For the first time in history, most people on Wall Street now wish they could give the Fed's rate cut back to Mr. Greenspan.
"We don't want it any more," they'd say. "It's obviously broken, and may even be a health hazard."
What happened? Why would so many be so unhappy with the very thing they had been PRAYING for all these weeks and months?
Reason: It's backfiring.
Throughout October, Wall Street pundits had managed to convince investors that the economy was OK -- that sales were not sinking, that more big bankruptcies were unlikely, that the corruption crisis was largely behind us and a real stock market recovery
was under way.
Then suddenly, the Fed dropped the Fed Funds rate by a full 50 basis points, sending the signal that all the Wall Street pundits were DEAD WRONG.
There could be only ONE reason the Fed dropped
the rate so aggressively: The Fed saw all the dangers we've been warning you about -- the sinking sales, even bigger bankruptcies ahead, no end to the crisis of confidence.
Dazed and confused investors are asking:
(a) Is the economy WORSE THAN WE THOUGHT?
Answer: YES.
(b) Does the Fed see a growing danger of deflation on the horizon?
Answer: MOST DEFINITELY.
(d) What does that mean for corporate earnings?
Answer: MORE SHARP DECLINES!
(e) What does that mean for my stocks?
Answer: DANGER, DANGER, DANGER!
Investors now realize that the situation is far more grave than Wall Street led them to believe. The economy is at death's door.
The fact of the matter is, though, the Fed's rate cut -- no matter how big -- won't be able to turn this economy around.
Just take a look at these developments ...
* Bellwether Cisco Systems continues to see a soft economy in the months ahead. Cisco CEO John Chambers blamed "an increasing chill among buyers, many of whom are increasingly uncertain of their own prospects." Not only does Chambers see a struggle
for his own company's earnings, but those of its clients as well.
* Bubbles in the auto and housing markets are ready to burst. Low rates made it financially more feasible for automakers to offer 0% financing deals, and bolstered home sales by driving
down mortgage rates.
But even those markets are collapsing now. Industry-wide auto sales plunged 27% in October from a year earlier -- despite the fact that carmakers offered an average of almost $3,600 in incentives on every vehicle sold. And the number of existing and new homes on the market is at four- and six-year highs.
* Hiring is stagnant and layoffs are surging! For ten weeks in a row, the four-week moving average of initial jobless claims topped the crucial 400,000 level.
Plus, companies announced plans to slash 176,010 jobs in October -- a whopping 151% more cuts than in September, according to employment firm Challenger, Gray & Christmas. As companies execute those layoff plans, the official jobless data should soar.