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

To: Captain Jack who wrote (16046)	8/21/2001 1:56:14 AM
From: stockman_scott	Respond to of 52237

Fed Seen Cutting Rates Again Tuesday August 21, 12:27 am Eastern Time By Caren Bohan WASHINGTON (Reuters) - Aiming to rev up an economy that has shifted into low gear, the Federal Reserve is expected to shave U.S. interest rates by a quarter-percentage point on Tuesday, its seventh cut this year. Even though there was widespread agreement among analysts that the central bank would decide to cut the key federal funds rate to 3.50 percent from 3.75 percent, financial markets kept up their usual vigil ahead of the decision. Stocks and the U.S. dollar gained on Monday but Treasury bond prices fell as traders took profits from last week's rally ahead of the meeting. In addition to the rate decision, which will be made public at around 2:15 p.m. EDT, investors are eager to see a short statement from the Fed that should shed some light on its thinking about the economy. Of interest to the market participants trying to gauge how long the easing cycle that has taken interest rates down by 2.75 percentage points this year will last, would be any language that might indicate the Fed thinks the U.S. economy may have hit bottom in its slump and is starting to recover. Chris Rupkey, economist at Bank of Tokyo/Mitsubishi in New York, said this wording would be unlikely. ``I don't think they are going to want to put any wishful thinking in the statement,'' Rupkey said. ``It could be pretty cut and dried, suggesting that the rate cuts will be good medicine that will help the economy.'' TENTATIVE FORECASTS FROM FED The economy, which began slowing around the middle of last year, barely grew at all in the second quarter of 2001, according to the latest figures from the Commerce Department. In fact, many economists think that when Commerce releases revised figures on gross domestic product at the end of this month, they may show the economy logged zero growth or possibly even contracted in the April-to-June period. Gloom about how long the slowdown will persist has hung over Wall Street like a dark cloud in recent months. Addressing Congress on July 18, Fed Chairman Alan Greenspan described the economy as still weak and deteriorating in some areas and was reluctant to be pinned down on when it would recover. ``If I had to make a forecast ... toward the end of this year we will see things improving and clearly so next year,'' he said. Echoing the notion that the sluggishness could drag on, Atlanta Fed President Jack Guynn told Reuters in an interview earlier this month: ``The process, the adjustment process, is just taking longer than I -- and I think many other people -- thought that it would.'' For most of this year, the worst aspects of the economic weakness have shown up in the high-technology sector, which saw the enormous boom of the late 1990s and early 2000 fizzle as demand suddenly plummeted. An announcement from Ford Motor Co. on Friday of job cuts and an intention to restructure added to the investment community's dejection about economic prospects as it highlighted worries that the high-tech troubles were spilling over into so-called Old Economy sectors. Still, Mark Vitner, economist at First Union Bank in Charlotte, N.C., said there have been some tentative signs of stabilization in the overall economy. ``We're beginning to see some encouraging news in the retail sector. Traffic is up a little bit,'' he said. Some economists also pointed to a steadier trend in new claims for unemployment insurance, which fell to 380,000 in the week ended Aug. 11 from 388,000 in the previous week. CASE FOR 50 BP SEEN WEAK With pessimism widespread, analysts said there may be an argument made at the Fed meeting for moving by 50 basis points instead of by a more modest 25 basis points. But ultimately they believed the central bank would eschew that aggressive option. In a move that marked a turning point to a more gradualist policy, the Fed at its last meeting on June 27 reduced rates by a quarter-point, breaking with the pattern of half-point moves that had characterized its rate cuts earlier this year. Lou Crandall, chief economist at Wrightson and Associates in New York, said such a decision would have two key drawbacks. ''One is that it would tell the markets that the Fed thought it made a mistake in June. The second is, it would lead the markets to wonder, 'What does Greenspan know that we don't know?''' Rupkey agreed, saying the last thing the markets need right now is more uncertainty, and any unexpected action could lead to greater uncertainty.

To: Captain Jack who wrote (16046)	8/21/2001 2:03:44 AM
From: Lee Lichterman III	Read Replies (5) \| Respond to of 52237

I have to disagree and thought AG was totally justified in raising rates. We were in a total nonsensical mania where people thought stocks would climb forever. Recall that when he was first raising rates, the mantra was that he couldn't stop tech stocks because it was a new economy and interest rates didn't affect techs in the new error, I mean the new era. Someone had to slap some sense into people and everyone just ignored his warnings. Look how much useless fiber is in the ground now yet telecoms were still laying it like crazy until he took the punch bowl away. It wasn't just stock traders throwing money around foolishly, it was corporations, banks etc also. Even now, many still believe we are going to bottom and have 1998 to 2000 style markets all over again. I think the economy will do fine, we just need to bleed off some more of this excess first and get people to read up a bit on history. Maybe then they will invest/trade with some sort of rational thought rather than the "Momma needs a new pair of shoes" mentality of the last couple years. Everyone wants to blame Greenspan for the market drop, and no one is willing to ask why they were paying such ridiculous prices for stuff that wasn't worth it at the top or why banks were loaning millions to companies that would never make a dime from busines plans drawn on napkins at the local pub. Tech companies were trading stocks like brokers instead of making money at what they were supposed to be doing. Yep, it is all Greenspan's fault. Good Luck, Lee