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Politics : High Tolerance Plasticity

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To: The Ox who wrote (2049)	3/20/2001 7:08:12 PM
From: cnyndwllr	Read Replies (1) of 23153

Michael, I think the reason for the small increments going up and the large ones coming down is because the fed overshot their mark. My take is that when they were raising, the markets were flying, wealth was being created in the markets, delivery times for manufactured goods were lengthening, the supply of qualified workers was shrinking and prices for raw materials were rising. It was clear that the fed needed to intervene to slow the economy and they began their rate cuts. Unfortunately, the cuts seemed to have little or no effect on spending, unemployment or the availability of capital and the fed just kept raising. When the higher energy costs and the fed rates kicked in at about the same time as the election crisis (at least it was a crisis if you were a democrat g) the thing went into a locked wheel skid and the fed had to hit the gas to power out of the slide. That's where we are now but the fed doesn't want to overcorrect and do a 360. I think they are shooting for a soft takeoff. It all means that the fed is on top of the problem, that they are still watching inflationary trends and that over time we are not likely to get a big meltdown no matter what the chicken little's think. The fed has faced much tougher times before, including energy problems during early shocks from opec and the gulf war and banking crisis. Interestingly enough, the excellent article that Razor posted within the last few days on investment strategies had a few of the headlines which were posted at the end of a bottom and those headlines were scary as hell and sounded just like the ones we are seeing now; ie deep recession looms after much damage already, types of things. I still think that this is in the buying range but I am greedy enough and careful enough to be off margin at this time. Ed

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