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Strategies & Market Trends : Win Lose or Draw : Be A Steve, Make A Call -- Ignore unavailable to you. Want to Upgrade?

To: westpacific who wrote (3910)	2/25/2003 7:57:22 PM
From: westpacific	Read Replies (1) \| Respond to of 11447

"PLUNGE PROTECTION"--OR PLUNGER? None of us have ever witnessed anything like the events of the last month. Hopefully, we never will again; though I wouldn’t make that bet. We truly are in a radically changed environment; by all appearances, our lives as both consumers and investors won’t be the same again for many years--if ever. The aftermath of September 11 will likely be played out over a very long period of time, with many attendant twists and turns. As now, we will have respites, as "the good guys" retaliate by bombing a Third World desert nation (for starters), making most Americans feel somewhat more secure. At other times, though, we will face new fears, threats and other unforeseen incidents, be they anthrax scares, additional highjackings, or other jolts to our previously carefree lives as Americans. In this environment, our economy’s planners--and those trying to keep the bear market’s grip from tightening--face a dilemma. In the case of the latter issue, all stops have been removed as everyone from Fed Chairman Greenspan on down try to reassure jittery investors. Greenspan reassures the Congress--and President Bush and others who seem to have earned economics degrees suddenly--tell us that the "long term fundamentals" of the economy remain sound. Thus, the thinking goes, investors should be rushing headlong back into a "cheap" stock market (they shouldn’t--and it isn’t.) What is known as the "plunge protection team" has been working around the clock to keep the bleeding on Wall Street to a minimum. And, they have not been using mere words. The Securities and Exchange Commission, for one, has looked the other way as the media, abetted by some big investors and other personalities, talk up even individual stocks in ways that ordinarily would invite prosecution. "Trading rules" have been relaxed, allowing for companies themselves to prop up share prices. Some of this is legitimate, and involves companies whose share prices truly are cheap; in my view, though, these cases are the exceptions. You see, my dear reader, the U.S. economy was already contracting before September 11. I have discussed this at length in my various mailings and Updates over the last few weeks. If anything, the economy is in considerably more trouble now than it was before; and no amount of "plunge protection" can change that. Frantic lawmakers, joining the Fed, seem to be using a plunger now to try to force-feed already-stuffed Americans. They think if they throw even more money and credit at us, we’ll rush right out and spend some more in a patriotic attempt to right their economy. Don’t get me wrong: in the case of at least some of the government’s tax rebate ideas, they’re good-- and should have been As I have likened this in the many interviews I’ve given lately, what is happening now is no different than if my wife and I went out to the finest restaurant in town and stuffed ourselves silly. As the waiter brings the bill for the damages, he informs us that--though our big feed cost us $100, including all the dessert we ate--he will sell us the same meal again, right now, from start to finish, for just $25. I don’t care if the price was 25 cents--I doubt we’d live through the experience! No, my friends--as I wrote in July’s commentary, Americans are already pretty much stuffed. Our stomachs were already fairly bloated before September 11. The debt-induced spending spree of the 1990's has nowhere near been digested sufficiently; and if Chairman Greenspan himself tried to force more cheap credit down our throats with a plunger while President Bush held our mouths open, it won’t work much. If anything, we’ll be sicker later on, and our "food" will take that much longer to digest, before we as consumers feel like consuming again.