Another good comment taken from a poster called Original Fred at bearforum.com
"IMHO, it is a mistake to compare the current rate cuts to past rate cuts as if rate cuts occur in a vacuum. I think you need to look
at all the economic factors surrounding the rate cuts and see how they compare to past economic conditions during periods of
rate cuts. Everyone is always looking for that one simple indicator that is guaranteed to predict the future, and I am sorry to say,
it does not exist.
My guess on rate cuts is that they usually come after the economy has already entered recession. I would also guess that most
recessions are caused by a consumer slow down. This time, it is different. We have a lot of rate cuts, but there is no recession
yet, and a business slow down is the problem with the consumer still spending like crazy and running up huge amounts of debt
along with a gigantic trade deficit. If anyone can show me a period like this in history, I would be glad to study it, but I do not think
it exists.
My point is we are in uncharted economic waters, and there is no exact way to predict what will happen next by looking at
historical indicators. "
I have to agree with this a lot. Though comparisons to past history is a great tool for learning, we must also look at what is different. On the outisde, we obviously have a need to correct still in this market, but the question is by how much and when? An alternative question that must be considered is, will we really get out of this OK? While my personal thoughts are bearish, I remain open to criticism that presents a new perspective on my thinking. |
