Post by Savant on Jul 5, 2004 3:50:58 GMT -5
Special Report
Golden Era Rate Hike Threat
The dominant theme of our current era of the past 15 Months has been the emergence of a Golden Era of Growth the likes of which most Baby Boomers, Yuppies, Gen X'rs and Y'rs to the Eco Boomers of the next generation of the 21st Century have yet to live through and experience what might become their fully deserved potential...
Namely: An extended period low interest rate environment that has not been seen since the last great era of post war good times... And that last extended period actually lasted about 16 years from 1950 thru 1966 or so.
The Nostalgic 1950's - A unique time in our history a la "Back to the Future", when productivity was particularly high, unemployment was at record lows of 2 1/2% and prosperity reigned as then unparalleled post depression and war era wealth creation was brought about by what turned out to be that almost unprecedented 16 years of a low interest rate and space race inspired boom times, that culminated in the 25,000 to 1 odds of success in a 1969 Moon landing and capped off two decades of hypergrowth before the stagflation of the 70's set in.
And it wasn't until the Space Shuttle era, Personal Computer revolution and Reaganomics re-invigorated growth that ignited the longest and strongest bull market in history as rates began a 24 year decline to where they are today.
The question is: Did the Fed deliver the first death knell blow to what could be a 20 year Golden Era of Growth (a la the beginning of the 20th Century, where from 1903 to 1929, the Dow rose almost 1000% from 40 to almost 400) or will our destiny play out and emulate the last century with a new era of growth for 1st quarter of the 21st Century?
Only time will tell, but we think the Fed may well have prematurely boxed themselves in, just as they did in 2000 and succumbed to the misguided wishes of the Wall St masses, who thought they knew better than the market 4 years ago and unfortunately think they know better today... They may well be right. but the odds are against it.
They were dead wrong in 2000 and got what they wished for and deserved: 3 years of hell and heavy back to back declines for 98% of mutual funds and $7 trillion in market losses.
And our bet is they will be proven dead wrong again in 2004, although this time the extreme low levels we are coming off should not unduly hurt the economy, but still could...
Maybe the best thing to come out of yesterday's rate hike is the Fed's admission that they don't want to be boxed in to a pre-telegraphed move that they cannot get out of without embarrassment, if things change quickly enough...
So what has changed in the past few weeks... There is a sense that this Golden Era economic recovery might not be quite as robust as previously thought and disinflationary forces still loom...
Gold and Silver have taken a severe shellacking in the markets and the Silver chart looks so awful that only a miracle seems likely to reverse it back into an uptrend anytime soon...
As of the past few days, the first surprise was the news out of Iraq that caught the market off guard and prompted an across the board sell off in everything and even a sharp down move in oil, that was not even enough to buoy stocks....
Then the FOMC meeting inspired what has so far turned out to be a death rally where stocks rebounded anemically on the rate hike news with waning enthusiasm that began to deteriorate going into Thursday as jobless claims were unchanged and the shocking news of a 5% decline in German retail sales along with a bevy of bad news outbursts surrounding retail and other issues across the World sent stocks reeling, taking the Dow down 100 odd points and the Nasdaq 31 plus points.
So Pray tell: What in the world is the Fed doing raising rates against a background such as this and why did stocks get the shivers Thursday?
Perhaps in anticipation of disappointing employment numbers Friday... As 9 times out 10 when stocks get nervous ahead of such sensitive announcements, they are often pre-empting the worst. So is all this now the same old Deja Vu all over again? We remember asking the same question back in 2000? What was the Fed doing raising rates when Latin American and most Global economies were already starting to flounder and by the way Mr Greenspan: Did you happen to notice that employment growth actually peaked in February 1997? This was akin to killing the Bull in a Bullfight when it was already on its last legs. There was no need to kill the bull market with a panic inspired interest rate 'Coup de Grace': It was already dying anyway. So just as Reagan so famously once said: There they go again. Financial Merlin Bill Siedman, (our nominee to be the next Fed Chairman or Treasury Secretary), even echoed our sentiments back in 2000 when he vociferously declared: Every recession since the formation of the Federal Reserve can be traced to an over-reaction by same. Happening like clockwork all over again goaded on by zealous analysts.
This time the only remaining dismal economic backdrop that starkly contrasts one of the greatest ongoing economic expansions in history - Why kill the Golden Goose? And to add to that... All these politicians who were constantly and continually whining throughout the 90's about lackluster growth rates and clamoring and for 4% plus: Then as soon as we get something approaching that, the Fed wants to knock it on the head, first in 2000 and now in 2004.
Thankfully, the economy finally delivered spearheaded by one of the most sensational market recoveries in history and 4 ~ 8% quarterly growth with near record productivity and record corporate profitability and some of the best economic numbers in history, rendering us closest ever to being the Number One Economy in the World in terms of:
Productivity, Competitiveness, Profitability and Employment growth and we are doing better than almost anytime in history in terms of US growth and employment levels, with arguably the highest number of Americans working ever at around 138 Million by some disputed measures. Whilst misguided politicians have their heads in the sand or are so blind to reality of what's really happening in the World or they are just plain lying when they say when they criticize economic performance, when given all that we have been through, is really a testimony to our strength and ability to recover. The more glaringly obvious, but conveniently overlooked fact is that the last so-called recession was a walk in the park compared to some of the horrendous unemployment statistics of the early 80's and 90's in the US, not to mention the current malaise of Europe within near 10% average unemployment across EuroZone, excluding Ireland and the UK, of course which are close to full employment and continue to perform exceptionally well.
Moreover, within 4 years of the so called bubble peak, the broadest indices in the US have already been at new all time record high levels of almost a year and yet still today, other analysts of former renown, re-told us only weeks ago on Bloomberg, that we are still in a bear market...Give me a break. How can you be in a bear market when your leading and broadest indicators are at new all time highs, implying broadest sectors of the economy are strongest.
Golden Era Rate Hike Threat
The dominant theme of our current era of the past 15 Months has been the emergence of a Golden Era of Growth the likes of which most Baby Boomers, Yuppies, Gen X'rs and Y'rs to the Eco Boomers of the next generation of the 21st Century have yet to live through and experience what might become their fully deserved potential...
Namely: An extended period low interest rate environment that has not been seen since the last great era of post war good times... And that last extended period actually lasted about 16 years from 1950 thru 1966 or so.
The Nostalgic 1950's - A unique time in our history a la "Back to the Future", when productivity was particularly high, unemployment was at record lows of 2 1/2% and prosperity reigned as then unparalleled post depression and war era wealth creation was brought about by what turned out to be that almost unprecedented 16 years of a low interest rate and space race inspired boom times, that culminated in the 25,000 to 1 odds of success in a 1969 Moon landing and capped off two decades of hypergrowth before the stagflation of the 70's set in.
And it wasn't until the Space Shuttle era, Personal Computer revolution and Reaganomics re-invigorated growth that ignited the longest and strongest bull market in history as rates began a 24 year decline to where they are today.
The question is: Did the Fed deliver the first death knell blow to what could be a 20 year Golden Era of Growth (a la the beginning of the 20th Century, where from 1903 to 1929, the Dow rose almost 1000% from 40 to almost 400) or will our destiny play out and emulate the last century with a new era of growth for 1st quarter of the 21st Century?
Only time will tell, but we think the Fed may well have prematurely boxed themselves in, just as they did in 2000 and succumbed to the misguided wishes of the Wall St masses, who thought they knew better than the market 4 years ago and unfortunately think they know better today... They may well be right. but the odds are against it.
They were dead wrong in 2000 and got what they wished for and deserved: 3 years of hell and heavy back to back declines for 98% of mutual funds and $7 trillion in market losses.
And our bet is they will be proven dead wrong again in 2004, although this time the extreme low levels we are coming off should not unduly hurt the economy, but still could...
Maybe the best thing to come out of yesterday's rate hike is the Fed's admission that they don't want to be boxed in to a pre-telegraphed move that they cannot get out of without embarrassment, if things change quickly enough...
So what has changed in the past few weeks... There is a sense that this Golden Era economic recovery might not be quite as robust as previously thought and disinflationary forces still loom...
Gold and Silver have taken a severe shellacking in the markets and the Silver chart looks so awful that only a miracle seems likely to reverse it back into an uptrend anytime soon...
As of the past few days, the first surprise was the news out of Iraq that caught the market off guard and prompted an across the board sell off in everything and even a sharp down move in oil, that was not even enough to buoy stocks....
Then the FOMC meeting inspired what has so far turned out to be a death rally where stocks rebounded anemically on the rate hike news with waning enthusiasm that began to deteriorate going into Thursday as jobless claims were unchanged and the shocking news of a 5% decline in German retail sales along with a bevy of bad news outbursts surrounding retail and other issues across the World sent stocks reeling, taking the Dow down 100 odd points and the Nasdaq 31 plus points.
So Pray tell: What in the world is the Fed doing raising rates against a background such as this and why did stocks get the shivers Thursday?
Perhaps in anticipation of disappointing employment numbers Friday... As 9 times out 10 when stocks get nervous ahead of such sensitive announcements, they are often pre-empting the worst. So is all this now the same old Deja Vu all over again? We remember asking the same question back in 2000? What was the Fed doing raising rates when Latin American and most Global economies were already starting to flounder and by the way Mr Greenspan: Did you happen to notice that employment growth actually peaked in February 1997? This was akin to killing the Bull in a Bullfight when it was already on its last legs. There was no need to kill the bull market with a panic inspired interest rate 'Coup de Grace': It was already dying anyway. So just as Reagan so famously once said: There they go again. Financial Merlin Bill Siedman, (our nominee to be the next Fed Chairman or Treasury Secretary), even echoed our sentiments back in 2000 when he vociferously declared: Every recession since the formation of the Federal Reserve can be traced to an over-reaction by same. Happening like clockwork all over again goaded on by zealous analysts.
This time the only remaining dismal economic backdrop that starkly contrasts one of the greatest ongoing economic expansions in history - Why kill the Golden Goose? And to add to that... All these politicians who were constantly and continually whining throughout the 90's about lackluster growth rates and clamoring and for 4% plus: Then as soon as we get something approaching that, the Fed wants to knock it on the head, first in 2000 and now in 2004.
Thankfully, the economy finally delivered spearheaded by one of the most sensational market recoveries in history and 4 ~ 8% quarterly growth with near record productivity and record corporate profitability and some of the best economic numbers in history, rendering us closest ever to being the Number One Economy in the World in terms of:
Productivity, Competitiveness, Profitability and Employment growth and we are doing better than almost anytime in history in terms of US growth and employment levels, with arguably the highest number of Americans working ever at around 138 Million by some disputed measures. Whilst misguided politicians have their heads in the sand or are so blind to reality of what's really happening in the World or they are just plain lying when they say when they criticize economic performance, when given all that we have been through, is really a testimony to our strength and ability to recover. The more glaringly obvious, but conveniently overlooked fact is that the last so-called recession was a walk in the park compared to some of the horrendous unemployment statistics of the early 80's and 90's in the US, not to mention the current malaise of Europe within near 10% average unemployment across EuroZone, excluding Ireland and the UK, of course which are close to full employment and continue to perform exceptionally well.
Moreover, within 4 years of the so called bubble peak, the broadest indices in the US have already been at new all time record high levels of almost a year and yet still today, other analysts of former renown, re-told us only weeks ago on Bloomberg, that we are still in a bear market...Give me a break. How can you be in a bear market when your leading and broadest indicators are at new all time highs, implying broadest sectors of the economy are strongest.