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Strategies & Market Trends : MDA - Market Direction Analysis

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To: Ted Downs who wrote (72501)	3/17/2001 11:18:58 PM
From: Rob S.	Read Replies (3) of 99985

Why does everybody like to bash Mr. G.? Lowering interest rates by 1% won't much change the fact that corporate earnings are down. The tech stocks were bolstered tremendously by some false assumptions about the value of building out the Internet and telecommunications. The profits didn't add up and business turned down as a result. Interest rate cuts will help to stimulate demand and long term will bolster the economy but it will not revive the "new economy" to the fantasy island it was once thought to be. The market will move up when investors see a light at the end of the tunnel for improved sales and earnings. Valuations of most high tech stocks are still high. Sales and earnings will continue to trend down for at least two more quarters. The NASDAQ is still valued higher than historical norms; as earnings estimates come down the stocks should continue to follow. We are due a technical bounce but in this market that may be 1-3 days and then the market will be right back down. Greenspan is doing his job by providing a stable and efficient market. The majority of instability has been caused by not increasing the margin requirement for stock purchases and decreasing interest rates too much during the "Asian crisis" period. That pumping of liquidity helped to distort the market into the bubble that has now burst. The biggest problem with the stock market is caused by investors who lost sight of valuations and the risks that can occur with exciting "new economies". I hope Greenspan lowers interest rates by no more than 50 basis points.

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