05/12/01 TO CUT OR NOT TO CUT - DOES IT REALLY MATTER? The Daily Reckoning
Weekend Edition
May 12-13, 2001
Paris, France
By Addison Wiggin
MARKET REVIEW: To Cut Or Not To Cut - Does It Really
Matter?
On Friday, the Dow slid aggressively - down 89 - to close
at 10,821, down 129 for the week. That makes four of the
past five sessions ending badly. The Nasdaq shed 21 to 2107
ending the week down 3.8%. The S&P 500 dropped 9 to 1245, a
loss of 21 for the week. Is the bear market rally over? Will the next phase of the
sell-off be as devastating as the first? We will certainly
see... Reuters released a poll Friday, showing "all but one of the
25 primary dealers of U.S. government securities - firms
that trade directly with the Fed in money markets - that
the central bank on Tuesday will cut the fed funds rate to
4.0% from 4.5%." (USAToday) The poll, taken just after April retail sales data and a
survey of consumer sentiment for May were released - both
were both better than markets had expected. But
unemployment has risen to 4.5% and most dealers are
expecting that number to invite the Fed to slash rates
again...at the Daily Reckoning we wonder - will it help? Code Blue: Greenspan, caught between the Charybdis of
inflation and the Scylla of recession, is fast running out
of options. A post-bubble correction is likely to be
long... and painful. The real story for New Era dreamers reared its ugly head
early in the week. The Labor department said Tuesday that
'productivity' dropped in the first quarter 2001... the
first such decline in 6 years. The 'productivity miracle' - Greenspan's long-time partner
in crime - has fizzled, proving to be nothing more than a
statistical mirage. In this bright new age... how could
Greenspan have gotten it so wrong? Click here: The DR Blue Service ADD'L PRICES FOR THE WEEK:
Gold: $268
Crude Oil: $28.55
Natural Gas: $4.27
CRB Index: 213
Dollar Index: 116
The Sad, Sad Euro: $.87 down 2 cents on ECB rate cuts
British Pound: $1.41
Japanese Yen: $.81
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