Tomorrow FOMC meeting
- Thread starter madmaxer
- Start date
One possible explanation for why the FED isn't concerned about inflation running hotter than their target
http://www.investorsinsight.com/blo...ive/2008/06/23/a-kind-word-for-inflation.aspx
http://www.investorsinsight.com/blo...ive/2008/06/23/a-kind-word-for-inflation.aspx
I for one am very suspicious about a rate hike of 25 tomorrow. The action in some of the commodities has been very different over the last several sessions, I have seen quiet liquidation going on especially in natty. Also note the lack of VIX getting bid up although we have been selling off. TSO calls for July ATM's today went nuts.
Maybe paranoid thinking but these trades are indicative of a shock and awe rate hike that would crush commodity complex and run the dollar (initially anyway). Call it an initial stab at inflation and an experiment on Bernanke part to test the waters.
Bottom line is cheap money will not spur growth in this particular environment, but cooling off of inflation will considerably help the consumer. IF this were to transpire tomorrow, I would expect a knee-jerk reaction sell-off of equities, followed by a very strong rally (either at the end of the session or on Thursday).
Maybe paranoid thinking but these trades are indicative of a shock and awe rate hike that would crush commodity complex and run the dollar (initially anyway). Call it an initial stab at inflation and an experiment on Bernanke part to test the waters.
Bottom line is cheap money will not spur growth in this particular environment, but cooling off of inflation will considerably help the consumer. IF this were to transpire tomorrow, I would expect a knee-jerk reaction sell-off of equities, followed by a very strong rally (either at the end of the session or on Thursday).
Gutsy call given how close we still are to that level (not surprising given your equally gutsy namesake).
You may be right but I think that the credit situation is worsening and despite the bounce in the financials today their pain is spreading. Look at the PRU deal getting done at 9%, the "rock" at 9% is a pretty good indicator of how tough times are and how the contagion is still spreading (looking for sub $60 on PRU).
Oil looks set to hit $144 and rates look like they are going to rise some more, I don't see how stocks can maintain these levels for much longer. Earnings still need to be taken down substantially. High vol of resets going to happen in the next few months and gas prices are likely to increase too. This is going to be one tough summer.
My 2c
Zero chance of rate decrease.
If FOMC do not raise or at least be very hawkish the USD will drop and US denominated commodities [oil gold] all will go up. The other central bankers IMF etc are all united in the fight against inflation.
If the fed does raise or is extremely hawkish the markets will drop and gold will go up [some of the recent strength in gold is probably due to this].
Most of this will be priced in already. My pick is no rate change with very hawkish commentary. Markets will jump around and probably settle close to where we are.
Biggest chance for surprise would be a rate cut.
Cheers
Zero chance of rate decrease.
If FOMC do not raise or at least be very hawkish the USD will drop and US denominated commodities [oil gold] all will go up. The other central bankers IMF etc are all united in the fight against inflation.
If the fed does raise or is extremely hawkish the markets will drop and gold will go up [some of the recent strength in gold is probably due to this].
Most of this will be priced in already. My pick is no rate change with very hawkish commentary. Markets will jump around and probably settle close to where we are.
Biggest chance for surprise would be a rate cut.
Cheers