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

To: Saulamanca who wrote (65708)	1/3/2001 3:21:29 PM
From: Saulamanca	Respond to of 99985

Fed Policy : Surprising but completely justified. That's our read on today's Fed move. There will undoubtedly be talk that the Fed has panicked or that they know something that the market doesn't, but we don't buy it. The fact is that the Fed knows exactly the same thing that the market knows -- that the economy is slowing much more dramatically than had been expected. The only reason no one expected this move is that just 15 days ago the FOMC had a meeting and a perfect opportunity to cut rates and they did nothing. Though there has been more evidence of economic weakness since that time, most of the bad news was already available on Dec 19 and they should have moved then. The fact that they didn't most likely does not reflect any sudden change of heart or a panic because the Nasdaq keeps falling. Instead, our guess is that Greenspan wanted to do this all along, but he is the consummate consensus-builder and didn't have enough votes for an aggressive cut on Dec 19. Greenspan thus opted to get a bias to ease at that meeting, and then look for an intermeeting opportunity to move. The unwritten Fed rule is that the Chairman can unilaterally move 25 bp even when there is no bias, and can move 50 bp without consulting the FOMC if there is a bias. So Greenspan could have made today's move without an FOMC vote. Either way, he was clearly looking for an opportunity to ease after failing to get a cut at the Dec 19 meeting. That opportunity was presented by yesterday's NAPM report. As we wrote on this page yesterday, that report was one of the more worrisome that we have seen in recent months. There was evidence of rather extreme manufacturing weakness in that report, as well as evidence of weakness in foreign demand. Coupled with indications that credit standards are tight and getting tighter, the Fed needed to move. That they did is not a sign of panic, it's a sign that Greenspan was seeing the same things the rest of us were seeing, and that the only reason he didn't move earlier is that he didn't have the votes. This is a good sign for the market and the economy, in that Greenspan is clearly aware of the threat to the economy and is willing to act aggressively. It is now likely that we will see another 25 bp cut to a 5.75% funds rate at the Jan 30/31 meeting and that this easing cycle will be more aggressive than the market currently expects. - Greg Jones, Briefing.com briefing.com

To: Saulamanca who wrote (65708)	1/3/2001 3:26:17 PM
From: High-Tech East	Respond to of 99985

Fed fund futures have already priced in 100% chance of 1/4 point rate cuts in January and March ... thank you for the info ... ... and exactly on target ... ... where does the market go from here in the short term ... ... down, way down ... Disclaimer: The above is my personal opinion. I recommend that you do not base your investment decisions solely on any one person's views or analysis (including mine). Do your own research and take personal responsibility for your investment decisions. Ken Wilson