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Pastimes : Ask Mohan about the Market
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To: Cents who wrote (16804)10/20/1998 8:49:00 PM
From: tekgk  Read Replies (1) of 18056
 
>> Why does this recent additional cut mark the bottom for the stock market as many analysts are saying?

Most analysts are nothing more than salesmen selling a product - stocks. They are not in the business of giving reasoned advice based upon the historical evidence.

I would argue that a cut in interest rates on the very day that the inflation hit a yearlong high and after the dollar had fallen around 15% against other major currencies in the past few weeks is a sign of panic on the part of the fed. What was so urgent that they couldn't wait for the next FMOC meeting? Why wait until the only thing trading was equities and equity futures the day before options expiry - manipulation? A panicking, manipulating fed is not the optimum indicator for long term investors to enter the market. Day traders, speculators and other professionals can play but investors should use this rally to head for the hills.

Interest rates cuts are not necessarily bullish as most analysts often state - for example: From late 1929, to the end of 1930 the Fed cut the discount rate from 6% to 2% - nice cut for just over 1 year. At the end of 1931, the Fed got into the business of frantically buying government securities in an attempt to expand the money supply, with no success.
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