The Motley Fool Discussion Boards

Previous Page

International Investing / Australia (All-Ordinaries)


Subject:  Re: market cycles Date:  12/5/2001  12:46 AM
Author:  harmy Number:  2865 of 6186

Also it is one thing to say the US is dependant on the Arab nations for oil

Uhhh !! - I didn't say that !! What I said was that the US depended on 30% of its oil supplies from overseas. Regardless of where it gets its energy it will have to pay in hard currency for it - it's a drain on it's economy that will get worse over time.

As far as the credit question well I'm miles away from you In agreeing the USA has had strong debt growth since 1987 & that has increased yearly as this Gov link shows

Not sure I'm with you on this one. Regardless of how big the debt becomes eventually the piper calls the tune and the debt will have to be repaid. If the economy continues to boom then it can carry the debt but when the economy falters then the debt becomes a real worry because it has to be repaid. Look at Argentina, for example, it has just defaulted on a 95 billion dollar debt and as a result inevitable inflation will ensue. You can't put off paying back debt for ever. In its simplest terms providing the average householder has a job and can continue to pay off his credit card all will be well - the problem comes when he's laid off at work and can't pay the debt - in comes the debt collector, repo man and bank enforced mortage sales. This is the worry that the US man in the street has at the moment.

It, to me, seems crazy to suggest that any rate increase delivered now is not going to effect the market until six months

It may seem crazy but that is how long a rate cut takes to wash through the economy. It may affect the market temporarily but additional liquidity will take time to work its way through. People have to decide to spend the additional money available, then buy the product which in turn generates a demand that companys take time to react to by increasing inventories. Six months is what it takes all right.
Lets take it a step further. The only thing that pumps the market when a rate cut is announced is peoples expectation that prices will rise. It has nothing to do with a companys balance sheet, increased sales, additional eps etc. If the economy is faltering, as it is in the US, then any rate cut as I've said will take months to work its way through. If the rate cuts had an instant effect then why is the US economy still going downhill ???


Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us