Ramsey, you are right that slowing earnings growth remains a very important issue. But that's an issue that affects different companies differently. Cascading devaluations were threatening to really crash the whole market, and perhaps even the developed world's best economies. Such as ours.
I think the important thing that happened over the US 3-day weekend was not Greenspan's announcement of bias to easing per se. It was Asia's and especially Japan's enormous reaction to it. The dollar/yen has been declining (Yen rising) for a while and further strengthened over their two day head start. Now it's clear that was not just a hedge fund unwinding artifact. It was a reaction to market short money rates dropping below the Fed rates. Now bolstered by clear indications of Fed direction. Japanese and Hong Kong market reactions were strong.
We have had the question answered as to whether a Fed easing would really help the hurting East and South much. The answer their markets gave us is a loud YES.
That is VERY encouraging.
We are not about to hit sustained new highs in this bull. We are stalled out, for the averages, in a trading range at best. But I think the risk of a deep, deep downside from here in the US has been very much lessened. And the possibility of an Asia recovery before things get horribly worse very much improved. Though nothing great soon, for sure.
In the end, very much is about confidence. If the Japanese consumer, especially the older consumer, who has much of the world's savings tucked away under mattresses and in sub 1% earning postal savings accounts, starts to get a bit less terminally gloomy, it would make an enormous difference. To Japan, to Asia, and to the whole world. The dollar/yen moves have got to help. As does the evident possibility that a reversal of the decline can occur.
I think what really happened in San Francisco is that Rubin and Greenspan finally decided they had better start listening to the Japanese. Instead of it all being the other way around.
Doug |
