If European economies continue to deteriorate, the European Central Bank, which has been dragging its heels, might be convinced to join in the rate-slashing parade. Shilling doubts that rate cuts will get companies to step up high-tech spending. Shilling doubts that the consumers will spend heavily unless the bear market ends. However, he thinks last week and yesterday's surge represent a rally within a bear market. Again, it's like giving another drink to a lush.
Housing is one key.
What could throw a wrench into the capital markets is high inflation. The Fed has not only lowered rates, it also has printed money and pumped reserves through the banking system at a fast rate, Darby says. The Fed had easy money, then tightened, then eased up again, and we will pay the price, he says.