I think the problem is worse than we think. The problem is that as the stock market goes down, companies are under tremendous pressure to make their numbers. But, since business spending is also contracting, they must do so by cutting costs. When they cut costs, it hurts other companies, who have no visibility and end up not cutting THEIR expenses enough. Witness NT as an example.
So, they don't cut enough, and their bottom line shrinks. As their bottom line shrinks, their PE rises, making them a 'risking investment' in today's market. Their stocks are then hammered, because no one wants to own a high PE stock. So, they cut costs some more, and the death spiral continues.
At the same time, most stock pundits are making it worse, saying these companies are STILL overvalued, and unattractive. It contributes to the overall downward spiral.
Someone has to dig their heels in. I think that someone is AG. By cutting interest rates more aggressively, and sending the market the comforting message it needs, he helps break the cycle of fear. Once that is broken, you'll start to see a little more optimism.
If we continue this downward cycle through the end of the year and into 2002, you WILL see the effect. Massive layoffs, business failures, unending red ink. Then, you'll WISH it were just a bear market instead of a 14th floor leap-fest.
Sometimes, leaders must step up and lead. AG is watching Rome burn. |
