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Trere were a number of pertinent articles in the July issue of
Technical Analysis of Stocks and Commodities. The first I would like
to post is the subject:
April '74 to November '76
Fed rate cut from 8% to 5 1/4%
Dow advanced 12% [843 to 947]
May '81 to April '84
Fed rate cut from 14% to 8 1/2%
Dow advanced 5 % [995 to 1046]
Dec '90 to Jul '92
Fed rate cut from 6 1/2% to 3%
Dow advanced 32% [2565 to 3393]
Jan '01 to Dec '01
Fed rate cut from 5 1/4% to 1 1/4%
Dow declined 5.6% [10,868 to 10,259]
The S&P declined 11% during this easing period
The Nas fell more than 19%
To present date the decline is obviously worse. The author makes his
own points related to deflation and inflation which are valid.
My point is that there were better fundamental valuations in prior
eras of Fed rate cuts and the impact of borrowing at lower rates and
investing in your own business helped more than financial
institutions in the mainstream.
It is just going to take a little longer for this turn around. And
while there will be periods of seeming recovery, the secular bear is
not yet dead.
John
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