Bernanke Says `Will Act as Needed' to Limit Credit-Rout Impact

For those that missed it, Rick Santelli gave the pimphand smack to Larry Kudlow this morning in a heated exchange over the need and reason to cut the Fed Funds rate.

Kudlow (the most overrated hasbeen on CNBC - the guy sucked as an economist, and still sucks as a talking head) insisted that the Fed must cut rates "to keep ahead of the curve", and flat out stated that it WILL cut 25 bps in September. Said it wasn't about bailing out housing, but bailing out the $300 billion commercial paper market, specifically the ABS CP market credit freeze up, and wants the Fed to back stop that market - made constant reference to what happened to t-bills yields over the last few weeks.

Santelli (the most underrated, underappreciated, and animated one on CNBC) shot right back that this is a credit issue, NOT a liquidity issue, and that what's outrageous is the fed trying to meddle in it. He made the point that the CP market will work itself out in 45 days or so, and that the fed shouldn't be focusing on the t-bill yields.

Rick's "15 second wrapup" had the most concise and sober points I've heard on CNBC in a long time - he basically said that the Fed needs to let the markets work through this, and although it will be painful because of all the leverage that market participants have used, in the end, we will come through it with markets priced at more appropriate yield levels for the risks involved.
 
Quote from jamjob_ramjet:

the behavior of the fed in the last 10 years is unbelieavable

a complete and arbitrary tyranny
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So this started under Clinton? Damn him!
 
btw, it was Greenspan who said publicly that ARMs were a good idea at a time when FF rate was around 1%

gee thanx Al

this is my most favorite chart...forget subprime, even AAA stuff may get sucked under from this black hole
 

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Quote from daddyeaux:

btw, it was Greenspan who said publicly that ARMs were a good idea at a time when FF rate was around 1%

gee thanx Al

this is my most favorite chart...forget subprime, even AAA stuff may get sucked under from this black hole
More...

only total dumbass would pay attention to a graph comparing cash with liabilities.

if you borrow at 5% and buy an asset that yields 10% then you obviously made a good deal - not a bad one!
 
Quote from daddyeaux:

is that so....

what happens when the asset value drops by 30% ??
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what did drop by 30%?
and even if it does drop 30% then it means that in the past 5 years you made only 70% - not 100%. (of course you probably made shit because you are only whining all the time)

switch on the brain
 
Quote from dhpar:

only total dumbass would pay attention to a graph comparing cash with liabilities.

if you borrow at 5% and buy an asset that yields 10% then you obviously made a good deal - not a bad one!
More...

Hmm where to start. Have you ever heard the expression "leverage is a double edged sword"? Maybe you should think about that one.

Try using your brain and applying it to reality. The 10% home value appreciation is not too reliable. It is also not liquid, it's unrealized until the home is actually sold. The debt payments have to be made regardless.

Borrowing at 5% and investing at possible unrealized 10% in an asset which is being driven by sheep mentality & cheap credit is not a smart deal, it's more like gambling.
 
Thank's for your post. Unfortunately I missed it live.

I've had breakfast and a few smoke breaks with Santelli over the years. He's a nice, bright, talkative guy. Don't ask him what he thinks of the yield curve though. You might as well learn to build a watch.

Kudlow is someone whose work I subscribed to when he was at Bear. You're being a bit hard Sponger. Kudlow and Ed Hyman are two economists who really do (did?) keep their ear to the street. And I don't mean Wall Street.

That said in principal I agree with Rick. In fact I posted the same argument on ET a few day's back.

Pa(b)st Prime


Registered: Oct 2006
Posts: 1664


08-29-07 06:55 PM

The Fed as well as Pabst are concerned that cheaper borrowing costs vis a vis a lower Funds target is more likely to find it's way into the inflated Treasury trade rather than into the depressed corporate/mortgage market.

There's no shortage of liquidity (10's traded 4.50 this morning) just a shortage of fund investors with balls.

Oil was up how much today? Was that Wheat I saw up 22 cents? Let's not forget that deflated, panicky NDX.........

http://www.elitetrader.com/vb/showthread.php?s=&postid=1586184&highlight=liquidity#post1586184


Quote from Sponger:

For those that missed it, Rick Santelli gave the pimphand smack to Larry Kudlow this morning in a heated exchange over the need and reason to cut the Fed Funds rate.

Kudlow (the most overrated hasbeen on CNBC - the guy sucked as an economist, and still sucks as a talking head) insisted that the Fed must cut rates "to keep ahead of the curve", and flat out stated that it WILL cut 25 bps in September. Said it wasn't about bailing out housing, but bailing out the $300 billion commercial paper market, specifically the ABS CP market credit freeze up, and wants the Fed to back stop that market - made constant reference to what happened to t-bills yields over the last few weeks.

Santelli (the most underrated, underappreciated, and animated one on CNBC) shot right back that this is a credit issue, NOT a liquidity issue, and that what's outrageous is the fed trying to meddle in it. He made the point that the CP market will work itself out in 45 days or so, and that the fed shouldn't be focusing on the t-bill yields.

Rick's "15 second wrapup" had the most concise and sober points I've heard on CNBC in a long time - he basically said that the Fed needs to let the markets work through this, and although it will be painful because of all the leverage that market participants have used, in the end, we will come through it with markets priced at more appropriate yield levels for the risks involved.
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