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

To: Secret_Agent_Man who wrote (38357)	12/18/2000 6:35:03 PM
From: Secret_Agent_Man	Respond to of 42787

That the Federal Open Market Committee will adopt a neutral bias tomorrow seems a foregone conclusion. But investors anticipating an actual rate cut are likely to be disappointed, as the still-uncertain fiscal policies of President-elect Bush -- notably the timing and magnitude of proposed tax cuts -- and the inflationary implications of rising natural gas prices likely will cause the Fed to keep the fed funds rate unchanged. David Jones, chief economist at Aubrey G. Lanston, who defended the 1998 rate cuts and Greenspan's overall stewardship of the economy, believes the most likely scenario is one in which the Fed adopts a neutral bias Tuesday, pronounces the risks have shifted to slowing growth at is meeting Jan. 30-31, but doesn't begin actually lowering rates until its March 20 gathering. That cautious approach will stem from Greenspan & Co.'s continued belief in the soft- vs. hard-landing scenario, Jones suggested. Second, the Fed wants its actions to be seen as "heading off signs of slowing in the economy, but not as an excuse for a rally that turns into a bubble," the economist continued. "The Fed does not want to go through that again. The fact there was a moral hazard will temper the way [Greenspan] cuts rates this time." Would You Buy a Used Car From This Man? If the Fed takes a steady-as-she-goes approach, it risks falling behind the proverbial slowdown curve and allowing a harder economic landing in 2001 than might otherwise occur. Greenspan devotees may be shocked to learn this, but it wouldn't be the first time. From February 1988 to February 1989, the Greenspan-led Fed raised the federal funds rate to 9.75% from 6.50%. The Fed then reversed course and began easing in June 1989 -- and continued to do so until the Fed funds rate hit 3% in September 1992 -- but was unable to prevent a recession that ran from July 1990 to March 1991, according to the National Bureau of Economic Research. Many observers believe the Fed caused, or at least worsened, that harsh economic downturn with its overreaching rate hikes in 1988-89. Given the Fed tightened fed funds from 4.75% to 6.50% in a series of rate hikes beginning in June 1999 and ending in May 2000, a possible repeat of the 1988-'89 scenario concerns Jones and others. The central bank "could be making the same mistake now," said Mickey Levy, chief economist at Banc of America Securities. "It is a worry that they ease, but too gradually." Judging an economic slowdown through the first half of 2001 is "already baked into the cards," Levy declared "the biggest risk is if the Fed inadvertently tightens" by not easing. Fed policy is already too restrictive relative to the so-called natural interest rate, said Levy, referring to an economic theory that there is a rate at which the economy can grow at its maximum output without causing inflation to accelerate. (Note, "natural" is not to be confused with "real" interest rates -- fed funds adjusted for inflation -- another measure by which some economists say the Fed is too tight.) Given a decelerating money supply -- MZM growth has fallen to around 7% vs. about 15% in late 1999, according to Hays Advisory Group -- amid lowered expected rates of return, the Fed keeping monetary policy on hold "makes no sense" and amounts to a de facto tightening, Levy said. The Fed is "slightly behind [the curve] now, and if it drags its heels in easing, will fall further behind," increasing the risk of recession. The point of all this is no one is infallible, not even (especially?) Alan Greenspan. i lied<g>

To: Secret_Agent_Man who wrote (38357)	12/18/2000 6:53:24 PM
From: heehee1	Read Replies (2) \| Respond to of 42787

We may have a meltdown in the market, which is caused by our own greed but the economy is hardly at a meltdown level. Remember employment numbers are still high. Not a sign of economic meltdown.