Bill Fleckenstein, the BEAR! Is he finally right? Message Board

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Strategies & Market Trends : Bill Fleckenstein, the BEAR! Is he finally right?

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To: Jay8088 who wrote (180)	10/16/1998 8:51:00 AM
From: Tommaso	Read Replies (2) of 259

I don't think that the Fed cuts had much to do with the market, except to the extent that they were taking the decline since July as a leading indicator of possible trouble ahead in the economy in general. Even that is not perfectly certain, since the stock market, as we all know, is not very reliable that way--maybe a better than 50-50 record, but not much. No, I think that the Fed is looking at a variety of things, most recently these tottering "hedge funds," and in a way reminiscent of later 1929, trying to make money easy to keep banks from getting too pinched. Now of course, the Fed would have to realize that what they did was going to kick the market up, at least for a day or two, so the exact timing of the announcement could be questioned. But--while the level of equities is certainly important--it is only one among many other things to consider. And indeed, we have to remember Greenspan's warnings earlier that the stock market was too high. He's a serious man and he meant that. I think that they waited until the stock market had weakened some so as not to pump the bubble up to even more unsustainable levels. If there is anything self-interested going on here, it's a desire to help banks gradually get out of their overextension of credit without collapses like Continental Illinois. There's also the wish not to go down in history as having caused a second Great Depression. I think we are more likely to make money ourselves out of this by trying to understand the true motives and mechanisms at work. I think the market is still headed way down.

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