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Technology Stocks : Semi Equipment Analysis
SOXX 348.67+0.2%Jan 22 4:00 PM EST
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To: Return to Sender who wrote (28970)3/1/2006 6:37:05 PM
From: Sarmad Y. Hermiz  Read Replies (3) of 95757
 
rts, I am sure you've heard all this before. But I think the inverted yield curve will have the opposite effect from what you expect.

An inverted yield curve means low long term rates. Which means that there is a large amount of money available to be lent. That came about from 2 sources.

1- foreigners swimming in dollars from their trade surplus.
2- US companies swimming in same from their accumulated profits.

Neither of these sources is bad for the economy. Foreigners have nowhere else to put their money - so basically the money is funding the real-estate boom in the US through low-cost mortgages. And companies will either buy back stock, give big dividends or make investments. All these usages lead to higher growth.

There are circumstances when inverted yield curve occurs at approximately the same time as a slow down in the economy. But in the current environment there is no reason to expect a cause-effect relationship.

Sarmad
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