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Thursday, January 25, 2001
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“There is only one side of the market and it is not the bull side or the bear side, but the right side." --Jesse Livermore—
Thursday January 25, 2001
I would like to comments on the economy and stock market….
First of all the Greenspan testimony and following Q& A session is no surprise to me…. Furthermore I would suggest that the recent economic slowdown that has occurred will be (contrary to most economists) brief …
I would add, the brevity of the slowdown should have no effect on the Fed decreasing interest rates in the coming months. There appears to be very little inflation. Combine that with further productivity gains in the future should allow the Fed NOT to worry about inflation…..
To reflect a bit over the events from the last few months and back to early last year… …
The Fed raised rates to offset inflationary pressures that in my opinion were due to stock market gains rather than Raw prices…
In the beginning the ‘Noted’ analysts argued ‘ that the Tech sector would not be effected by rate increases and began dancing in the streets last New Years a Dance that lasted till the March / April period… . The public witnessed a sharp sell off then a rally to a comfort level..
The public was happy and marking time as the Stock Market declined, only to be hit upside the head with the Firestone tire problem .
Although not a monetary problem but a problem of lost confidence during a time of Stock market uncertainty…
As we wandered through the summer and witnessed a bit of rally then a decline the public was content and held course in anticipation of the election in the fall….
Typically a strong period into elections…
What happened ? …
The public is briefly elated on election Eve to the Early results …then gets word of no winner and begins to witness the complications of a close election as the stock market most notably the Tech sector begins to Slide and Slide heavy.. ..
The result ? a consuming and investing public ( in recent years ) sits back .. takes losses in the market.. , drives the SUV in for a tire change and most notably takes advantage of the real-time communication available today to focus solely on the election fight ..
That consumer does not shop for X-mas ..
Does not Buy a Car or truck..
‘Hell’ he just was told to return the new trucks to fix the tire problem and surely does not want to invest in the markets cause it was dropping like a rock and who knows who will be president !!…
As a result the economy took a dip. A HARD DIP…
Stock analysts all lowered expectations, Corps began layoffs, restructuring while major Economists began issuing forecasts for a continued ‘year long or more slowdown …
Economists are like weathermen paid to be wrong and never sticking their neck out…
They based their forecasts for two years out on Gov’t Supplied economic figures, which were a result of ‘The Average Joe’ Watching the election on TV for 6 weeks,
while worrying about his SUV and Stocks.
In my opinion a purely TEMPORARY SLIP…one that is NOW over……!!!
Because of the depth of the decline in the Dow and SP500 roughly 20 %.. accompanied by a 60% or more decline in Nasdaq .. I would suggest that we are now at levels that can lead to a new Bull Market in the Economy and stock prices..
One that may not be as pronounced as the last ,but one that nevertheless brings a higher stock market as the economy is re-invigorated by the Fed ‘s
ability to lower rates. A procedure that in my opinion may be hastened by loss of consumer confidence accompanied by a forever-stable inflation outlook!!!
This markets reminds me like the one just after Clinton took office … as the last recession was in full force.
A market that began a BULL move that lasted for years. AS the next one should.
What should a trader do!!
Buy dips. Sell rallies but keep a friendly posture…as the market heads toward the level it was on election night… Near 1450 SP500…
--Ship in Harbor does Not Sail!! ---
Jan 25 12:50 PM ‘2001’
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