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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Robert Graham who wrote (34054)	10/25/2000 4:21:33 PM
From: Paul Shread	Respond to of 42787

>>>What this I hear you and Bobby agreeing with each other? Bobby is at his best when there are others disagreeing with him. :-) <<< LOL. We ALL should have shorted this rally.

To: Robert Graham who wrote (34054)	10/25/2000 6:53:16 PM
From: UnBelievable	Respond to of 42787

There Might Be A Small Problem With Cutting Rates Given the significant increase in liquidity which has accompanied the "rate cutting" it isn't clear how much of a stimulative effect a rate cut would have. (The failure of BOJ's Zero Interest Rate Policy is illustrative). Consumer and Commercial credit are at all time highs and risk quality premiums will continue to rise offsetting core rate cuts. More troubling is the effect a rate cut would have on the Dollar. The strong dollar has been the true enabler of both the stock market bubble and the relatively low rate of inflation. Any rate cut would reduce the value of the dollar. This would have two adverse consequences for the US. The cost of imports would increase creating significant inflationary pressure, Foreign money would repatriate because of a concern about currency exchange risk. This would remove significant capital from both the US equity and debt markets. The money which remained would require a greater real rate of return to offset this risk. Inflation is going to continue to become more evident which will also make rate cutting difficult (unless the FOMC were to drain liquidity at the same time as cutting rates <gg>). By using the tools generally reserved for a period of recession during the preceding years of unprecedented growth the Fed has eliminated its ability to do anything about the economy. The economy is going to have to work through this Fed aggravated recession the only way in which lean years are worked through, slowly and with some discomfort. The recovery is going to be even more difficult because it comes at a period of particular economic vulnerability because of the changing demographics. Economic cycles can not be eliminated any more than the seasons. But when you have a bumper crop and don't save any for the winter it can be a cold, hungry winter.