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Well, whatever will happen will happen. Here's some additional
fodder for the fire:
What's Known Is That There Are Unknowns
George F. Will, Washington Post Writers Group Monday, January 1,
2001
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REGARDING the economy, this is a time -- like, come to think about
it, all other times, regarding everything -- to remember this: "There
are knowns, known unknowns, and unknown unknowns." That axiom (whose
author is unknown) is pertinent to the problem of understanding the
economy's trajectory, or at least not misunderstanding it too
harmfully.
America has just been draped with the journalistic equivalent of
black crepe -- stories about the dreadful Christmas shopping season.
But the season, although disappointing when measured against
expectations, was slightly better than last year's, which was the
best Christmas in a decade.
Amid anxiety about a coming recession, unemployment has crept up one-
tenth of 1 percent to . . . 4 percent, a full percentage point below
what was, until recently, defined as full employment. The Nasdaq
composite index has just had its worst year in its 29-year
history . . . and is still 16 percent above where it was two years
ago. In America, misery is relative.
Unless you think the economy can, should and will grow at 5 percent
forever,
it is odd to regret evidence that the economy is on a glide path to
2.5 percent to 3.5 percent growth next year. And for the president-
elect, the slowdown is serendipitous, given his advocacy of a tax
cut.
Stock market volatility is not serendipitous for George W. Bush, who
hopes to persuade Congress, and the country, to adopt partial
privatization of Social Security. Critics will ask: Will the
government-approved funds in which individuals will invest portions
of their Social Security taxes be more secure investments than, say,
AT&T?
Once synonymous with blue-chip reliability, AT&T's stock has plunged
from $61 to $17.25 in nine months.
The broadening demographics of stock ownership, which now includes
more than half of all households, is desirable, not least because it
broadens the constituency for policies of economic prudence and
growth. Yet, as participation in the stock market increases, so does
the potential for economically destabilizing mood swings.
That is, some analysts, including Alan Greenspan, believe there is
a "wealth effect" -- that consumption increases as rising portfolio
values cause consumers to feel more prosperous, thereby producing
irrational exuberance among consumers.
Greenspan's formula is that every extra dollar of stock-market wealth
prompts a 3 to 5 cent increase in consumption. And it would seem to
follow that in a society of broad stock ownership, there can be a
negative wealth effect -- declining portfolio values cause mutually
reinforcing retrenchments that drive the economy down further than
underlying realities warrant.
However, Kevin Hassett, resident scholar at the American Enterprise
Institute, notes that individuals who are at least moderately wealthy
own most stocks: "The top 5 percent own about 80 percent of all
stock." But these individuals account for a small share -- perhaps as
little as 12 percent -- of society's aggregate consumption.
Therefore, Hassett says, it is mathematically implausible to argue
that positive wealth effect drove the economy to its heights.
The known unknowns are less worrisome than the unknown sort. But,
then, 20 years ago the Internet was an unknown unknown.
--- In realtraders@xxxxxxxxxxx, BobsKC <bobskc@xxxx> wrote:
> At 08:58 PM 12/31/00 -0500, you wrote:
> >I would take the statement from the last Fed meeting as being more
important
> >than Moskow's statement. High energy prices can and do cause
recessions.
> >Only time will tell. I am not saying it is a guarantee (a cut),
but as of
> >now, I'd be surprised if they did not ease 25 bps next month.
>
> I'll be shocked if they don't ease by that and the reasons are
many. I'm
> not sure there won't be a .25 cut before the meeting and if there
is, a
> 50/50 chance of another one at the meeting. Please remember that
there is
> a lot more to the decision than inflation issues.. right now,
political
> considerations are running high and the psychology of the markets
which
> brought about at least a few of the hikes, is now such to bring
about a few
> decreases. This Fed Chairman is the greatest friend a trader ever
had. He
> pushes em up and takes em down and pushes em up and ...... ...
Anyone
> who doesn't love this guy has taken up a one tracked mind set and
gets
> burned a lot.
>
> Anyway, it's New Year's Eve .. Happy New Year to the list and a
healthy,
> profitable, 2001
>
> Bob
>
>
> >
> >---
> >Steven W. Poser, President
> >Poser Global Market Strategies Inc.
> >http://www.poserglobal.com
> >swp@xxxx
> >Tel: 201-995-0845
> >Fax: 201-995-0846
> >
> >-----Original Message-----
> >From: J W [mailto:inbox@x...]
> >Sent: Sunday, December 31, 2000 5:25 PM
> >To: realtraders@xxxxxxxxxxx
> >Subject: [RT] Re: OOPS - There goes the anticipate rate decrease
> >
> >
> >I don't know about that. Energy prices were referred to as a sort
of
> >tax. As such, a tax applies differently to different groups while
> >interest rates have a more general effect. OPEC is also making
noise
> >about keeping oil prices high regardless. And natural gas is high
> >but I don't know if that is artificial and will decline as warmer
> >weather approaches. In any case, I think high energy prices are
good
> >as they encourage further development of alternative sources.
> >
> >Seems to me that if this were to be considered an "official"
> >statement, then the intent would be to say that a rate change is
not
> >guaranteed. The FED doesn't want to return to "irrational
> >exuberance" <g>...
> >
> >JW
> >
> >--- In realtraders@xxxxxxxxxxx, "Steven W. Poser \(psn\)"
> ><sposer@xxxx> wrote:
> >> Note however that suggesting that energy prices are higher is
also a
> >> suggestion that such increases, if they are not following
through to
> >> inflation, which seems to be implied in the quote, is equivalent
to
> >further
> >> rate increases. While this may take the odds of 50 basis points
> >down from
> >> more than 50% now to near zero, I doubt that it will take the
odds
> >below
> >> 100% for 25 bps on Jan. 31.
> >>
> >> Steve Poser
> >>
> >> ---
> >> Steven W. Poser, President
> >> Poser Global Market Strategies Inc.
> >> http://www.poserglobal.com
> >> swp@xxxx
> >> Tel: 201-995-0845
> >> Fax: 201-995-0846
> >>
> >> -----Original Message-----
> >> From: J W [mailto:inbox@x...]
> >> Sent: Sunday, December 31, 2000 3:27 AM
> >> To: realtraders@xxxxxxxxxxx
> >> Subject: [RT] OOPS - There goes the anticipate rate decrease
> >>
> >>
> >> Saturday December 30, 2:41 pm Eastern Time
> >>
> >> Chicago Fed's Moskow sees no recession - paper
> >>
> >> CHICAGO, Dec 30 (Reuters) - U.S. economic growth is slowing, but
the
> >> economy is not heading toward a recession, the president of the
> >> Federal Reserve Bank of Chicago said in a newspaper interview
this
> >> weekend, reiterating a view he has previously expressed.
> >>
> >> Chicago Fed President Michael Moskow declined to say whether the
Fed
> >> will cut interest rates, the Chicago Sun-Times said in its Sunday
> >> editions.
> >>
> >> The Fed's interest-rate setting body, the Federal Open Market
> >> Committee, warned on Dec. 19 that the economy was slowing so fast
> >> that there was a risk of a sharp downturn, a signal the central
bank
> >> was preparing to cut rates soon. Moskow will be a voting member
on
> >> the FOMC in 2001.
> >>
> >> ``I can tell you that we will be monitoring very carefully all
the
> >> various indicators (of economic performance) ... and gathering a
> >host
> >> of anecdotal information as well,'' Moskow told the Sun-Times.
``And
> >> we'll be prepared to do what's best for the American people.''
> >>
> >> Moskow noted that the housing market has stayed ``at a very high
> >> level,'' while businesses can still borrow and spend money,
despite
> >> higher interest rates. Also, despite layoffs announced by many
> >> companies in recent months, those workers can still be absorbed
into
> >> other jobs, he said.
> >>
> >> ``We may see a certain number of layoffs that get a lot of
> >> publicity,'' Moskow said. ``But if the economy is still expanding
> >and
> >> total jobs (created) are still going up, say 100,000 to 200,000 a
> >> month, then those people are being absorbed into the economy and
> >> other jobs.''
> >>
> >> Moskow said the Fed is carefully watching rising energy prices.
``In
> >> essence, it's like a tax increase,'' he said. ``It hurts
businesses
> >> as well, increases their costs. It's one of the elements of the
risk
> >> that we see toward weaker economic growth going forward.''
> >>
> >> Moskow said earlier this month that he did not see a significant
> >risk
> >> of recession, though there has been slowing in the economy.
> >>
> >> A Chicago Fed spokesperson could not be reached to comment on the
> >Sun-
> >> Times article.
> >>
> >>
> >>
> >>
> >> To unsubscribe from this group, send an email to:
> >> realtraders-unsubscribe@xxxxxxxxxxx
> >
> >
> >
> >To unsubscribe from this group, send an email to:
> >realtraders-unsubscribe@xxxxxxxxxxx
> >
> >
> >
> >
> >
> >
> >To unsubscribe from this group, send an email to:
> >realtraders-unsubscribe@xxxxxxxxxxx
> >
> >
> >
> >
To unsubscribe from this group, send an email to:
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