Will everyone be disappointed with just 25bp cut?

[bluud]

The Fed Should Loosen 25bp Next Wednesday:
http://seekingalpha.com/article/51544-the-fed-should-loosen-25bp-next-wednesday

 

[scriabinop23]

Quote from akeyla:

A 25 BP cut is a certainty. Although imo there should be no cut. The market over the past week has been pricing in a 25 BP cut.

Look how certain it was as of 10/16.


Now the equities market is almost back up to the highs, and people still haven't removed their fed funds bets.

 

[Dr.Greenback]

Quote from condorll:

Ya hit the nail on the head!

No Cut, 25bps, 50 bps, it doesn't matter. As soon as it's released markets tank.

You have the beginning of 50 billion dollars in sub-prime resets to start in November. Seems like a good backdrop for a decline in equities.

 

[ssblack]

Quote from Pa(b)st Prime:

It comes down to free markets seeking a semblance of parity in global purchasing power. As I've written here before, we American's can make $400 on a Saturday tending bar and know we can "exchange" that $400 for the labor and materials of 10 Chinese guy's manufacturing a plasma. We take it as gospel that an autoworker in Flint provides 20x the utility of an assemblyman in Tampico. It used to be American's worked 10 minutes for a gallon of gas while a Malaysian worked a day. Now perhaps we work half an hour for the same product while the Asian works two hours. Someday we'll be at parity. I'm no liberal but I am fair minded and there's a social-justice tenant saying all men are equal. This bring's us to Bernanke, Cheney and policy.

There are two distinct economic American's. One part of America benefit's from asset appreciation rather than labor and the other provide service in exchange for currency/essentials. In a capitalistic society the poor work for the rich. That's fine. That's how poor folk eat and with initiative they can try to be un poor. Hence to keep the chain afloat it's important to keep asset prices away from levels that could cause upheaval. The only people who really benefit from price shock are shorts and those seeking entrance into the asset class. Rest assured, the asset holders aren't looking out for the interest of those two groups. Is there a price to pay for risk avoidance? Of course and it manifests itself in the form of a cheaper currency.

A devalued dollar effects the asset holder very little. His assets will generally appreciate in cheap dollars so that they can maintain global parity in price. The America toiling for dollar wages suffers the most as it's they who are assetless and paying more for essentials. Just the same, they'd be far worse off being unemployed.

With the negative balance of trade and our number one export being debt how could anyone think that we'd maintain lordship over the third world? Because of our know how? Give me a friggin' break. Been to Compton? Besides those American's with know how-particuarly 6"11 power forwards- are rewarded very nicely. It is what it is.

/thread

Excellent post.

 

[scriabinop23]

Quote from Dr.Greenback:

You have the beginning of 50 billion dollars in sub-prime resets to start in November. Seems like a good backdrop for a decline in equities.

Do you have more information on the ARM reset schedules? as in how much has already reset and how much per month is due?

 

[trefoil]

from the previously cited article:

There will be a lot of trading noise around the news, but after the dust clears, stocks and bonds won’t have done much, and the yield curve will be a little wider. TIPS should outperform inflation un-protected bonds. The dollar will weaken to the degree that the FOMC hints that they aren’t done.

The statement is the key. Doesn't really matter how much they cut, the real question will be, are they done?

 

[thetrendfollowe]

If the rate cut is 25bp, will the markets tank?

I think so.

 

[scriabinop23]

Quote from thetrendfollowe:

If the rate cut is 25bp, will the markets tank?

I think so.

I am going to be bold and presume if the fed doesn't cut, the markets will initially sell, but find strength -sooner- than the alternatives.

If the fed cuts 50bp, in -real- terms (counting dollar devaluation) the market will actually do the worst I propose.

 

[drsteph]

Quote from thetrendfollowe:

If the rate cut is 25bp, will the markets tank?

I think so.

Fed cuts, dollar adjusts, equities bid to remain at constant value. If you worry about the value of your wealth, would you rather hold cash or equity?


Smooth sailing until 2008. No worries, mates, we made it through October.

 

[thetrendfollowe]

Quote from drsteph:

Fed cuts, dollar adjusts, equities bid to remain at constant value. If you worry about the value of your wealth, would you rather hold cash or equity?


Smooth sailing until 2008. No worries, mates, we made it through October.

Thats true bro.

November to April is seasonally a very strong period for equities.
Then sell in May, and go away