Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: Mark Fowler who wrote (123272)	4/9/2001 3:30:38 PM
From: pater tenebrarum	Read Replies (4) \| Respond to of 164684

in deflationary supercycle bears interest rates get slashed to no avail. look at Japan...its short term lending rates are close to zero, and have been there several times already over the past decade. it hasn't helped one bit. also, it has pursued a very expansionary fiscal policy, also with no tangible results in sight, after 11 years of trying. i agree that a steepening yield curve is a positive, generally, but note that the curve remains inverted in some maturities. imo the shape of the curve dictates that a lot more rate cuts are coming...i'm targeting at LEAST 2,5% for the FF rate, barring a strong sell-off in the longer dated maturities. this implies of course that the economy is going to tank a lot more, although i don't expect that to happen right away. the crutches of ballooning mortgage refinancings and a still relatively tight labor market are keeping things afloat in the short term. however, the real estate bubble (which is even more momentous than the stock market bubble was, in terms of the debt incurred while it was growing) is beginning to crumble too. so far it is mostly commercial property that is faltering, with available space increasing dramatically in all important urban regions, while new (and useless) commercial property is still being built everywhere, a typical late cycle phenomenon. commercial property busts traditionally precede residential property busts, and the consumer is particularly ill-prepared for this to happen this time around, as home owners equity is wallowing at a multi decade low. this is just another way of saying that the consumer is drowning in debt, just as the value of his/her assets is coming under pressure. the imbalances in the economy are too great to be amenable to interest rate cuts. specifically the financial sector, which is at the heart of the credit and asset bubble has been expanding its balance sheets at breath-taking rates over the past few years. last year, every dollar in GDP growth required 4,55 dollars in NEW debt being taken on by the private sector - this compares to 30 cents in new debt for every dollar in GDP growth in the mid 1950's. clearly this is a disparity that can't just continue unabated, as eventually the debt burden becomes to great to be serviced by the cash flows that are supposed to support it. the savings rate has gone negative, which imo supports the contention that the consumer is resorting to Ponzi finance to maintain the boom time life style...note that recurring consumer expenditures like utility bills, food, medical insurance/care, transportation costs are all subject to big inflationary pressures (which in the current 'false spring' puts deflationary pressure on everything else, as less money is left for other forms of consumption). the debt mountain can't be fought by taking on even more debt, which is what the rate cuts are intending to achieve. we need a period of rebuilding the savings rate, slashing private sector debt and weeding out malinvestments...also the current account deficit needs to be tackled. all this is associated with economic weakness...it may not be pleasant, but is is NECESSARY. i also believe that the bear market in stocks, near term wiggles notwithstanding, has a way to go yet before it is over. it is widely misunderstood, and underestimated in my opinion, mainly due to the conditioning of the seemingly never-ending boom.