Market Euphoria is Still Dangerous

Mercury News: Fed’s move lifts markets, raises concern. “It’s not going to suddenly restore earnings growth to where it was six months ago,” said David Resler, chief economist at Nomura Securities International in New York. “The economy is still going to stay soggy.”

Investors’ immediate reaction to yesterday’s Federal Reserve rate cut was scarier than the economic considerations that prompted the Fed to act, though today’s slight pullback in the markets showed some collective sanity.

Here’s the worry. Some people seem unwilling to accept the plain truth that the growth of the past few years has been due, in part, to unwarranted market enthusiasm.

The euphoria that fueled the NASDAQ and, to a lesser degree, the DJIA was based on the technology mania, particularly the dot-con game that blew up in investors’ faces last year. We should not want to restore that same fervor. We should want to prevent it from happening again.

I’m not saying that enthusiasm for the benefits of technology is unwarranted. The benefits are becoming clearer every day. The boom added value to many parts of the economy due to the tech infrastructure investments, if nothing else. Technology investments are still a good long-range strategy, moreover, provided investors are realistic.

Nor am I saying that we should do nothing amid signs that a deep recession could take hold. Lower interest rates, moreover, could help curb the ardor for the massive tax cut favored by George W. Bush and his ideological allies — a dangerous move that would return the U.S. to fiscally unsound policies and present a much worse danger to the nation’s, and world’s, long-term economic future.

Investors are insane if they think they can return to the days when it seemed like practically any technology company would double in value in short order. If that does turn out to be true, even briefly, it will only precipitate a market meltdown that will make last year’s troubles seem tame.

Now that’s scary.

The Desktop Web

Dave Winer: Desktop Websites. Like Desktop Publishing (DTP) of the 1980s, more of the Web of 2001 will reside on your hard drive, using the CPU cycles of your machine, not on a machine purchased by investors. DTP put new power in the hands of users, and Desktop Websites do that too.

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