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

To: Robert Scott who wrote (27630)	1/15/2002 8:11:36 AM
From: Vitas	Read Replies (2) \| Respond to of 52237

here are two charts of discount rate cuts 1929 through 1932 and 1934: geocities.com The cuts then were ongoing and relentless. The longest interim between cuts until May 1931 was a half year, not over a year. There was no net positive response from the markets. Today there has been no net positive response from the markets after a long string of Fed rate cuts, the first time the markets have ignored rate cuts since the early 30's. The clear warning is there that this is not business as usual and that blindly relying on stimulative monetary policy may be a fool's game. Are you employing any objective indicators to monitor whether we may be slipping into that kind of environment? What change would it take in those indicators to reverse your current position? What is it about the situation, as you define it, that precludes a retest of the bottom more than two months after it has occurred?

To: Robert Scott who wrote (27630)	1/15/2002 9:02:09 AM
From: ajtj99	Respond to of 52237

Robert, in this recession with overcapacity rampant, the cuts have little effect on capital spending. They bring down borrowing costs for existing business and consumer credit, but it is far more difficult to get a money for a business in this environment. Banks are really cracking down on credit. The Fed easing money is probably helping avert a deflationary, depression cycle, but it is by no means boosting capital spending. Look around your town. How many construction cranes do you see? How many big projects are going up? How many new factories are laying foundations? How much investment in new plants and equipment? It's like that everywhere. Don't bring up the lag time for the Fed cuts either. If you're waiting for that to kick in, you might be waiting another 2-3 years.

To: Robert Scott who wrote (27630)	1/15/2002 10:32:17 AM
From: Paul Shread	Respond to of 52237

I don't think Fed "responsiveness" matters, and in fact can complicate the recovery by overburdening the system with debt. The issue is when does the system become so saturated with debt that it can't absorb any more and the pace of defaults begins to pick up? Household and corporate liabilities-to-assets have tripled since the end of World War II, and have actually reached new highs in this 'recession' by a substantial margin. That's unusual for an economic contraction, when debt is normally consolidated and reduced, and it's a big reason why the rebound may be a weak one. At what point can the system absorb no more debt because balance sheets are so far out of whack? I don't know when that point occurs, but it's a risk when the primary economy policy is based on credit and interest rate manipulation. In other words, there is only so much the Fed can do until the economy has to contract.