I can see fed cutting rates next week

[syswizard]

Quote from scriabinop23:

I agree the fed should not cut rates here - not with the dollar as weak as it is.

Dollar crash = huge inflation
huge inflation = higher salaries
higher salaries = higher operating costs
higher operating costs = lower profits
lower profits = corps must raise prices
...and then we're "off to the inflation races"...

Now if the higher salaries don't happen, then we slip into recession.

Interest rates must rise to stop the first from happening.

Bernanke knows all of this....it will be interesting to see what move (if any) he makes.

 

[number22]

Quote from scriabinop23:

I agree the fed should not cut rates here - not with the dollar as weak as it is.

The better move from a policy side (if you want to talk about supporting the economy and ease this housing crash) is a program to enable struggling people to refi their ARMs and subprimes in certain qualified income ranges into fixed rate products with -good -rates.

Yea its a subsidy and quite a socialist move yada yada yada.

... but I say its a more focused way to solve a problem and less destructive to the dollar, in defense of the markets.

either that or plunge protection team, aka "fat finger orders" from big brokers, er... i mean to support the market.

People hold your view are simply naive; why do you think fed and bankers have created this problem at the first place? There is not simple answer; only tough choices.

 

[scriabinop23]

Quote from number22:

People hold your view are simply naive; why do you think fed and bankers have created this problem at the first place? There is not simple answer; only tough choices.

its not naive. the dollar was relatively strong (despite long term vulnerabilities in our policy) when greenspan started his wild string of cuts. And much of those cuts -were- necessary, I won't disagree.

But --- he should have started raising in early 03 .. it was very clear if you looked at the housing markets accelerate. Not until Sep 04 did they start raising again.

The housing bubble was already quite a bubble when i purchased a condo in san diego in apr 03. i remember buying thinking some of the excess in price was going to be money down the drain.

Now we're in a commodity driven liquidity spiral, and defense of the currency needs to occur.

just another ET troll.

... Why the public lets out of touch senior citizens run this country (politicians, greenspan, etc) is beyond me.

 

[Pa(b)st Prime]

The Fed may cut.

The ENTIRE yield curve sits below the Federal Funds rate.

As a trader I believe in free markets. The Fed should be responsive to the levels that the market prices Treasury securities. The fixed income market is DEMANDING a rate cut. The 2 yr is 75bp under funds!

I too think the bond market is crazy. What we have though is a true paradigm shift. Assets i.e. stocks, loans, homes are in a deflationary phase. Commodity's are in an inflationary phase. The Fed can do little about oil and wheat prices.......

 

[scriabinop23]

Quote from Pa(b)st Prime:

The Fed may cut.

The ENTIRE yield curve sits below the Federal Funds rate.

As a trader I believe in free markets. The Fed should be responsive to the levels that the market prices Treasury securities. The fixed income market is DEMANDING a rate cut. The 2 yr is 75bp under funds!

I too think the bond market is crazy. What we have though is a true paradigm shift. Assets i.e. stocks, loans, homes are in a deflationary phase. Commodity's are in an inflationary phase. The Fed can do little about oil and wheat prices.......

fixed income market isn't demanding a cut; its predicting one with a bet that the economy will slow down even more in the near term. But remember its done a bad job being right with that prediction during the past few years. (how many years did the inverted yield curve fail to predict anything)

The long side of the curve is still stronger, so the long term bet is actually bullish - not like that means anything.

 

[Pa(b)st Prime]

Quote from scriabinop23:

fixed income market isn't demanding a cut; its predicting one with a bet that the economy will slow down even more in the near term. But remember its done a bad job being right with that prediction during the past few years. (how many years did the inverted yield curve fail to predict anything)

The long side of the curve is still stronger, so the long term bet is actually bullish - not like that means anything.

I agree with everything you're saying. If market participants always bet right there'd be little opportunities in trading.

Greenspan used to say "the two year made me do it."

I'm just not sure if a group of political appointees should operate policy independent to that of market forces.

 

[kashirin]

Quote from Pa(b)st Prime:

The Fed may cut.

The ENTIRE

I too think the bond market is crazy. What we have though is a true paradigm shift. Assets i.e. stocks, loans, homes are in a deflationary phase. Commodity's are in an inflationary phase. The Fed can do little about oil and wheat prices.......

And $ demands rate rise.
Oil demands rate rise.
Food prices demand rate rise
People who will never be able to buy their first house because of this bubble demand rate rise to cool prices at least 20-30%
And stock market which rose 20-30% since last July demand rate rise
So what fed should do? Cut? Not sure

 

[Pa(b)st Prime]

Quote from kashirin:

And $ demands rate rise.
Oil demands rate rise.
Food prices demand rate rise
People who will never be able to buy their first house because of this bubble demand rate rise to cool prices at least 20-30%
And stock market which rose 20-30% since last July demand rate rise
So what fed should do? Cut? Not sure

Many are under the mistaken impression that the Fed is worried about sending the dollar lower.

They could care less.

This administration has perused an aggressive lower dollar policy for 6 years.

Until the American consumer is forced to buy American goods we'll see little upside potential in the dollar.

 

[scriabinop23]

Quote from kashirin:

And $ demands rate rise.
Oil demands rate rise.
Food prices demand rate rise
People who will never be able to buy their first house because of this bubble demand rate rise to cool prices at least 20-30%
And stock market which rose 20-30% since last July demand rate rise
So what fed should do? Cut? Not sure

US rates won't make a dent in commodity prices and demand unless they intention provoke an all out recession.

What we need to fix oil demand and food prices is *policy* change -- ie lack of ethanol subsidy, aggressive mpg requirements for new cars, even a low-mpg tariff for all those SUV drivers who don't need em. use that tariff to pay for medicare and other debt entitlements.

Either that or we start nuclear war with China to stop their commodity demand.
(and ours as well)

 

[Arnie]

Anyone that thinks a 1/4 pt cut is going to rescue housing has their head up their ***.