Zeev,
I wish I can share your bullish tone.
Having a little time to reflect on the recent chain of events, I am concerned that the other shoe(s) has yet dropped on the unsuspecting.
Let us start off with Greenspeak. Mr. Greenspan, I know it is not popular in Washington to do so but try telling the truth in simple English. A few FOMC meetings ago, I opined here that Greenspan has lost all credibility when he was pounding the table on inflation, higher wages, rate increases etc. It was a lie and he knew it was a lie, strictly for the purpose of manipulating the masses to avoid irrational exuberance. Now is a total reverse.
A good Fed Reserve Chairman is one who is invisible. A good monetary system is one that is stable and predictable, not one that swings on the moods of one man. Greenspan, in pursuit of his moment of glory as the almighty, has destroyed the system on Thursday. Together with Clinton, these two have severely damaged a great political system for years to come.
Trying to be objective, I wrote a few notes to myself as a reminder of the good and bad news which may affect the market. On the good list, there were: Fed Fund rate cuts, Brazil stabilizing, IMF funding, Japan opposition approving bail out plan, positive earning surprises. Almost all are on the table now.
The bad list: Fed inaction, the discovery of Fed rate cuts and no impact, Brazil falling, no IMF funding (which may be good news), Japan revealing depth of bad debt problem and links to other parts of economy, negative earning surprises, the street recognizing 1999 will be a no growth yr and adjust estimates (PE will skyrocket), China failing at 8% growth rate and bank failures.
While most items on the bad list are occurring, none may be factored in the market yet. It is almost laughable that despite of admitted failure by the IMF in Asia, they are doing the same thing to Brazil. Doesn't Camdesus understand austerity, which by the way means economic constraint due to lack of consumer goods per Webster, is most likely going to generate the same results for Brazil and SA as SE Asia?
While Japan did agree on some type of a resolution, has anyone reported on how much it is going to cost the Japanese economy? Without Japan, what are the chances of an Asian recovery in the foreseeable future? The Nikkei appears to be the only one who got the message.
While reported earnings appear to be not far from estimates, has anyone paid attention to how far they are below last yr and earlier estimates? Furthermore, how much does forward estimates have to be revised?
China has been out of the limelights for a few months. Not much attention is being paid to the GITIC and GZITIC "failures(?)". Is this the beginning of a trend? Is this part of Zhu's economic reform plan? China has proven to be far more proactive than Japan. Is Zhu going to start letting state supported banks, businesses and ventures fail if they cannot stand on their own merits? What would that do to the institutions who loaned money to China?
In conclusion, I can only suspect that last Thursday marked a turning point. Now that all the good news are out, what would be driving force to hold me the market?
Sorry for the long rant. Got up too early this morning.
Ramsey
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