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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Rolla Coasta who wrote (1679)	1/6/2001 1:29:46 AM
From: Erik T	Read Replies (1) \| Respond to of 74559

Consolidation is here around 2000-3000 of the Nasdaq That's exactly what people said between 3,000-3,500. I would think they are just fighting against the FED. Two days does not a market make, but the market has nearly laughed off the rate cut, giving up 2/3 of the gains seen after the initial shock. This did not happen in Oct 1998, the last time the Fed moved unexpectedly between meetings. I personally do not think the FED (or the govt) would allow this scenerio to happen That's the wild card here, isn't it? The Fed has socialized risk by bailing investors out over-and-over. Everyone was sitting around wringing their hands waiting for the Fed to cut at their Jan meeting. Well they got their rate cut and more, yet the market has been selling the rally. Most view Greenspan as an omnipotent genius. He was supposed to have orchestrated a soft landing. Ooops. This is not to denigrate him, but it should serve as a wake up to people that he is not almighty and most attempts at soft landings end up hard (according to a recent article in The Economist). I think the biggest risk to the markets right now is loss of confidence in the Fed. If the Fed becomes viewed as impotent to stop a slide, then all bets are off because risk premiums will go right back into stocks which could send them significantly lower. If that happens and liquidity dries and we see discontinuous gaps in prices then the world of derivatives may become a very ugly place. For derivative risk limiting strategies to work properly they need enough liquidity and continuous prices to make automatic buys and sells based on moves that a particular derivative is meant to cover. If this system breaks down who knows how the > $50 trillion derivative market will behave. I just think the arguments for lower prices from here are more compelling than just believing the Fed/govt will bail us all out. Disappointing to me, we are our government and any bail out will come from us ultimately, even though I personally did not participate in the risky behavior of the last few years. Regards, Erik

To: Rolla Coasta who wrote (1679)	1/6/2001 7:34:44 AM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

The FED will have little influence over the course of the market from this point onward, as the Japanese central bank has no influence over the Nikkei. The puny weapon of interest rate, when not supported by the nuclear engine of liquidity is of little use against massive psychological desire for safety and the light of day. Nuclear engine of liquidity, if continuously used, will blow up the Dollar, and with it, everythingelse of perceived value. It is now clear to all that the NAZ investors are hooked on 30% per week return, trickle fed by intravenous interest rate drug, comatose to the point of oblivion to anything remotely resembling the "discounted dividend" valuation model. Greenspan against Newton will see Greenspan humbled.