The Week ahead

More problems predicted

There is little good that can be seen on the short term horizon for this market. All technical factors and indicators point toward future deterioration. There is little that can happen other than really good economic news that can change it. Not even Alan Greenspan can do something about this, though he may already have handled things.

The outlook for corporate profits is dismal. European growth is slipping fast and Japan is clearly in a deep recession, facing a major, painful economic overhaul. The picture is indeed very bleak.

Most forecasts don't show any economic growth picking up anywhere in the world for the next three to six months. Some pessimists believe it may be as long as a year before things straighten out.

If you think the market has bottomed out, a world wide recession will show you how wrong you are. Alan Greenspan can not even change things here. A sudden rate cut would be seen as a sign of panic.

If there is a sudden rate cut, the markets might panic, thinking there is desperation in Washington.

It is clear by now that Alan Greenspan raised rates too high in 2000 and kept them up too long. The world economy is now paying the price for that mistake.

When Greenspan reacted, he reacted well, and those very rate cuts will eventually help the US and world economy. Any moves now will not be felt for a year, though they may help the psychology of the market.

It is the seven rate cuts this year that will ignite the only economy that will drag the world back into growth.

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Shmuel Protter
investmenttool.com