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Strategies & Market Trends : Classic TA Workplace
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To: Shack who started this subject5/9/2002 9:29:19 AM
From: byhiselo  Read Replies (2) of 209892
 
from hahn's corner:

Greenspan's Defibrillator

Imagine you are Alan Greenspan, a “Doctor” of Economics. You've just spent 16 months cutting interest rates as aggressively as any central banker ever has in the history of the world. At the same time, you've expanded the money supply at a 14% annualized rate. The attempts at monetary stimulus have been so aggressive, the inflation hawks and bond vigilantes are starting to notice. Now, you're out of monetary policy options. Figuratively, the patient (the US equity market) is still dying on the operating table, in spite of your best efforts to resurrect the terminally ill. (The patient was run over by a giant bubble.) As a last gasp measure, you use the defibrillator paddles to shock the patient's heart, hoping to bring back the pulse. The virtual “defibrillator paddles” used in the past 24 hours by Greenspan consisted of concentrated buying of stock index futures. Cover stories were told about CSCO and productivity to conceal the true source of the push behind the strong advance. But, it was a futures' led rally. The Fed's OMO fingerprints are all over the event. The patient developed a pulse beat, but the prognosis remains “uncertain”.

Dr. Greenspan is hoping for a sustained pulse. If only one or two spike heart beats follow, at some point the defibrillation effort will be abandoned. Greenspan will eventually act to save the economy and the currency regardless of the fate of the stock market. That's the way it should have been all along.
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