Comment
Hot water
tap, Cold water tap - Interpreting US economic and corporate statistics.
June 27, 2001
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This analysis is our conclusions drawn from our earlier maps on the US. From our maps, it is clear how the battle lines are drawn between the Fed and the cooling economy chilled from the aftermath of the exploded tech bubble. The dilemma for investors and business people is who is right, and who will win. An appropriate metaphor to look at is a large tank of water with two inlet taps. One tap is filling chilled water, and the other is pumping in hot water. If you are near the cold water tap, then you draw the evidence to be pessimistic when you extrapolate that the rest of the tank would eventually be chilled. Corporations struggling with earnings invisibility inhabit the colder parts of the tank nearer the tube pouring out cold water. On the other hand, if you are present nearer to the warm water tap, i.e., you are buying a house and mortgages rates are getting attractive, then you reckon things are not so bad. The accumulated sentiment is shown in consumer spending and durable goods purchase. Will the warm water overcome the cold and eventually warm tank? If you look at the total picture like we do by drawing maps of micro-worlds, then you conclude a tug of war or a battle between the "good and evil" is in progress. We know the Fed is willing to throw at it everything it has got to win. But is the enemy it is up against too strong to overcome? Now if we are just deploying the resources of the US for battle, it may not be enough. Interestingly, much of the rest of the world is willing to be IMF to the US without conditions. How fortunate the US is. In the worst case that Greenspan and Company lose, the result would be a milder cold than it would otherwise be had they taken a more hawkish position. Related Maps
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