range until summer, unless or until companies beat lowered expectations next quarter or the quarter after then we can resume a modest climb.
Why am I so sure this will happen? Because Greenspan (as master of the world economy) cannot afford to not make it happen, and he has the power, and the freedom to do so. No one will criticize him for additional rate cuts. And he knows that the market and economy needs his help now. Not to help traders but to keep public confidence at least neutral going forward. As we've seen when the public gets too bearish they stop buying goods, and that would spell doom. Greenspan is the enemy of the doom and gloomers now, and is working for longs, at least in a modest sense.
I'm going to keep buying the dips then take my 15-20% profits as they come. The only mistakes I've made recently was not taking ALL of those 15-20%+ gains, only half of them. From now on I'm taking all of them, and also buying on the 15-20% drops. I don't think there's much more upside or downside in your average stock right now. A 30-40% trading range and right now we're down toward the bottom of it. That's why I'm buying the next dip tomorrow if there is one. I will also sell into the next Fed rate cut and buy back afterward, hopefully right before everyone else. |
