Posted by: mlsoft
In reply to: TJ Parker who wrote msg# 136325 Date:7/31/2003 9:16:03 PM
Post #of 136345
TJ...
"ah, here i think we disagree. the consumption frenzy we've been seeing hasn't been concentrated in coach stores and nieman marcus; its been at walmart and has boosted chinese exports by 33%."
Hmmm -- I haven't seen any consumption "frenzy" at all recently. Consumer spending has held up but that was because re-fi's and debt replaced the equities bubble as a source of funds for the consumer after the bubble burst. Now that the re-fi mania is over and the consumer is maxed out in debt, what is going to be the source of extra funds to keep consumer spending from going down?? Employment is way down and the economy is very sluggish, so that won't work. The answer is that the only source that Greenspan has any control over is to reflate the equities bubble once again as the "new" source of funds until the economy strengthens. To date, I doubt that the markets have done much more than ease the stupor and shock that wealthier individuals have been in, and AG will have to continue to drive the markets significantly higher for the Gambit to work. Remember, we are far, far below the top in the NAZ, where most folks got killed.
"tsk tsk. its not similar. above we're talking about absolutes and here you're talking proportions. its not gonna help the italian economy much of lamborghini quadruples its yearly sales, but if fiat increased theirs by 25% ..."
I think you missed the point - a relatively small group of "well to do" individuals and business owners will outspend a very large group of poor folks. It is true that if you increased the assets of both groups by $50,000 per person the poor folks would probably outspend the rich folks, but how are you going to do that?? Greenspan has to work with what can be done, and he can raise the assets of the rich folks.
As for your last two points, the Gambit is not done by a long shot and although it is hard to deny that sentiment has improved somewhat, the poor economic data and earnings reports/guidance has certainly hurt. To the extent that he can continue to drive stocks ever higher, sentiment could continue to improve, although it would defy the reality of the economy.
I do not think it will work nor do I think he can pull it off. I have said that all along but he has already taken it far higher than I thought possible, so I am cautious about saying what he can or cannot do. The other point I have made all along is that it is the only choice he had to keep us from entering global recession and possible/probably deflation. Realistically, he has to play the hand and see what happens.
My guess is that the Gambit runs out of gas, either now or in the near future, and both the markets and the economy come down.
mlsoft
