fed will cut fed funds rate tomorrow

Quote from Joab:

The Fed could care less what the Markets are doing....
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The Fed cut the discount rate the morning of an expiration Friday. How can you say it doesn't care what the market is doing? It carefully chose a time and day such that its actions would pump the market as much as possible. To say that it doesn't care about the market is not being truthful given recent evidence. Maybe Feds in the past have not tried to directly influence the market but Greenspan did and now Bernanke has.

I'll take the other side of this bet though - Fed won't cut tomorrow.
 
Quote from Joab:

25 years in this business and I still shake my head when I see people thinking that the Fed gives a rat's ass about the market.

The Fed could care less what the Markets are doing....

You really have to learn this folks. :cool:
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I disagree.

Granted their purview is the banking system and money supply, however please explain the timing of the cut on Friday am of expiration Friday and the "intentional" leaks on Thursday that pushed the S&P up in time to save all those hedge funds from their underwater short puts.

It is clear to me that, while the Fed may not care about the market as it affects you or me, they do care very much about the major market participants, and that is one and the same thing as far as i am concerned.

They could have not leaked and waited until Monday to announce or announced after the close on Friday -- but quite obviously the timing of the leak and the official announcement (wasn't it like 8:15 am on Friday am???) was aimed directly at rescuing some major players that were in trouble.

The US stock market and the banking system are so closely interrelated that to say that the Fed does not care about the market is naive in the extreme.
 
Quote from piezoe:

I disagree.

Granted their purview is the banking system and money supply, however please explain the timing of the cut on Friday am of expiration Friday and the "intentional" leaks on Thursday that pushed the S&P up in time to save all those hedge funds from their underwater short puts.

It is clear to me that, while the Fed may not care about the market as it affects you or me, they do care very much about the major market participants, and that is one and the same thing as far as i am concerned.

They could have not leaked and waited until Monday to announce or announced after the close on Friday -- but quite obviously the timing of the leak and the official announcement (wasn't it like 8:15 am on Friday am???) was aimed directly at rescuing some major players that were in trouble.
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i have to agree ..
 
By the "market" bernanke is referring to the market for commercial and cmo paper.

There is plenty of money in the system, but the holders/controllers of that money don't want to buy commercial paper or CMOs from certain institutions.

The FED has offered 30 days grace to these troubled institutions via the discount window. The idea is that money holders/controllers will relax and will start bidding for these types of paper again.

Sentinel was managing historically liquid assets, but the bid for those historically liquid assets disappeared...Citadel came in with a bid.

:D

Quote from trueliquidity:

The fed's job is to stabilize interest rates, so wouldn't another liquidity injection have done the trick? Why lower a discount rate on friday when the rate was not particularly off track, especially compared to monday? Bernanke stated that the "market conditions have deteriorated", not the credit market, or the interest rate conditions have deteriorated. The fed's intervention to stabilize the interest rate should affect the market, not the other way around if you follow the fed's mandate to the letter...
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Exactly. Excellent explanation Enfinity.

Quote from Enfinity:

By the "market" bernanke is referring to the market for commercial and cmo paper.

There is plenty of money in the system, but the holders/controllers of that money don't want to buy commercial paper or CMOs from certain institutions.

The FED has offered 30 days grace to these troubled institutions via the discount window. The idea is that money holders/controllers will relax and will start bidding for these types of paper again.

Sentinel was managing historically liquid assets, but the bid for those historically liquid assets disappeared...Citadel came in with a bid.

:D
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Those who have been paying attention know that the liquidity situation has not yet stabilized as bids on even decent corporate paper are hard to come by. Look at tbill yields hitting 1.6%

DB tapped the Feds new line today and their justification was that they were doing in support of the Fed action, maybe maybe not, usually the Fed window is only tapped for emergency funds by firms like DB. The Fed is also taking the toxic waste as collateral in essence guaranteeing the subprime paper but so far that doesn't appear to be enough hence the meeting in the AM between bernanke's and Paulson (the go to guy of the big WS banks) and Chris Dodd (the go to guy for the CT Hedge Fund crowd). My guess is that between them WS's interests will be well represented and the news will favor those who are long at least in the very short term.

It should also be noted that the hedgers are record short the 10's.
 
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