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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts -- Ignore unavailable to you. Want to Upgrade?

To: Junkyardawg who wrote (37663)	6/6/2000 5:22:00 PM
From: Original Mad Dog	Read Replies (3) \| Respond to of 63513

One more thing: Didn't CNBC report that a couple of the FED members were saying in public that they said they weren't sure if the economy has slowed or not? Yes, two spoke today and two others yesterday: dailynews.yahoo.com Here's my take on recent economic news and its likely impact on the market: It seems to me that the market mini-crash has achieved what the Fed could not: it has stopped consumer spending in its tracks, and the economy has stopped overheating, almost overnight. And it follows, to my mind at least, that the Fed is done raising rates for awhile. How could this be, when everybody knows that rate hikes take several months to actually slow things down? My belief is that the wealth effect has become much more pronounced and acts far more quickly than previously. There are some studies floating around someplace from a few years back which suggest that the wealth effect has (or had then) a relatively minor but measurable impact on consumer spending. But those studies were conducted when (1) the market's swings, especially the upswings, were much less significant as a percentage of the average person's income; and (2) far fewer individuals were participating in the market for individual equities, especially speculative ones. Both of those factors have changed, and dramatically so. Now there are millions of people making tens of thousands of dollars or more on stocks. Most of this money is available for discretionary spending. Big ticket item sales have been way up during the latter stages of this boom in the Nasdaq. Anecdotally, it isn't hard to see why. I remember telling my wife a few months back when she asked about a particular purchase that she could pretty much buy whatever she wanted in a particular price range without worrying too much. She is not used to hearing that from me. I saw new cars all up and down our suburban block. People were taking slightly better vacations, and thinking nothing of dropping $100 or $500 on this or that. And because of the rate of return they were getting on their investments and the strong job market, they simply were not worried. Between mid-March and mid-April, that seemed to change, almost overnight. People stopped assuming that this was going to last indefinitely, and started realizing that the market goes both up and down, and a little more caution would be advisable. They still spend, but more discriminately. And now we are seeing the first quick reports from the government on that phenomenon, in the form of retail sales figures and the like being down, and the job market tightening. All of this, IMO, bodes very well for the market undertaking a sustained and measured advance over the next 12-18 months. Any sharp moves upward will be met be selling on worries of either a repeat of April and May or a more vigilant Fed. But the economic reports will show much slower, and more sustainable growth, and the Fed will soon stop its statements about consumption exceeding the economy's ability to support it. A fly on the wall at the June Fed meeting might see a spirited discussion about whether the patient needs more medicine or is already getting better. And ultimately, the mandate from the Hippocratic Oath will carry the day: "First, do no harm." The Naz may even dip below 3000 once this year. But I believe that it will close above 4500, and maybe above 5000, by year's end. And in the long run, these past two months will just be viewed as a necessary pit stop. Nasdaq 6,000 will likely occur in 2001 or 2002 IMO. I expect that lots of you disagree, but that's my story and I'm sticking to it. MAD DOG