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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: bobby beara who wrote (65493)	12/30/2000 8:19:45 AM
From: Haim R. Branisteanu	Read Replies (2) \| Respond to of 99985

BB, the real economy started slowing about a year ago there was a bump related to Y2K. It was for several factors one of which was the rapid rise of energy cost. That is why in the real economy stocks were peaking during 1999 and are in a bear market since (DD,AA,PD, S,IP etc.). Irresponsible liquidity injection by the FED from October 1999 until after January propelled the Internet Bubble, which masked weakness in the real economy. The drastic fall in economic activity is a result of the demise of the Bubble and end of the elections. Further teh result of those elections scared a lot of foreign money out of US financial markets the two factors coupled gave us the evaporation of over 3.5 trillion in NASDAQ and $1.5 to $2 trillion on the NYSE of paper assets and about the same amount in the Junk Bond market. So about $9 trillion in financial assets evaporated. Now you must add to that the drop in real estate prices which are not completely reflected in the market yet but will be obvious by spring and you get there something around the same amount $6 to $7 trillion drop in prices. Keep in mind that the US GDP is only $9.5 trillion the drop in asset value are around 150% of GDP, that is a killer for any economy. Even a 15% drop in asset value would slow an economy by 1% but this one can have a multiplyier effect if teh FED is not actiong quickly. The only luck we had was the substantial drop in energy prices, which will lower inflation even with massive liquidity injection. The FED MUST be in panic mode and lower rates quiker than in 1988 wen it was not really needed as much as it is now. Fact is that the treasury market demands at least 1.5% drop in rates by summer. Such alarming drop is quite rare wen on the surface no crisis is eminent. IMHO 48% of the American made an very bad choice and now all American and many around the world are paying for it dearly. This will not be forgoten easily and the people who will take office are a cut below the task that is awaiting them. BWDIK Haim