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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: michael97123 who wrote (41222)	1/2/2001 11:36:23 AM
From: mitch-c	Read Replies (1) \| Respond to of 70976

I argued with a friend in late November about the Fed stance in December for exactly this reason. Greenspan is a gradualist. I did not see him cutting rates at the December meeting, but merely shifting bias. Turns out I was right ... this time. Broken clock ... <g> Similarly, with the uncertainty of tax-cutting activity, I think Greenspan has two possible courses of action: do little and wait; or act firmly now, but reverse course as the tax-cut activity becomes clearer. The fastest prospective tax cut a) must be legislated this year; b) will be effective in the next TAX year (CY 2002); c) will have effects actually felt throughout that CY. We're nominally 18 months lag time (and as much as 28 months, to April 2003) away from the cresting of any tax action taken NOW. Common wisdom says it takes 6 months for a rate change to be assimilated. Contrasted with the 18-28 month horizon for a tax change, I think Greenspan has good reasons to lower rates now. I'll guess 1/2 point "immediately" (all in Jan or split 1/4 Jan, 1/4 Feb), followed by a period of observation. A zero-change jawbone meeting in March should give a better feel for where we go from there. (By that time, any potential tax plans should be taking shape.) - Mitch