Zeev's Turnips Patch-No Politics (ZEEV)

[Zeev Hed]

Nevin, welcome to our modest abode. Was TRKN still Plasma at the time...? You may want to read first my long term forecast from April 2000 (#reply-13483082). At this point the main macro-economic question is will that recovery grow to be self sustaining, or have most of the bullets been spent. I am of the opinion that medium term (two three years), the bullets have been spent (how much more tax reduction can we have? how much lower the interest rates can go, how much more refinancing is there that the consumers can do to continue supporting the growth?). Yet, if employment starts and increase consistently for few months at a pace of 200,000 new jobs, that could stretch the economic recovery before another recession sets in. You got to understand, however, that bear markets start more often than not at peak economic activities and bull market at through in such activity. If you add on that observation that 2005 is the first year of an presidential cycle, and that this is the ideal time to administer any bitter medicine an economy needs to swallow in order to assure future growth without inflation, then 2005 might be a year of such "bad tasting medicine". Mind you, the process of reequilibrating the world economy (suggested in that 2000 post) is not finished. We still have major areas of over capacity, we still have excessively valued equity (particularly if interest rates start to rise to more rational levels). If indeed that 2000 forecast was right and we are in a long term secular bear market (which I think we still are), we will get into a period of excessive under valuation of equities marking the end of the secular bad bear. That is not here and now. For now, though, there is ample liquidity around and stimulus to provide for the short term resumption of the current bull (after what I believe will be a short term relapse here)