Actually, the Fed has more ammo than the interest rates. There are other things they employ, such as bond repurchases and other items that don't show up in meeting notes.
That said, interest rates aren't the only thing propping up the economy. Economics is about expectations, and how people react to the perceived value positions of items within a (hopefully growing) market. As a result, most consumers have been hardwired to believe that all "falls" are followed by rebounds. What they forget is that occasionally those rebounds can be rather unsatisfying.
6% unemployment seems really BAD when you've been to 4.8%. However, 6% used to be really good after we'd seen 8-10%. Again, expectations and perceived values.
I don't think the winter is over, but the question is one of how mild it will be. To this point, Greenspan has done the most amazing job of delivering a soft landing that one could ever expect. A soft landing is impossible to define, since most people have a different expectation of what it entails. However, given the terrible declines in the markets that the past 3 years have provided, what is truly amazing is that the economy hasn't suffered more.
That implies something is happening. Doomsayers tend to say it is due to increased money in circulation. Statistics don't really support that, since this would imply rapid inflation. Of course, rapid productivity, which we have had, would offset that.
I believe that we are now in a stagflation type of environment. But this stagflation is more manageable due to improved computing and management versus, say, the stagflation of the 60's or 70's. As a result, the key to management is cost. You can't plan for spending (not that you ever could), so you manage cost. Once you get that under control, your business runs much more effectively and smoothly. That is why the current environment bodes well for the long term future.
Still...the growth scenarios of the late 90's were a pipe dream, and will only return after 2 or more generations have forgotten the folly of this generation.
Hence, we're stuck in a sideways situation, with a fairly large trading range, until the indexes all touch "bottom" again, which I figure is 5-7 years away....so learn how to trade well. |
