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

To: Lee Lichterman III who wrote (40258)	1/8/2001 12:52:23 AM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 42787

<<The striking exception was an initial discount rate cut on Nov. 4, 1929, right after the crash. The Dow lost another 11.2% until the second cut nine days later. The Dow rallied until April 1930, then tanked massively.>> '29 was a critically important exception to the rule, Lee, especially considering where we've been and where we're at. services.elliottwave.com As you can see (and despite the misinformation one frequently sees propagated on SI and in the popular media about what the Fed did in 1929-31), the Fed lowered rates prodigiously BEFORE and after the crash. Nonetheless, they were pushing on a string, and easier access to credit did not reverse the markets. Same was true in Japan in 1990, indeed, the Japanese lowered rates all the way to zero and nothing much has happened. Why? Because they did not address the structural problems, eg, failure to recognize and write off bad debts (mostly real estate related), and allow clearly insolvent businesses to die a natural death. An intact banking system is a prerequisite to economic recovery induced by monetary stimulation. Both '29 and '00 were blow-off market tops, fueled by speculation in new technology (autos/telephone/airplanes/radion vs. internet/networking/PC's), financed by new instruments (corporate margin lending and installment credit vs. syndicated loans, pooled interest mergers, GSE related mortgage expansion and expanded use of options in lieu of salaries) and incorporating new classes of speculators (women vs. middle class 401K bagholders). The key similarity in both cases, though, was that lenders (and borrowers) were WILDLY extended at the top. The problem with reliquefication in such an environment is that lenders are unable to find responsible borrowers who can produce a reasonable ROI on the loans. Easier monetary policy will NOT work untill bad debts (personal, corporate and governmental) are written off, previous malinvested enterprises are liquidated and creditworthy targets for capital can be reliably identified. This will take willingness to acknowledge and adress the problem (you will not hear it referenced in any of the popular media or by politicians thus far...indeed, when B of A's problems surfaced on Friday, the media were eager to accept the BAC's own denials as the final word on the story) and time...lots of it. Untill then lowerer interest rates will channel dollars into continuing nonproductive enterprises (specifically, the remnants of the residential and commercial real estate bubbles and commodity inflation are two that come to mind), but not result in substantive GDP growth for 12-18 months or longer. For another view on the above: prudentbear.com Appreciate your posts, they're excellent! Regards, Patron