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

To: OWN STOCK who wrote (69750)	2/20/2001 6:30:21 PM
From: Zeev Hed	Respond to of 99985

Own Stock, I believe you err in that assessment. If the feds goes at once to 3% here he'll lose the great majority of the psychological impact of the cuts (strangely enough, the cuts have more of a psychological impact than a real one, since the feds do not really control the important long rates). Doing an urgent cut of .5% on January 3rd, told the market and the consumers, we see that inventory denouement and we are paying attention to it. The second cut of .5% was of similar import, but the fed must maintain a period of six months or more during which it continuously signal to the market, "we are easing", if they drop to 3% at once, what do they do next? raise rate as soon as the PPI shows two consecutive months of plus .5% rise? What happen if our inventory denouement causes a small financial accident (here or abroad, like seizing of some bond markets, or a rapid devaluation in a SE Asian country), the fed will have no room left to signal that it is at the helm ready to pump in liquidity to ameliorate the impacts of such accident. AG must keep always some powder dry, Bush Sr wanted him to go down more rapidly in 1992 (for his reelection campaign, and he later blamed AG for his loss, but frankly, he kept lowering these rate all the way into election and down to 3%, dangerously low), but the economy was already reviving on its own. Just my 2 cents. Zeev