Hearing lots of bullish sentiment again, "history MUST repeat itself" they say, to the chorus that goes something like this: fed rates cuts + economist and analyst upgrades = appreciation in stock prices. Big ticket rate sensitive items, including homes and car sales are hardly hurting either. SO Greenspans cutting job is working right?
Well not so fast, lets take another look at what is really driving the recent stock prices lower. As those in the kitchen have accurately stated many times before, it is almost specifically the IT sector (the wide spectrum including telcom, semis, PCs). Already talking heads are suggesting another .50 rate cut, and then we're off to the races. But is that really going to change the fact that over 90% of the telcom capacity is presently unused? Who is going to start spending again and when?
Or let me summarize it with another equation: F/O over capacity + huge inventory glut - decline in cap ex = share price stagnation.
Again, as mentioned in a recent post, the faith in our leaders to resolve a global recession is what the bulls must have, past events suggest I need more...
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