Zeev's Turnips - No Politics Message Board

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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Crimson Ghost who wrote (6554)	11/18/2001 11:32:07 PM
From: Softechie	Read Replies (1) of 99280

From another poster: If history is any indication then the feds can cut no more. The last rate cut in the 29 period was May 7, 1931. It was at this point that bonds yields reversed from under 5% and crashed to over 9.5% in about 12 months. Prior to this bond yields had dropped steadily from a high of 7% in 1920. The fed had dropped rates 8 times on an average of ½% starting in October of 29 for 18 months from a rate of 6% to 1.5% or 450 bps. This is the same amount they have lowered over the last 10 months. The economy appeared to be turning (same as now) and the Fed just couldn’t cut anymore because in reality current rates were already below zero in real, inflation-adjusted terms (same as now). Bond money knew this and was the first to hit the exits(same as now). Stocks soon followed and ended up losing an additional 75% of their value before they bottomed one year later and finally began to recover. Frightened bond money did not pour into overvalued stocks and higher interest rates did not bode well for an ailing economy. ----- The more things change the more they stay the same. capitalstool.com

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