Comments on: Surprise Fed Rate Cut Coming?

By: Out at the Peak

Out at the Peak — Fri, 12 Sep 2008 18:58:51 +0000

I would not be surprised at all. I hope Ron Paul is able to look Bernanke straight in the eye and bring up the fact that Bernanke said Fannie and Freddie were not in trouble and how wrong he was.

“If you can be wrong about something as important as Fannie Mae and Freddie Mac, what other important things are you wrong about? If this body is not capable of action, I suggest new leadership is needed. I move to a vote of no confidence in Chancellor Bernanke!”

By: dacounselor

dacounselor — Fri, 12 Sep 2008 18:47:47 +0000

I think we have along way to go and quite a bit more pain to endure before the economy gets back on track. Certainly more bad news in the financials, more asset devaluation, unemployment, credit tightening, sales declines, government budget disasters, etc etc etc. Who thinks we have turned the corner? Anyone?

I think we could very well see a FFR of 1.5% before we truly turn the corner toward recovery. We may not get a cut this year but we may be looking at several .25 cuts or one big .5 cut in ’09.

By: Nick

Nick — Fri, 12 Sep 2008 18:43:48 +0000

Rate cut = hyperinflation = dollar collapse

Simple, isn’t it?

By: REappraiser

REappraiser — Fri, 12 Sep 2008 17:50:04 +0000

fedwatcher -

I totally agree with everything you stated. I’ve been saysing same ad nauseum for months now since Fed Funds target @ 2%. Stability is the name of the game now; we don’t need a bunch of girations going on with monetary policy. And, yes, 1990′s Japan is the playbook now. We averted it (Greenspan) until now, as it has finally come home to roost. Stuart Hoffman, chief economist at PNC Financial Services Group Inc. says Fed Funds @ 2% until at least next spring (see link below):

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vEzBHz7cLdTY.asf

By: buy now`pay later

buy now`pay later — Fri, 12 Sep 2008 13:21:51 +0000

Mr M you are spot on. The rate cut will come some sooner than most expect. Every major economy is slowing and most of the developed world is already in recession. The emerging markets are not far behind.

Rate cuts so far have not worked – almost every borrower group is paying higher rates today than they did at the start of the year. The Fed needs to cut to zero if necessary to lower borrowing costs and kick start lending.

A few months ago the Fed was worried about inflation but that is now a distant memory. Look at TIPS breakevens, look at the yield on the long bond or howabout precious metals prices. The markets are not worried about inflation they are worried about DEFLATION.

Bernanke has spent a lot of time lecturing Japan on what they should have done. It’s time he applied his own medicine. Every rate cut so far has been decided by the market. The Fed needs to show leadership this time and act before the market forces their hand.

By: fedwatcher

fedwatcher — Fri, 12 Sep 2008 08:30:22 +0000

A fed rate cut would be pushing on a string. Its main effect would be to cut the rate that “savers” receive on their deposits and could put the banks in worse shape as “savers” put the money in the mattress.

It could help gold. It could help stocks. But it is too late to stop the deflation or shrinkage in the number of dollars or the shrinkage in the velocity of money.

We are just attempting to re-do what Japan did in the 1990s.

Real estate and consumption will continue to decline as debt must either be serviced or defaulted on.

By: peterb

peterb — Fri, 12 Sep 2008 04:37:36 +0000

I think that inflation is coming down hard and unemployment is rising into a level that will cause the Fed to consider a rate cut. It’s a safe play for the Fed. Greenspan thought this way and Uncle Ben seems of the same mind. The Eurozone is headed into a recession and will probably behave in a similar fashion.
With inflation under control and a recession in full swing, it would give them the green light they want to cut rates.

By: 5755hsa

5755hsa — Fri, 12 Sep 2008 03:00:01 +0000

A rate cut would not take me by complete surprise. The Fed is stuck and really cannot afford to raise rates so why not import some extra inflation…we really don’t have enough of that do we? These cuts have proven to be the remedy in the past…NOT! No lessons have been learned by these morons…you cannot print your way out of this. This will serve to stall the inevitible which I beleive will be a massive market dislocation…hang on to your balls!

By: Mr. Mortgage Rocks & You Haters Suck

Mr. Mortgage Rocks & You Haters Suck — Fri, 12 Sep 2008 02:01:20 +0000

Cut or No Cut the FED & Treasury have done better than a rate cut they have essentially forgiven trillions in debt.

But, in the short term The forgiving of debt is deflationary because our money is debt based.

Therefore, dollar is gaining through simple supply shrinkage.

The FED will and must recreate the trillions in debt it just forgave it will do it through the budget.

By: HousingRealist

HousingRealist — Fri, 12 Sep 2008 01:53:36 +0000

Viv – Not sure where you’re getting your data points. The median P/E on the S&P is roughly 16.5 over the last 50 years. There have been few times to buy at PEs of 8. Yes, that is a great buy, but if that’s what you’re waiting for, you’re going to be out of the market for years if not decades. History says, that is a losing proposition. As for the current PE I would suggest you look at trailing operating earnings publsihed by s&p. Nowhere close to 23.