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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (56582)	1/4/2002 7:34:25 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 77397

re: hoping that a cleansing process will take hold of the financial market: You want closure? You want the Invisible Hand to grab a scalpel and excise all the festering rot (overcapacity, bad debts, Moral Hazard, etc.), quickly and completely, leaving the patient smaller, but with only healthy tissue left? I don't think you get it, not yet, not in 2002. The PlungeProtectionTeam still has a few cards up their sleeves: 1. still another 1.75% for the Fed to cut. 2. the max effect of a rate cut takes place a full 18 months (not 6) later. The mid-point of this rate-cutting cycle was mid-2001, which means the max effect of the rate cuts won't be felt till end-2002. 3. fiscal stimulus. Bush The Younger has just begun to do deficits, and not yet near the scale his daddy did, or Reagan did. How many trillions in Federal Stimulus can be thrown into the breach, until Uncle Sam has as much debt (as a % of GDP) as, say, Japan? We can waste trillions, for years and years, before the government's debt rating gets downgraded. It took Japan a decade after their crash, to get to that point. 4. the U.S. government has just begun to directly intervene in the stock market (taking equity stakes in airlines recently). This process could go a lot further, in a variety of industries, before it collapses. For instance: Whenever insurance premiums rise, for any business, they can get the U.S. government to take over that insurance risk (for National Security reasons, or for Stability, or whatever), nationalizing the insurance industry by degrees. Do it slowly, and no one will notice. We've had, so far in this Bear Market, 4 rallies of 50% in the Semiconductor Index. The first 3 failed and went on to lower lows. What will the fourth do? Answer: more up and down and up and down and so on and on. So, you won't get closure. "Valuations will create a ceiling, and liquidity will create a floor". There doesn't seem to be any limit to how wide open the liquidity spigot can be opened.