So all is fine and the glorious melt-up can continue, or can it? That darn crafty Bil Gates actually duped the great Al "got cash" Greenspan. The fed flooded the U.S. with liquidity to prevent any shortage causing a bank run. So now what, the fed sits idly by while the maket continues out of control? I really don't think so. How does the fed slow the economy that was just flooded with liquidity? Even if you decide that this is your plan when do you pull they trigger? If you slam the brakes and then bad news from enterprises comes out you have two point blank shots at the economy. If you wait and the market's heat up inflation could bite before any action could take effect.

If the market was indeed helped during the last couple of weeks you could possibly just back out. This could be masked by any flood back into equities. This could be followed by fed reversing the liquidity moves by adding liquidity at the same time the interest rates were raised (what one hand takes away the other gives). The fed could raise or lower interest rates why they remove liquidity. If they feared the market over-reacting they could mask the lowering liquidity with lower rates.

Now what? The next week should be extremely volatile regardless as those true gamblers place their bets before the true direction is set. If the market reacts very favorably the Fed is boxed in and would have to move against the economy. For those who have been saying "never fight the fed," this leaves you waiting for the move to react.

I would remind those thinking of jumping in with based on futures (one way or another), I cannot tell you how many times the futres have been the opposite of the market movement for that days trading.

If y2k is truly dead then the market will start trading the future. And the future right now is inflation driven by the Fed. Don't be suprised if the early moves in Oil, Gold and Indexes reverse after the initial push is over.

I will watch from the sidelines, and wish you all a prosperous new year based on something more valuable than money.

-- Squid (ItsDark@down.here), January 02, 2000

Answers

Squid,

I supposed similarly last night on a thread related to gold. The fed has to bleed off the liquidity if it isn't needed. The big risk is the people who took it (but didn't need it) and made leveraged bets on the market flying higher as a last resort investment. Now the US is just going to look alarmist and it is very likely that the shine is off the DOW and NASDAQ. This may be a bigger hit than y2k would have been.

If you read any analysis in the last few weeks, there was thinking the DOW could go to 25,000 in the first two months of the year as an safe-haven. Who needs a safe-haven in a non-event?

The POLLIES may get what they least wanted but didn't realize it. Assuming that they held their views because of the market situation, which based on the razzing about gold last night, many of them do.

-- William R. Sullivan (wrs@wham.com), January 02, 2000.

I'm waiting for William Fleckenstein to give his Contrarian feedback tomorrow on www.siliconinvestor.com because he took the holidays off just when the NASDAQ rocket was being refueled in midair. Bet he has some interesting comments after Monday's session.

-- dinosaur (dinosaur@williams-net.com), January 02, 2000.

I certainly hope Gold over-reacts, can buy lot on the cheap.

Money is made in front of and behind the crowd, not in it...

-- Squid (ItsDark@down.here), January 02, 2000.

Dino,

I've lost track of Fleckenstein lately- has he stayed short all this time?

-- mike (maples@voy.net), January 02, 2000.

Well, let's see what the markets that are open are doing. All times Eastern time zone:

Hong Kong Hang Seng ^HSI 11:10PM 17233.09 +270.99 +1.60% Malaysia KLSE Composite ^KLSE 11:10PM 830.59 +18.26 +2.25% Philippines PSE Composite ^PSI 11:09PM 2141.77 -1.20 -0.06% Singapore Straits Times ^STI 11:06PM 2542.25 +62.67 +2.53% Sri Lanka All Share ^CSE 11:09PM 573.28 +0.81 +0.14% Egypt CMA ^CCSI 8:03AM 636.76 +12.25 +1.96% France CAC 40 ^FCHI 10:41PM 5958.32 -34.56 -0.58%

Overall, not too bad. Some of these are notoriously volitile markets as well. I don't think theres anything brewing to push the American markets into the tank tomorrow.

YMMV

Jon

-- Jon (here@home_its.Y2k), January 02, 2000.

Mike, I guess so. I'm certainly no stock expert. Duh. Read what he posts tomorrow several hours after Wall Street closes. He's the one who taught me what a "dead fish" is. I like his sense of humor, and he freely admits he can be wrong at times.

But this mania cannot be sustained. Now that Alan Greenspan's dumped an incredible amount of new money into the economy to float us over Y2K, how is he going to control the raging bull? I think Wall Street is too big for the Fed to bail out when the crash starts.

Dr. Ravi Batra wrote about a soon coming "destruction" of wealth. Maybe within days...

-- dinosaur (dinosaur@williams-net.com), January 02, 2000.

Looks like a key reversal is in the making this morning.

The long bond is up to 6.57 as I write. The bond market is in a rout and the stock market is finally going to act like it should....follow bonds down when interest rates go up.

-- William R. Sullivan (wrs@wham.com), January 03, 2000.