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Strategies & Market Trends : Steve's Channelling Thread
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To: James C. Mc Gowan who wrote (26616)9/8/2001 9:20:08 PM
From: Zeev Hed  Read Replies (3) of 30051
 
James, there is no shortage of liquidity to fuel a very powerful rally, their is shortage of confidence. MZM has grown by more than 20% during this bear market, only half of that is intended to stay in zero maturities. Institutional Money markets since March 2000 have increased by $350 B and retail money markets by $120 B. Once confidence returns, a lot of that "diferential" will go into equities IMTO, (and from there to "money heaven" late next year?). I would not be surprised if about $100 B (less than 125% of the increase) of that money could find its way into the markets (that will still be less than 10% of the total money markets aggregates). What is needed is "seller exhaustion" coupled with increased confidence. Another important boost to the economy is the tax rebate (about $50 B) and the lower interest rates savings which are now worth probably some $120 B annually (I am assuming that only $6 T out of the 15 T of non federal debt had an average reduction in rates of 2% annually, I think this assumption is conservative). Last but not least, I estimate that refinancing has generated (or will generate on an annual basis) some $60 B into consumer's pockets, that sums up to a "stimulus" of about $230 B, or 2.3% of GDP on an annual basis. That is one reason, I do not think we will actually get into a recession right here, and one reason for my optimism for the market's behavior toward the end of the year and at least a good chunk of next year.

Zeev
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