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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: LiPolymer who wrote (17926)	1/31/2000 12:16:00 AM
From: eli74	Respond to of 27311

I was speaking hypothetically, Li; the problem is that no knows before the fact what degree of monetary tightness will be necessary to bring about a particular level of economic activity. So Greenspan (and the rest of us poor benighted souls) are to a certain extent groping in the dark. What Greenspan is trying to do is to reduce the overall level of demand in the economy, and reduce GDP growth to somewhere in the 3.5% range. He is not targeting asset levels per se (i.e. equities), he's just trying to slow things down. Part of the problem is that the consumer has been spending money like a sailor in a whorehouse, due in part to the wealth effect caused by the ongoing bull market in equities. Ask yourself how much of an increase in interest rates it would take before you changed your spending habits. And also ask yourself how much your equities have to go down before you begin to pull in your consumption horns. My own personal opinion is that fixed income markets (using the Treasury curve as a proxy) have already discounted 50-75BP of additional Fed tightening (i.e., increases in the Fed Funds target rate). If the markets are confidant that the Fed is ahead of the curve, and that significant (200BP+) tightenings are not in store, then the markets probably won't react too badly. If market players begin to feel that the Fed is behind the curve, then 2000 will be even uglier than 1999 (and 1999 was not a pretty picture in BondLand). Eli74 (P.S. Thx for giving me the opportunity to pontificate).