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To: re3 who wrote (43901)	12/5/2000 2:17:26 PM
From: UnBelievable	Respond to of 436258

Making Too Much Of Fed, Prez News By Gene Colter A Dow Jones Newswires Column NEW YORK (Dow Jones)--Good news, stock fans: The economy is slowing, and we're near to completing an election whose outcome very likely will have no meaningful impact on asset markets. Federal Reserve Chairman Alan Greenspan's pronouncement that we're in "an economy that has already lost some momentum" vied with earlier reports that suggested the Florida courts were close to ending the presidential stand-off for top news of the day Tuesday. But the market put the two developments together to equal a rally, especially in many of the technology stocks whose recent erosion has helped nearly halve the Nasdaq Composite Index from its all-time high. Profit-takers stepped in by early afternoon, but still left major market indexes sharply higher. Had the Nasdaq closed around lunch time in New York, it would have done so with one of the highest, one-day percentage gains ever - well over 8%. Does any of this make sense? Well, Greenspan, in reviewing the economy for a meeting of community bankers, went on to say that "one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household or business spending." Translation: the central bank may be ready to drop its bias in favor of higher interest rates and in fact even consider taking back some of its previous rate increases to keep the economy from sliding into recession. But the very reason Greenspan's Fed would be willing to back down from a decade-high Federal funds rate (the Fed's key rate target) of 6.5% is because all evidence - government data, consumer-sales reports, earnings and corporate spending - points to further deceleration of the economy's growth. Not exactly the catalyst to resume the stock market rally, is it? During a nine-year surge in equity values the Fed was able to keep inflation at bay, and there's good reason to believe it can back off rates now in such a way to engineer the next best thing to a growth economy - a so-called "soft landing." In doing so, the central bank will provide a backdrop by which legitimate businesses with preexisting clients and good management will probably be able to chug along. Such companies should still have access to cash. (Greenspan also urged those bankers to "guard against allowing the pendulum to swing too far the other way by adopting policy stances that cut off credit to borrowers with credible prospects.") Their shareholders can probably expect historically average returns on their investments in the range of single-digit annual returns. But many other, less stable companies will falter, including a lot of those techs. Meantime, others might be able to grow for a while by capturing market share through lowering prices or some other short-term measure, only to sacrifice margins. As for the day's other big headline, even many of the political partisans would admit relief now that Election 2000 looks like it's drawing near an end a month after we voted. But with Congress divided right down the middle and the emerging president skating in with an oh-so-thin mandate from Americans, don't look for an active government. (Fine, Wall Street would reply, the less Washington does, the better. But the cynicism of that reply wouldn't gibe with the rally.) When you step back and think about it, then, Tuesday's market swing looked way overdone, as if professional traders and investors in need of one good day went too far. Indeed, some observers were describing a lot of the action as short-covering. Perhaps the best indication of this is the obvious one - Greenspan's own words. Again, the bank bard himself directly referred to "weakening asset values in financial markets." -By Gene Colter, Dow Jones Newswires; 201-938-2068; gene.colter@dowjones.com (END) DOW JONES NEWS 12-05-00