<<, what if the stock market is the economy, or at least a big part? >>
You made a beautiful point, I think great thinking on your part, let me concgatulate let you, now to the music..
1. If it so we are dead as bulls.Let me admit ito n the onset, no argument.
2. $ 4.5 trillion has been washed off from US stock market cap, that is nearly 30% of the cap as of end 1999, now since last 5000 was hit, we have seen this decline consistently, not in a day, we have 1987 Oct but extended over 12 months not one day, 1987 Oct was charaterised by that 27% decline in one night, here we have more of extended decline with pockets of 'irrational exuberance' wiped out, like my BRCM's and PMCS..In htis extended delcine we hould have seen a huge impact on retail sales, consumer spending or sentiment or housing starts, if markets were to be economy.
2. If markets were to be economy, like Japan we should have seen 'falling prices' if apparels are not falling and medical is not falling or retails stays strong what does all this shows, we have a robust demand as of Feb end. CPI numbers would have been disasterous if we had -.4%, that
is the current argument of major hedge funds that of deflationary pressures not inflationary pressures.Robust demand by now with real rates being so high should have been killed, like the corporates suffered the burden it should have killed the demand also.
3. The 4.5 trillion$ I have talked about above represent 10% of individual wealth in US, an individual who has taken a hit is either launched in a 401 K has a strong holding power or is playing with savings not disposable income.I don't see that if disposable income is not hurt how can we expect the broad economy to be severely hit.
4. Don't forget that 'margin debt' has fallen, from $260 billon to $180 billion, this is a huge fall and indicative of a bottom. In comparison to the market cap it is miniscule.
5. Now if 'market' is economy, don't forget that surpluses in budget this year should have changed to deficits after such a concerted decline..If that was the case FED would not be buying the TB's back on comiong Friday in an effort to retire the US loan..$ 2 billion is now going to bought back..
Iti s for htese reasons I think that 'market' is not economy, it is part of hte economy and only 72% of the GDP from 120% last year..Since last year when AG was raising rates this thread has argued many a times that the problem is hte high real rates not the inflation, now we are seeing a daramtic slow down from the white hot economy speeding at a rate of 7% some quarters to 3%, thati s where I think we will stabilise and that is where we will see that growth rate adjustment will be needed..
Ebbo Caddy I ma no AG, I am Pakistani from a very modest background, I know no big htings but please make an effort read my posts over last year, if this guy would have
listened to us he would have not raised rates so high based on CPI/PPI, I think that the real rates were kept to high far too long, AG and FED were old timers and could not understand the productivity influence of hte economy, they also got mixed up with the inability of reading hte breakdown of the 'phillip curve', we declared it dead four years ago, the FED was operating on a model thati s and was old, the unfortunate thing is that most of these dime a dozen experts in big houses tend to follow herd mentality, we all are part of it, we have maintained an independent line, we have been bullish we are bullish and we will be proven right, in the interim I am ready to take all that abuse from the people who think we are trying to save a sinking titanic, no we are not.. No answer so far has come to me about this lack of understanding on steady prices and deflation, like most of my points either I am totally out of sync with the whole world or my economic education was wrong, but something is miss here big time..I did it extempore and i hope you will ignore hte omissions..Your obedient servent ready to serve under love and abuse.. as always .. please send me one more..Ike |
