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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (2126)	7/15/2002 10:35:40 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

The great stock illusion biz.yahoo.com <<...Over long periods stocks greatly outperform bonds, right? Maybe not. A new study raises the disturbing possibility that this conclusion derives from a misreading of history...>>

To: Jim Willie CB who wrote (2126)	7/15/2002 10:54:20 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Wall Street Economists See Chance of Interest-Rate Reduction By Heather Bandur New York, July 15 (Bloomberg) -- Most economists at Wall Street's biggest bond dealers say the Federal Reserve may cut its target interest rate to stem three years of stock declines and boost consumer confidence, according to a Bloomberg News survey. A drop in the Fed's target for overnight loans between banks, or federal funds, might be needed to bolster consumer spending, which may falter as unemployment rises and the Standard & Poor's 500 Index has its biggest three-year slump since 1941. ``The stock market is behaving as though the economy is slipping back into recession,'' said Ethan Harris, co-chief economist at Lehman Brothers Inc., who sees a 40 percent chance of a cut. ``If it continues to languish, or goes down something like 10 percent in one day, the Fed would feel the need to step in to assure the market.'' Estimates from economists at the 22 primary dealers, which trade directly with the Fed, say the probability of a rate reduction is as high as 40 percent and as low as 5 percent. Lehman and Goldman, Sachs & Co. see the highest likelihood of a rate cut, and J.P. Morgan Chase & Co. sees the least. ``You never want to say zero,'' said Mickey Levy, chief economist at Banc of America Securities LLC. He sees the probability at less than 10 percent. Expectations Fed Chairman Alan Greenspan will reduce borrowing costs have climbed as the S&P 500 lost 41 percent since its peak in 2000. The Dow Jones Industrial Average slid 27 percent, and the Nasdaq Composite Index erased more than 73 percent of its value since then. Not Dead Yet Still, the consumer hasn't stopped spending. Car sales jumped 3.4 percent in June, with dealer incentives sparking the biggest gain since October, according to the Commerce Department. General merchandise sales gained 1.1 percent, following a 0.8 percent fall in May. Consumer spending rose at a 3.3 percent annual pace from January to March after rising at a 6.1 percent rate in the last three months of 2001. ``Consumer spending has slowed, but it's not dead in the water,'' said Conrad DeQuadros, an economist at Bear, Stearns & Co., who sees a 10 percent chance of a rate reduction. ``In terms of spending, the strong housing market goes a long way in offsetting the decline in stocks.'' The University of Michigan's preliminary index of consumer confidence for July, released Friday, also fell to the lowest level since the aftermath of the Sept. 11 terrorist attacks. What's `Lurking?' Interest-rate futures are starting to signal the possibility of a rate cut as well. The 1.725 percent yield on August's fed funds futures contract suggests traders see about a 16 percent chance of a quarter-point reduction at the Aug. 13 meeting. The contract is a gauge of expectations for the average overnight rate for a particular month. Not everyone is convinced. ``The economic data aren't falling apart, so why would Greenspan lower rates?'' said Steve Ricchiuto, chief economist at ABN Amro Inc. ``That would signal to the world that something bigger is lurking out there -- it's not that bad.'' The Fed has already cut its target 11 times, for a total of 4.75 percentage points to a 40-year low 1.75 percent. U.S. Treasuries have rallied as a result, helping to drive benchmark 30- year fixed-rate mortgages to a record low of 6.45 percent in November and underpinning economic growth, economists said. `Clear Risk' Economists at Goldman Sachs are among the 11 surveyed by Bloomberg News who predict the Fed will hold its target at 1.75 percent until 2003 on expectations growth will slow to an annual rate of 2.8 percent in the first quarter of 2003, down from 6.1 percent in the first quarter of this year. They place the probability of a rate cute during the next 12 months at 35 percent. ``There is a clear risk that at some point the economy might feel weak enough, or the financial strains become sufficiently intense, that the Fed could respond by trimming rates further,'' said John Youngdahl, an economist at the firm.