Lee, the turnips do not agree with Makin, while they do see a spring relapse, toward the second half, they see a liquidity driven market again, assuming the FED's do not actually raise interest rates. I do not see a scenario where the Fed's would raise rates that are still high relative to inflation. I agree that they will not rush to lower them in face of another international tremor, but if our markets get destabilized, they have sufficient ammunition to step in and actually lower those rates and still be in a "restrictive interest rates" environment.
So what do the turnips say? They are actually quite jovial and once this early February discomfort passes (and they think this should be over before the week is out), they see a rally resuming but spreading to a larger group of stocks (leaving some the nuts stocks to breathe a little, meaning not responding as well as the soldiers in the market) some of which have quite rational pricing. The troubles according to the turnips start in late spring and early summer (the spring relapse) with influences from places like Asia and South America. This relapse could get the Dow down some 2000 points from its high (the turnips are quoting as a Maginot line the level of 7450), followed by a spirited rally. The reason for a second half rally is the same that Makin quote for troubles in Japan, the 120 trillion yen that will need to be turned over. That turn over will start later this year and some of it will leak into international markets including our own providing a bubble of liquidity into 2000 and thus rising markets. If just 10% of these funds get out (and I think more could) you will have $100 billions looking for places to earn better returns, if $20 billions of these come here over the next year, it will cause rising prices in the equity markets. This year as last, we are actually be the beneficiary of the world deflation, keeping our inflation down, our interest rates down, and possibly declining (if we get to 7450 on the Dow, you will almost surely see the Fed's cavalry to the rescue, particularly if the decline seems a bit disorderly) hitting few sectors but keeping the majority of the economy humming, IMHO.
Zeev |
