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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 680.28-0.5%4:00 PM EST
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To: HairBall who started this subject5/14/2001 6:56:03 PM
From: gfs_1999  Read Replies (1) of 99985
 
Cramer: Rate Cuts Can't Stop Now
By James J. Cramer

5/14/01 5:05 PM ET

The Fed's still got a lot of work to do. It is crucial that the Fed get the economy back on a growth path -- we are far from it right now. We need to break the notion that has developed in the market over the last year, the one that says, "If you wait, prices will go lower." Only rate cuts can snap the back of that reasoning. If the Fed does one more cut and then says it is done, that will undo the cut's promise immediately.

Remember, I believe that this economy is led by the stock market and not vice versa. I think we all agree that if the Fed stops right here, the Nazz and the Dow slip right back to where they were before April. By taking the rates to 3.5%, the Fed would virtually guarantee more capital coming into the market -- if only because cash will yield much less. We also guarantee that banks will want to lend more. Going to 3.5% would also make the stock and bond markets more likely to be hospitable to new capital creation, which is what we need.

To stop after tomorrow is to run the risk that, as unemployment starts rising, as it will next month, the consumer will join the corporations -- the weakest link in spending right now -- and the spiral will go ever lower.
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