Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (5843)	7/15/2001 12:43:30 PM
From: tradermike_1999	Read Replies (2) of 74559

Hey Jay. HAven't really been posting or following SI for past few months. But will have to start checking back in. Here is what I wrote this weekend about the market: Last weekend I said that the Nasdsaq would likely bounce off of the 1970 or 1900 support levels as earnings season began. We got that bounce on Wednesday and some nice follow through as the week came to an end. I expect to see the market trade with an upward bias through the end of August - as earnings announcements continue and we approach another Federal Reserve interest rate cut - and will continue to slowly add long positions to my portfolio and trade short term breakouts. Once August comes though I will sell off the laggards in the portfolio and enter a large group of short positions. I am expecting a large correction to follow. One that will take the Nasdaq down to its April lows and will likely penetrate them.You will want to be in a defensive posture as the summer comes to a close. On Wednesday the Scared Crow is going to testify in front of the US Congress. Our representatives will probably ask him some pointed questions about growing unemployment, but he'll deftly dodge them and talk in riddles and complicated sentences that baffle and confuse everyone. Whenever he speaks to the public his intention is never to speak straight or honestly. Instead he tries to make it sound like what he is saying is extremely complicated in order to give the impression that he is some sort of super genius and all you can do is sit there passively and trust him. He has the most arrogant public persona in Washington. Reality is that he has mismanaged interest rate policy these past few years. The result has been a stock market bubble and an economic downturn that will be probably end up lasting much longer than it should have. There is nothing you can do about Greenspan. You have no vote over who reigns on the Federal Reserve and no one you elect into office has any say about what it does. Not even the President. Woodrow Wilson gave up the power of Congress to manage the money supply when he created the Federal Reserve Board in 1914 on the advice of Colonel Edward House who was the personal assistant of both Wilson and J.P. Morgan. You can read about it in the history books. But anyway. After earnings wind up which will be the by the middle of August everyone on CNBC will focus on the Federal Reserve Board and worry about whether or not Greenspan will cut again. Right now the bond market is factoring in a 100% chance of a .25 point cut so it is a no brainer that he will. The excitement will probably help keep the market afloat. Some commentators will get so excited that they will talk about an end of the year rally. But after the rate cut all of the good news to buy in front of will dry out. All that will be ahead as September comes is another batch of bad earnings warnings and stories of rising unemployment which will spook the market and send it lower. When Greenspan speaks this week he will tell everyone that he has fixed the economy and his interest rate cuts have kept consumer spending strong. He probably won't say much about the state of corporate investment spending which is dismal thanks to the crash of the new economy bubble. He is now ushering us into what a reporter called the Tinkerbell economic era in which everyone is supposed to trust Greenspan's rule and use their credit cards to keep the economy afloat, because the investment and employment crunch isn't going to do it. Debt is supposed to fill in for real economic growth. That is the real scary bubble. Not the stock market. The months of September and October will be the most critical of the year for not only the stock market, but the real economy. We will find out whether the consumer fill fall down because of layoffs or if growing public debt will be able to replace real economic growth as Greenspan theorizes. We'll see the results when his new theory gets put to the test

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