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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: American Spirit who wrote (16134)	4/13/2001 11:45:57 AM
From: Ron Dior	Respond to of 37746

Rate cuts are very important to those companies which need to borrow, buy or re-structure debt. Very-very important. If you have 5 billion in debt for instance, how much do you save with just a 1% drop in rates? Just because the FED drops rates .25 or .50 does not mean that companies are going to run out and refinance their debt. First off the costs of refinancing debt of that magnitude you have stated above would be astronomical. A company would not even consider refinancing debt unless they could save 2 full points. Secondly it would only increase their long term debt which opens another can of worms. Many companies are already locked in at comfortable rates ( have you heard anywhere yet that the reason for a company missing their numbers or struggling was because of interest rates being to high ?). In retrospect viewing historical data teaches us that interest rates are still very, very low. To answer your question, would a drop in rates help? Maybe. Is it the solution that the economy needs? Definitely not! The FED should do nothing and let the economy sort things out on it’s own. Unfortunately the FEDS job is to meddle and mold the economy even if it is to it’s own detriment. And yes I am going to hold, at least until the May rate cut, then we'll see where we stand. If a rate cut is the medicine we desperately need then why wouldn’t you be buying more? You contradict yourself……. Ron Dior