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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (39199)	10/6/2003 2:45:51 AM
From: elmatador	Respond to of 74559

It is what comes in 2004 and 2005 that concerns me. That is when the over-leveraging of the country will be unwound, at a high cost. Speculators suffer a severe case of déjà vu By John Dizard Published: October 5 2003 22:03 \| Last Updated: October 5 2003 22:03 One question I have been hearing lately among speculators concerns what year we are in. "Do you think this is 1994?" or "Could we be coming up to 1987?", or "Is this 2001 all over again?" This is not bad science fiction. It is an attempt to find a pattern to chaos. No one asks: "Is this is going to be 1967, the Summer of Love, or mid-Eisenhower 1955", because there is a sense that what comes next won't be as comfortable as the moment we are in now. I believe we are in 1971. What distinguishes the 1971-1972 period from other messy times, such as 1994 in the bond market or 1987 in the equity market, is the way that political and financial patterns overlapped. The key financial event in 1971 was not reported at the time. It was the unnatural deal made between the Nixon Administration and Arthur Burns, then the Chairman of the Federal Reserve Board of Governors. In discreet negotiations that were more like an arrangement with a courtesan than an outright purchase of a prostitute's time, Mr Burns agreed to pump up the economy, starting in 1971, to give an early boost to the Committee to Re-Elect the President. It worked, of course. That was the monetary goosing that put an end to the brief slowdown of 1970-1971. The feverish, temporary revival of the 1960s boom did provide a bull stock market and a revved-up real economy that was sufficient not only to re-elect the president but to do so with a 49-state to one electoral vote margin. Mr Burns also gave his support to the August 1971 debasement of the dollar, which was in the control of the Treasury Department rather than the Federal Reserve. As for Richard Nixon's opinion of European currencies, he was heard to say: "I don't give a f*** about the lira." The Democrats are also falling into the historical precedent. The palpable hatred of Nixon at the time among bien pensants and the rest of the Democratic party is now reflected in the emotion that President George W. Bush inspires among their successors. The Democrats also had the sense at that time that while it was morally necessary for them to win the presidency, they wouldn't. Instead, they concentrated on tearing down and rebuilding the Democratic party itself. George McGovern may have lost the 1972 election but the people who organised his campaign have run the party ever since. Perhaps Howard Dean's campaign will work out the same way. If the insider Fed fix, along with the Treasury-organised currency debasement, had led to a sustained, balanced expansion, we could all be feeling good now. It didn't, of course. The Fed-goosed stock market peaked in January of 1973. As soon as Nixon took office, the worst hangover since the Depression hit the country. The Fed ultimately not only had to take away the punch bowl, it had to hit the country over the head with it. The 1973-1974 bear market and recession were very, very bad. And if the same happens this time round, we won't even have the sex and drugs to distract us. I believe a mild bull market will carry us through at least the middle of next year, with an easy re-election for the president. It is what comes in 2004 and 2005 that concerns me. That is when the over-leveraging of the country will be unwound, at a high cost. Jim Bianco, the bond market expert, tends to agree on the parallel between the Burns Fed and the Greenspan Fed. Apart from his undying faith in prospects for the Chicago Cubs in the World Series, Jim has excellent judgment. "Look at the timeline around Greenspan's reappointment," he says. "On April 23, they announced Greenspan's reappointment. That was unusually early, since his term did not expire until June of next year. Then on May 6, the Fed marked a major change in the way it formulates policy by talking about deflation in opposition to market expectation." What puzzles Jim is why the rest of the Fed governors and presidents, along with their retired colleagues, continue to fall into line. My view is that they are all members of the Union of Fed People. Some unions control who can touch plumbing or machine tools. This one has a lock on the infallibility trade. As the Teamsters would say: You got a problem with that? Well, yes I have. I was in a Madison Avenue restaurant on Tuesday with a friend of mine who is a defence attorney for white-collar criminals. I had just been remarking on how many of his former and future clients seemed to be in the room when Dennis Kozlowski and his wife walked in. They were ushered to a corner table, plied with Bellinis and serenaded by a baritone. If you or I were to have our assets frozen by a court, we would be fishing in the couch cushions for quarters. johndizard@hotmail.com

To: TobagoJack who wrote (39199)	10/6/2003 3:35:45 AM
From: energyplay	Read Replies (3) \| Respond to of 74559

Nice editorial in the latest Business Week on the co-dependence of the US and China economies. Points were that the economies are becoming MORE tightly coupled, and their are some large imbalances (US trade deficit) which will need to be resolved... Speculating, China may be pushing a "Buy American" focus... Be interesting to see Caterpiller vs. Kubota, Boeing vs. Airbus, GM vs. Damiler, etc. Minor points - >The US market did not go up enough after the favorable payroll report - I have increaased cash. >RRI looks good, settled wtih FERC. >Natural gas may jump on colder weather, storage report on Thursday. >Nikkei was up recently (early session), ignoring Israel strike on Syria.