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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (34031)	3/19/2001 3:41:04 PM
From: Mannie	Respond to of 65232

I was just noticing The Q Dealsie...nice to see How was the move? Hope you are enjoying the new digs. Scott

To: Dealer who wrote (34031)	3/19/2001 3:53:23 PM
From: r.edwards	Read Replies (1) \| Respond to of 65232

Hi dealie , welcome back , SSTI may have bottomed . EOM.

To: Dealer who wrote (34031)	3/19/2001 3:57:10 PM
From: RR	Read Replies (2) \| Respond to of 65232

Glad your back, Dealer. Hope all is well. RR (eom)

To: Dealer who wrote (34031)	3/19/2001 6:14:13 PM
From: stockman_scott	Read Replies (2) \| Respond to of 65232

DAILY BRIEFING -- Don't Expect the Fed to Drop a Lifeboat ____________________________________________________ Monday March 19, 4:41 pm Eastern Time BusinessWeek Online By Rich Miller in Washington <<If you weren't ready by now to bail out of an open window following the stock market's battering during the week of Mar. 12, here's a quote from none other than Federal Reserve Chairman Alan Greenspan that's likely to push you out on the ledge: ``Even if we were to foster somewhat larger movements in short-term [interest] rates to address changes in stock prices, I doubt investors' perceptions of equity risk would be much affected and thus that equity prices would be meaningfully influenced. Monetary policy should focus on the broader economy.'' Translation: Shell-shocked investors shouldn't look to the Fed for salvation. The stock market is on its own, Greenspan is saying, and there's little the central bank can -- or should -- do about it. No, BusinessWeek Online didn't ferret out a supersecret conversation the Fed chairman had with his colleagues ahead of the critical Tuesday, Mar. 20, meeting of the Federal Open Market Committee (FOMC). That quote is from a speech Greenspan gave to a White House economic conference nearly a year ago, in April, 2000. Back then, the maestro of money was under attack for allegedly trying to short-circuit a supercharged stock market as he raised rates repeatedly in the face of a soaring economy. FLEETING IMPACT? But Greenspan's words could just as easily apply today, when the Fed is cutting rates and both the economy and the stock market are swooning. And their meaning is just as clear. Investors who are counting on the Fed to ride to the market's rescue with a jumbo three-quarter-point reduction in rates on Mar. 20 better think again. Chances are good the Fed won't cut rates by that much. And even if it does, there's no guarantee that the move would have anything more than fleeting impact on stock prices. To hear the stock market jockeys tell it, the Fed has little choice but to deliver an outsize cut in the federal funds rate for overnight interbank loans. After all, if it doesn't, stock prices are sure to spiral even lower. That thinking is reflected in the fed-funds futures market as well. It's pricing in a nearly 75% probability that the Fed will deliver the big 75-basis-point rate cut investors want. But talk to veteran Fed watchers and they're a lot less certain. ``It's a real toss-up,'' says Louis Crandall, chief economist at consultants Wrightson & Associates. A Mar. 16 Reuters poll of Wall Street's top 25 bond dealers showed them virtually split on what the Fed will do. Thirteen firms think the central bank will cut rates by half a percentage point, while the balance say it will go three-quarters of a point. And even those in the latter camp -- like former Fed Governor Wayne Angell -- readily admit it's far from a sure bet. CHEERLEADERS. For one thing, Greenspan & Co. has recently shown a willingness to risk the wrath of the markets and disappoint rate-cut-hungry investors. Less than three weeks ago -- at the end of February -- investors, egged on by Angell, were firmly convinced that Fed policymakers would slash rates right away rather than wait for their regularly scheduled Mar. 20 meeting to act. The central bankers didn't comply. The last thing they wanted was to be seen as bailing out the stock market. ``Action for action's sake is not desirable,'' Greenspan huffily told a House Financial Services Committee hearing on Feb. 28. For another, it's not clear that Fed policymakers believe that the economy's outlook is as gloomy as many on Wall Street seem to think. While Greenspan has not weighed in with his thoughts since that Feb. 28 hearing, a succession of other Fed officials have. And their message has been uniformly upbeat. Yes, the economy is going through a slow patch, they've argued, but it's likely to recover later in the year. ``The pessimism,'' Atlanta Federal Reserve Bank President Jack Guynn declared on Mar. 10, is ``overdone.'' Certainly, the cratering stock market is a concern at the Fed. First worry: The rout will disrupt the financial system, and trading will become disorderly. But so far, despite the pain investors big and small are feeling, there's no sign of that happening. Second concern: Wall Street's woes will, in Greenspan's words, ``breach the fabric of consumer confidence'' and trigger a recession. No clear evidence shows that happening yet either. The University of Michigan reported on Mar. 16 that consumer confidence edged up slightly in early March. Although two-thirds of the consumers surveyed were contacted before the latest stock market plunge, the remainder who were polled the second week of March exhibited no big loss of faith in the future. A separate Gallup poll on Mar. 14 for CNN and USA Today showed the same thing: Consumers were concerned but not panicked by the nosedive on Wall Street. A FULL MONTY? In the long run, there's no doubt that the destruction of trillions of dollars of wealth on Wall Street will have a negative effect on the economy (see BW,3/26/01, ``When Wealth Is Blown Away''). Consumers who feel less wealthy will cut spending and save more. But that's a process that will play out over a year or more. On its own, it's not clear whether that's enough to tip the balance at the Fed in favor of a huge rate cut. Of course, it's conceivable that Fed policymakers will relent and reduce rates by 75 basis points when they meet on Mar. 20, rather than the more likely 50-basis-point cut. After all, with their next meeting not scheduled until May 15, the monetary mandarins might consider it prudent to cut rates more sharply now. But if they do the full monty and go 75 basis points, they certainly won't be under any illusions that it would spark a turnaround on Wall Street. Just look at what happened earlier this year. Stock prices rallied smartly after the Fed surprised investors with a half-percentage-point cut on Jan. 3. But the market soon fell back as company after company warned that earnings were falling short of expectations. As Greenspan put it last April, ``the risks of investing in equities come primarily from uncertainty about future earnings ...and much less from changes in overnight interest rates.'' Those are words investors perched on a window ledge should keep in mind as they await the Fed's next move.>>