Re: "seems there's some negative vibes on the Barron's front..who cares,we have one of the premier companies of the twentieth century. I picked up some more MER at these unbelievable low levels...this Russia and Latin America fears are vastly overblown...Even though I don't own any of the money center banks,I think they are very cheap.The banks are still pocketing the difference between the diiference in rates.Just look at the mortgage rates-they should be at least a full point lower but they're not."
This may put things into a clearer perspective. I think most of the selling was due to fear nothing to do with real danger to us. Don't believe Greenspan would be saying or actually doing anything if he knew there is real danger. He's too smart to try what Japan did hopeless lowering rates in vain.
washingtonpost.com
Fed Chief Hints at Possible Rate Cut
By John M. Berry
Washington Post Staff Writer
Saturday, September 5, 1998; Page A1
Federal Reserve Chairman Alan Greenspan said yesterday that ongoing turmoil in world financial markets poses a risk to continued U.S. economic growth and signaled that the Fed might cut interest rates in response. Greenspan disclosed that at a policymaking session last month, Fed officials, who had been leaning for months in the direction of raising rates to head off any increase in inflation, moved back to a neutral stance as a result of mounting concern about the potential impact of the turmoil on the United States.
"As dislocations abroad mount, feeding back on our financial markets, restraint [on U.S. economic growth] is likely to intensify," the Fed chairman warned in a speech at the business school of the University of California at Berkeley.
The United States is strong and many of the "imbalances," such as rising inflation, that usually appear in long-running economic expansions "are largely absent today," Greenspan said. However, he added, "it is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress."
His comments, a copy of which was made available in Washington, were his first since a default by the Russian government on a portion of its debt two weeks ago that triggered sharp declines in stock prices around the world and large interest rate increases in some developing nations.
In the United States this week the Dow Jones industrials average fell more than 5 percent for the second week in a row, closing at 7640.25. Altogether, the Dow now is down more than 18 percent from its peak on July 17 and more than 3 percent from its level at the beginning of the year. In countries such as Singapore, Malaysia, Brazil and Mexico, stock prices are down more than 40 percent since Jan. 1. "In the spring and early summer," Greenspan said, the Federal Open Market Committee, which is the central bank's top policymaking group, "was concerned that a rise in inflation was the primary threat to the continued expansion of the economy. By the time of the committee's August meeting, the risks had become balanced, and the committee will need to consider carefully the potential ramifications of ongoing developments since that meeting."
The next Fed policy meeting is Sept. 29. Unless the world economy suffers another shock, Fed action on rates is unlikely at that time because it may be hard to quantify those "potential ramifications" for the U.S. economy that soon. On the other hand, a grave development - such as the collapse of several large ailing Japanese banks - that posed an immediate threat to the world financial system could cause Greenspan to act using his own authority even before the meeting.
Last week, as the financial turmoil increased, a number of Fed officials who went to a conference in Jackson Hole, Wyo., said they no longer were thinking about raising rates but that they saw no need at that point to reduce them.
In a talk in Boise, Idaho, on Thursday, Robert T. Parry, president of the San Francisco Federal Reserve Bank, noted that "these international problems are coming at a time when spending inside the United States is strong, so that our economy has some room to absorb a shock from abroad."
"However," Parry added, "recent financial developments in the United States and around the world raise uncertainties about whether this strength in domestic spending will continue. Falling U.S. and foreign stock markets, as well as possible effects of problems abroad on U.S. corporate profits, could restrain consumer and business spending in this country." In his speech, Greenspan also raised the question of whether a big drop in stock prices, after several years of large increases, might have a major depressing effect on consumer spending and economic growth.
"Since equity values are demonstrably more variable than incomes, when equity market values become large relative to incomes and the gross domestic product, their fluctuations can be expected to affect GDP more than when equity market values are low," Greenspan said.
"Clearly, the history of large swings in investor confidence ... counsels caution in the current context," Greenspan said. "We have re-learned in recent weeks that just as a bull stock market feels unending and secure as an economy and stock market move forward, so it can feel when markets contract that recovery is inconceivable.
"Both, of course, are wrong. But because of the difficulty imagining a turnabout when such emotions take hold, periods of euphoria or distress tend to feed on themselves," he said.
In December 1996 Greenspan shook the stock market by asking whether investors were showing "irrational exuberance." His comments last night made clear that he is not so much concerned about the level of stock prices, but rather how changes in them may affect the real economy.
Greenspan's comments suggest he is worried about the possibility that a psychologically driven "bear market" could cause such a pullback in consumer spending and business investment as to put the U.S. economy into a serious slump.
At yesterday's close, the Standard & Poor's index of 500 stocks was still slightly above its level at the beginning of this year but it had dropped 17.9 percent since its peak on July 17.
I think he wants the baby boomer money back in those funds!!!
Greenspan's greenbacks are on the markets side now i hope this will start those shorts covering real soon. After labor day we may see some HUGE FUND money coming back in heavy heavy trading. I think Intel will be leading the pack!
TTOSBT |
