Stokes: Industry Edge
A MARKET IN
CRISIS... GREENSPAN STEP DOWN?...7000 DOW? Distinct Possibilities...
JULY 18, 2002
Much to the chagrin of even the most optimistic observers and players, the market, particularly the Dow, continues to do its thing, which is to find its true level.
The DJIA closed Thursday of this week at 8409.49 -- these days about as "bearish" as Russia -- but no doubt on its way to "new" lows. A quick look at the rise of the Dow from 3000 in 1990, to 7000 in 1997, to above 11000 in the fall of 1999 via Dow-Jones indexes (www.djindexes.com/jsp/avgDecades.jsp?decade=1990#dowdiary) is an excellent historical comparative.
In light of recent revelations and investigations, it really and truly is in the best interest of the economy to stop the artificial stimulus that has been part and parcel to market existence for at least the past 5 years. The extent to which key Wall Street executives encouraged such stimulus and which resulted in the subsuming of the most basic checks and balances, have made the alleged excesses of Milken and Boesky seem trivial by comparison. Presidential calls for bringing such ones to justice are viewed by many as hollow; afterall, the longest running bull market required a modification, if not an outright suspension of the SEC regs so elegantly crafted by Joe Kennedy.
It is also our expectation that Greenspan may well be "invited" to step down, but for reasons all but diametrically opposite to the head of the SEC. The Chairman is about perfect a choice for the position as they come. And in a perfect world devoid of presumed prerequisite political machinations, there would be no question as to competency and capability to stay long term. He has, afterall, presided over one of the longest -- if not the longest -- boom cycles in US history. Prior to the step down possibility, the market would be well served if he ignores the political ramifications associated with raising Federal rates by a half to a full point.
This is the next necessary step that will accomplish everything everyone wants the market to do, in addition to reeling in an artificially weak Yen.
The "irrational exuberance" that prompted Greenspan to "build a hedge against inflation" by raising rates six years ago in the middle of a boom, has come full circle in the damage inflicted on our economy by investor overconfidence.
Right now, at this moment, he needs to show the same courage and conviction demonstrated then.
In the meantime, with no further inappropriate stimulation, the Dow will fall to within the 7,000-7,500 range, with 7,000 to 7,200 representing the buy, or sell, point. These numbers will represent as true an indication of market worth as we've seen over the past half decade. It's as close as the market will come to setting itself back to zero, and benefit is that any subsequent increases in level will be largely viewed by investors as real. The upshot: investor confidence rises.
SHELTER FROM THE WIND
As these market gyrations, oh, just call it a plunge, continue, the makers of Aspirin, Advil, Bufferin and Motrin are no doubt experiencing unprecedented sales. Well, duh.
There are better stress management techniques than the above, actually, and we must say that we found a place that truly represents "shelter from the wind". No, its not some sprawling resort on the Big Island or a place only accessible by billionaires with Lear 60s, G5s, BBJs or Avantis. Rather, it's a quiet place in the Florida Keys whose true beauty is found underwater.
They call it the Lookout Lodge (www.lookoutlodge.com) and if you need to clear your head of swirling NASDAQ, DOW, S&P 500 numbers and the latest moves by Al-Queda, do yourself a favor and visit a place that's part dive resort, part B&B and part home. Tell them we sent ya...
Myron D. Stokes
The best SUV in the world and eMOTION! REPORTS.com SUV of 2003: RANGE ROVER
eMOTION! REPORTS.com Publisher
Myron D. Stokes presents Land Rover
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