Pat Fitzgibbons chatted on TheStreet.com on Wednesday, Jan. 3 at 1 p.m. EST.
Hey, everybody! Hope everyone had a nice holiday and is surviving the market these past couple days.
What do you think will affect the interest rates the most for this term?
I think that in the short term, the
is going to be watching the economic data over the next few days. We have a very important jobs report due out Friday morning and we also have same-store sales numbers tomorrow.
If any of these are completely out of whack, we could start hearing the calls for a interest-rate cuts a lot sooner than we thought. Maybe as soon as next week.
They say every year that the retail market hits an all-time low for the Christmas holidays, does this effect the next year's beginning market?
Definitely. Retail sales at the end of they year are very closely watched by analysts and market watchers alike. If there's been a lousy Christmas season, don't look for a great January in the market.
How broad has the trading been at the start of this year? I've been thinking of moving stocks around, good or bad idea?
Well, I guess it really depends on where you're thinking of moving the money into. I'm not too sure that now is the absolute best time, for example, to start socking a lot of cash into tech. However, with the new crew ready to move into DC, it might be the time to start looking for values in some of the more GOP friendly sectors -- drugs, health care, financials might be good bets with this crew.
With the 50/50 split in the Senate, can we expect a lot of deadlock in Washington under
? How will this effect his tax cut plan? The market?
I think we'll definitely see some problems with Bush getting a whole lot done on his tax cut. And despite all the good bipartisan noise we're hearing the Ashcroft nomination really has the potential to light some pretty partisan fires down there. I still tend to think, though, that he'll get some sort of tax cut through, but 1.6 trillion sounds a bit high.
With the technology market getting hit hard last year, I'm wondering if investing in the newer emerging companies is a mistake. Do you think that the technology companies will keep spiraling downward?
I don't, actually. I think that we're due for a bit more of a correction from some of tech, but at the same time a good number of companies are, in fact, darn good companies and should rebound. A lot of companies have been sucked down with their respective sectors.
After the market does a little more correcting, I think the stock pickers out there are going to have a field day in picking out some unjustifiably beaten-down names.
What types of changes do you think we'll see coming up for this week? I've been a bit amazed watching the market!
Well, today and tomorrow the markets will likely not do a whole lot. There are a lot of people who are focusing on Friday's jobs data and they may wait until Friday before they do too much. For today and tomorrow, though, there will likely be a lot of nothing.
I've been told to invest daringly and take risks since I'm so young that I will recover in the long run. Is this advice sound for today's market, more specifically for this year?
Tread very carefully with this sort of advice. Last year is a good example. If you were young, old, whatever and socked away a lot of cash in, say,
in March, is that money ever coming back? I'm not sure that it is.
Young or old, you need to realize that unless you take a good hard look at what you're investing in, you could lose it all. This is not blackjack, it's not craps, and it's not betting on the ponies. This requires real work.
Is management something to consider when looking at investing in a company?
Absolutely. It is, I think, the most obvious thing you can check before making any investments. If the CEO or the CFO or some other bigwig flies the coop, why would you want to invest with that company? Remember, these are people who
know what's going on with a company's financials.
Well, folks, this is different...
The Federal Reserve has just cut rates by a 1/2 basis point and have cut the discount rate by a 1/4 point and the market is soaring on the news
This is an unexpected development and suggests that
and his team think the economy is slowing a lot more than we thought. They may also have an idea that Friday's employment data is going to be a lot weaker than we thought.
This means a lot. First of all it means that it's going to be easier for firms/individuals to borrow money and have more ready access to cash. What this also means, looking at the history of the Fed, is that they feel they are making a preemptive move to help create a softer landing for the economy.
is now up 300 points and the
is up about 100 points. This is an event that the market clearly was hoping would happen but the sudden spike suggests that this has happened a lot sooner than they thought it would
are all way up on this. Even tech is coming back.
In the short term, next eight weeks, what are some the critical factors that could cause this "New Economy" recession to last longer than expected?
The critical event has just happened. When Greenspan and his gang have acted in this manner with this degree of forcefulness, well, it says a great deal. This, remember, is a good thing for the stock market today. However, it should not be forgotten that the reason they have done this is that the economy is weakening.
The last time the Fed acted this aggressively, that is an intermeeting rate cut, was 1998. The Dow is now up 339 points and the Nasdaq is up 130.
This is great news, but are we talking a band-aid or a tourniquet for the market?
That's yet to be determined. The Fed doesn't generally apply band-aids. What the Fed usually does is act in a manner that they deem to be appropriate to create a softer landing or a more orderly expansion. Most people feel that the Fed has a few of these easings in it.
Stop looking at the stock market for crying out loud. The Fed just cut rates. Where is the bond market? That will tell you where expectations were.
Ok, the 10-year is off 9/32 and this is not a huge move by any means. So, Treasury traders were expecting something, but just not this at this point.
This is great news, but are we really in the clear? Energy is still a problem.
Yeah, you're absolutely right and I think that the high cost of energy will be one of the reasons cited for this easing. People clearly have less money to spend on anything else because gasoline and heating oil costs so much.
I think we're going to see some pressure put on the big oil producers to up production.
How does this effect a company like
It doesn't really affect eToys that much, actually. eToys and its brethren in struggling Internet stocks have more than the Fed to worry about. They're fighting to survive and, if anything, for a company like that this could be a bad thing because of the slowing economy.
What's the deal? Is the Fed panicked? Is this one of the first? Will there be more? Is it because Bush's Mid-Class tax cut is "No Gonna Happen? Lucy!!!!!"
I don't think this is a sign of the Fed in panic. This is a sign that Alan Greenspan and the
have decided that a preemptive move was necessary to stimulate the economy. They are not a group that typically panics. They are, however, a group that has proven itself willing to move in aggressive ways when they see the opportunity.
One other thing to consider with the bond market is that it has run up a ton in the recent weeks, so a bit of a correction should not be seen as a huge surprise.
With stocks, the big thing to watch is to see how this market closes and how futures look in the after-hours session. The stock market will end up on the day, but is there a sustained feeling that things are going to improve? It seems to be holding its bid right now, but check closely how the Dow and Comp do from 3:45 to 4:00. That will tell you a whole lot about whether the market thinks this move is a huge deal or just a one-time event.
Yeah, but if there is a tax cut, won't this be overstimulation? And then it'll be Mr. Toad's Wild Ride all over again?
That's a vital point. However, with the split in Congress, with a president with the slimmest of mandates, I think people are gaming that a huge tax cut is just not in the cards, at least immediately.
Bush is going to have to work to get anything done and it's going to take him some time to prove himself down in DC.
Wow, IBM is up 10%,
is up 11%,
is up 17%
Do you think Greenspan and gang made the right choices today?
I think that Greenspan and the FOMC have generally moved prudently. They have kept the economy on an even keel and they have done what a great CEO often does -- they haven't messed things up. I think that this move was justified and I think it will have a positive affect on the economy and on the markets.
Looks like everyone's hi-fiving right now. Any final comments?
Yeah, you're right. But watch carefully how the afternoon goes. There's going to be a lot of "I saw this coming a mile away" from a lot of people.
Looks like Greenspan trumped Bush in being the big hero for the U.S. economy. Opinion?
Well, before we start calling anyone a "big hero" we're going to need to see how this all plays out. The Fed has acted, but there's still a lot of slop in the market and the major indices have lost tons of their value for a reason partially due, but not wholly due, to the economy.
Bush is a pretty savvy politician, watch how he gets some of the credit for this.
Whew, what a wild ride this was! Not a bad day to be doing a chat! If you're in the market, remember that the market is never as good or bad as it looks right away.