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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (4658)	11/11/2001 3:55:56 AM
From: Steve Lee	Read Replies (3) \| Respond to of 99280

"the primary reason for the capital spending crisis is not the existing global overcapacity but the worst profit crisis since the 1930s" The overcapacity caused the profit crisis. More supply + less demand = lower prices and profit In the late 90's the tech industry had to bring enough capacity on line to cope with the demand triple-whammy of Y2K upgrades, Euro currency upgrades, and the rush to buy systems to participate in the new internet economy. I don't believe we will ever see anything in our lifetimes to bring that level of demand back, however much the Fed stimulates. Fed stimulation is designed to help customers buy products, however its byproduct is to help stocks rise. This byproduct in turn makes it easier for companies to raise money through debt and stock offerings which in turn prolong the misallocation of capital into unprofitable enterprises. I agree that the Fed must make a soft landing. I.e the economy, markets, employment situation should be helped not to plunge - BUT - to actually cause the markets to rise is making things worse. If the fed could find a way of stimulating consumption without stimulating investment then that would be better than this across the board stimulation. Tax cuts are good in that they affect the consumer more than corporations, but not if the consumer puts their savings into the markets. Maybe a restriction in margin availabilty would be sensible. However the introduction/announcement of such a move would cause markets to crash. So, in summary, I know it's bad, but I don't know what the solution is.