Remembering comments I’ve made repeatedly, I’ve been expecting a 50 basis point cut in rates for over a month. It looks like the market is responding nicely to the news.

Is today’s intra-day jump panic short covering, the market’s support for the cut that will extend through the week or just a knee-jerk response to a fifty basis point cut versus the 25 basis point cut that was widely expected?

Re: 50 Basis Point Cut In The Fed Funds Rate!

[quote author=“DawnTreader”]Remembering comments I’ve made repeatedly, I’ve been expecting a 50 basis point cut in rates for over a month. It looks like the market is responding nicely to the news.

Is today’s intra-day jump panic short covering, the market’s support for the cut that will extend through the week or just a knee-jerk response to a fifty basis point cut versus the 25 basis point cut that was widely expected?

So we’re going to have hyperinflation first before deeper recession later.  Thanks for the non-advice .  From what I’ve found out, real estate is still appreciating around my neighborhood, decent crowd at open house too.

Are we going to get another 1-2% reduction by end of the year?

Re: 50 Basis Point Cut In The Fed Funds Rate!

[quote author=“DawnTreader”]Remembering comments I’ve made repeatedly, I’ve been expecting a 50 basis point cut in rates for over a month. It looks like the market is responding nicely to the news.

Is today’s intra-day jump panic short covering, the market’s support for the cut that will extend through the week or just a knee-jerk response to a fifty basis point cut versus the 25 basis point cut that was widely expected?

Given LEH’s earnings report - I really didn’t think we needed more than 25 bps cut with the window being dropped 25 bps too.

But hey, my margin rate went down to 5.5% - time to load up.

HAB

FWIW, highly skilled jobs are in demand in Silicon Valley and pay is appreciating for those with the right skills.  So while housing prices are declining elsewhere, prices are going up in Silicon Valley.

Re: 50 Basis Point Cut In The Fed Funds Rate!

[quote author=“Mace”][quote author=“DawnTreader”]Remembering comments I’ve made repeatedly, I’ve been expecting a 50 basis point cut in rates for over a month. It looks like the market is responding nicely to the news.

Is today’s intra-day jump panic short covering, the market’s support for the cut that will extend through the week or just a knee-jerk response to a fifty basis point cut versus the 25 basis point cut that was widely expected?

So we’re going to have hyperinflation first before deeper recession later.  Thanks for the non-advice .  From what I’ve found out, real estate is still appreciating around my neighborhood, decent crowd at open house too.

Are we going to get another 1-2% reduction by end of the year?

I think this cut was the Fed’s response to the mortgage mess. I don’t see another cut anytime soon. The only way I see another cut happening is if the broader economy shows serious signs of tanking. A couple/few months more data will be needed.

Well Money-Bags Ben did his duty today didn’t he?  As Barry Riholtz said on his blog today - It’s now clear the Fed has become Wall Street’s bitch - a situation that may prove a problematic later on.  50 basis point cuts on both the FF and discount rates? Are things really that bad?

Got burned a bit on my short SPY call verticals :o but long S and P futures hedge kept damage to a minimum - I’ll keep my fingers crossed for a pull back to 151 by Friday.

It will be interesting to see where we go from here.

DT,  your prediction of new market highs by Thanksgiving may have been too conservative. We could see new highs by October!  Let exuberance reign - irrational? who’s to say with Helicoptor Ben on our side. 

[quote author=“mtdoc”]It will be interesting to see where we go from here.

DT,  your prediction of new market highs by Thanksgiving may have been too conservative. We could see new highs by October!  Let exuberance reign - irrational? who’s to say with Helicoptor Ben on our side. 

Americans are addicted to cheap credit. I’m more concerned about real fragility in the economy should rates rise to historical norms.

I agree. It’s not a question of if, but only of when rates will rise.  As Greenie keeps saying on his book tour, eventually wages rise in China, India and Brazil and commodity prices will only continue to go up.  Rates eventually have to rise to push back against these inflationary pressures - How long until this happens though?  The cheap-credit monkey on the American consumer’s back will be tough to shake.

I think Warren Buffet said- until the tide goes out, you don’t know who is really swimming naked.

[quote author=“mtdoc”]

I agree. It’s not a question of if, but only of when rates will rise.  As Greenie keeps saying on his book tour, eventually wages rise in China, India and Brazil and commodity prices will only continue to go up.  Rates eventually have to rise to push back against these inflationary pressures - How long until this happens though?  The cheap-credit monkey on the American consumer’s back will be tough to shake.

I think Warren Buffet said- until the tide goes out, you don’t know who is really swimming naked.

Need any more proof that ben is wall street’s bitch? From boris & company :

“I was listening to Bloomberg and a comment from the CEO of homebuilder Toll Brothers (TOL) was repeated over and over. “Our boy has righted the ship”. HOMEBUILDERS WERE UP ON AVG 15% or something..

It’s a bailout of the rich, pure and simple.”

Mace you are correct..hyperinflation coming as The Creature continues to steal from the average joe’s bank account. It will be sad to see the effect on regular people’s purchasing power. But for us..lets stay calm and how shall we hedge?

While I do think that Bernanke was right to cut rates, I am also inclined to believe the cut will be reasonably short-lived. It seemed to be a balancing act between fighting inflation and trying to buy time for companies that are struggling to remain afloat through the absence of available funds from the money markets. Hopefully the money markets will come back on line now as a viable option.

This will give those struggling businesses time to get their houses in order. For example, E*TRADE are making a move away from riskier parts of the mortgage business. Many see that as a sign of problems, whereas I see it as prudence.

This is the opportunity for companies to right themselves. Those that don’t take action and learn a lesson from recent events deserve to go under.

Sorry, but I think the people moaning about yesterday’s cut are guilty of hyperventilating about issues they have no real personal understanding of. You have no idea how much pain millions of home owners were about to face through no fault of their own, thanks to rising real rates far exceeding the interest rate rises the Fed put in place months ago, due to lenders being unable to borrow on the money markets themselves and having to pass on THEIR higher borrowing costs to end borrowers/mortgage holders. Coupled with the predatory manner in which credit card issuers have jacked up peoples’ rates from 15% to 30% and beyond, and you have a scenario where millions of innocent people suddenly faced their monthly payments on their borrowings doubling in the space of just a few months.

Many on AFB will have no understanding or comprehension of what I am talking about, and perhaps need to get out a bit more and mix with different socio-economic groups to understand, but I am not kidding when I say that Cramer was absolutely right in his assessment of the impact the current toxic environment was having on millions and millions of ordinary people who don’t deserve to be left holding the bill for the banks’ greed and excesses.

The credit market problems have had the net effect of increasing real interest rates being paid by real borrowers by 1-2%. The Fed HAD to cut, just to reduce that effect and calm the waters, and permit real lending rates to drop somewhat, and free up the credit markets to allow lenders access to money to finance their operations at reasonable rates which didn’t require them to raise end borrowers’ rates.

Quite why this is so hard for so many people to understand is baffling to me. Those moaning that this cut helps out hedge funds, banks and “rich people” are absolutely right, but so fckuing what? The real people people helped by this are the millions of ordinary folks who were about to get their houses stolen from them through repossessions and made bankrupt because they couldn’t pay their credit card bills due to their rates being jacked up to the skies and beyond by a corrupt and mendacious banking industry hell bet on recovering its lost profits in one area from another.

Just because a few self-serving greedy disgusting pigs got their bacon saved by the Fed doesn’t make the move the wrong move. Things may still get worse from here, but I wholly disagree that this was anything other than the only move possible, at this time, because to have done otherwise would have been cataclysmic. Bravo to the Fed for having the guts to realise that to do the right thing, it has to be perceived by many to have done the wrong thing. I do not believe this was the easiest way out for the Fed. I believe it was the hardest way they could have chosen because of the criticism it opens them up to.

If they need to raise rates in the future, that door is open to them too, but their firm, assertive action yesterday was just what was needed and leaves the Fed in control of the agenda which is the kind of leadership the market and the economy needs right now. You don’t steer a ship by allowing all the passengers to run to one side and then the other in an attempt to sway the boat in one direction or another. You take hold of the wheel and steer the damn thing. Luckily, IMO, the Fed grabbed the wheel at last, and told the passengers to stop running around like headless chickens causing mayhem.

Just remember this: no money = no iPod sales, and we all know how important the “iPod Metric” is as a signal of the health of the broader economy

For once I am thoroughly and completely in agreement with Cramer. Now, if only crude oil would stop its insane and absurd climb, perhaps some normality could return to the world. While we’ve got ÑŒber-crook Boone Pickens in CNBC hollering for $100-150/barrel oil, that’s unlikely. Too many hedge funds are over-invested in this stinky stuff to let it fall hard.
———————————————————————————

Jim Cramer Blog
The Cut Has Changed the Market
By Jim Cramer
RealMoney.com Columnist
9/19/2007 8:20 AM EDT
URL: http://www.thestreet.com/p/rmoney/jimcramerblog/10380287.html

But what about oil?
But what about the dollar?
Is it enough?
Is it too much because of inflation?
Are they behind the curve?
Is it wrong that hedge funds get bailed out?

I have no objections to any boilerplate questions about the Fed and its rate cuts. They make sense. I do, however, occasionally want to suspend suspicion and cynicism and even, yes, skepticism, for the moment after something as monumental as yesterday’s half-point cut.

I say that because sometimes my job conflicts with the need to be the skeptical reporter. That’s because there’s an overriding need on this site and in what I do for a living, which is try to make people money. People want to know how the market will react, they want to know if it is time to buy, or too late to buy, or okay to buy, or good to sell. Those questions are obfuscators. They are theoretical. They get in the way of making money, and if answered incorrectly, they block the chance for making money.

Of course all of those issues are concerns, chiefly oil. It’s not “good” that oil is going higher, even though to anyone with a car, it is obvious that it hasn’t filtered through. I paid $2.60 yesterday, a dollar lower than I would think I would have had to pay given crude. Weak dollar, possible inflation flare-up, all bad.

But the simple answer is that things were not right going into the meeting. Big things. You shouldn’t have T-bills so high when the 10-year is so low. That’s 105 degrees on the thermometer. Those who fought 50, thinking it is too much, that it means panic, are the same people who would deny children antibiotics lest they scare the parents! It’s all nonsense. Retail, autos and banks are real economy sectors, and everyone knew they were hurting.

I swear, I think there were a lot of underinvested people squawking Tuesday, pointing out all of these risks. Anyone who is truly “worried” about business can’t be “worried” about a half-point. Anything that gets us to where the short-rates are lower than the long rates is a win for business and business people know it.

Why would their stocks not gravitate higher when that’s the case?

When you have the CEOs of outfits like Ford (F) and GM (GM) calling for rate cuts, that means something. They can afford to offer lower-cost financing to move inventory. Strapped homebuilders could get some relief as banks are now going to lose a half-point less when they are renegotiating.

People will feel better and spend more at retail, helping a Kohl’s (KSS) , a Target (TGT) or even the hated Sears (SHLD) . How can that not be better?

As far as whether rates can “save” homebuilders and stimulate buying, all I can say is: How can it hurt? The summer and fall are already miserable. The firesale will prove to be a blip for Hovnanian (HOV) , but at least a blip that shows you that Hovnanian may be solvent. So don’t buy the homebuilders, but you can’t short them any more.

Or how about the banks? Do you feel worse about buying Washington Mutual (WM) ? Wachovia (WB) ? Doesn’t it make you feel better about the margins a Thornburg (TMA) could have or that a Downey (DSL) or a First Federal (FED) could have? I would buy them both.

In the meantime, the effects of cash rates being lower of course lowers the competition to an AT&T (T) or a Verizon (VZ) or a Con Edison (ED) or a Genesis Lease (GLS) , like I had on last night with its 8% yield. What a great story that is!

So, let’s put away all of the theory and shelve the morals. Today’s a better day than before the half point. As someone who even the New York Times acknowledges was the most vocal critic of the Fed because they didn’t know how bad things were out there, I relent and praise.

They know something is very much awry. They had to suspend the worries that I mentioned up top because they had to save jobs. Because they had to save the economy, and anyone who thinks they didn’t is simply a simpleton. Sure, if they wanted to, they could “break the back” of inflation. But things had gotten out of hand very quickly and there’s no reason to cause a recession in order to try to knock down the price of oil and corn. If houses were in the CPI, you would see that their goal might very well have been to stop deflation, not stop inflation.

In sum, don’t be distracted. It’s not too late to buy. And if you are short or underinvested you’ve got to get your butt on a site, in a newspaper or on television expressing those qualms I ignore at the top of the page.

How else are you going to bring in the shorts and put money to work on a sale?

So there you are.

[quote author=“Tommo_UK”]For once I am thoroughly and completely in agreement with Cramer. Now, if only crude oil would stop its insane and absurd climb, perhaps some normality could return to the world. While we’ve got ÑŒber-crook Boone Pickens in CNBC hollering for $100-150/barrel oil, that’s unlikely. Too many hedge funds are over-invested in this stinky stuff to let it fall hard.

Oil is traded in dollars. I suspect much of the inflation in oil prices is due to the low value of the dollar. Reducing interest rates puts further pressure on the greenback. That’s one reason I don’t think we will see another cut or at least real hesitation before cutting rates further.

[quote author=“DawnTreader”][quote author=“Tommo_UK”]For once I am thoroughly and completely in agreement with Cramer. Now, if only crude oil would stop its insane and absurd climb, perhaps some normality could return to the world. While we’ve got ÑŒber-crook Boone Pickens in CNBC hollering for $100-150/barrel oil, that’s unlikely. Too many hedge funds are over-invested in this stinky stuff to let it fall hard.

Oil is traded in dollars. I suspect much of the inflation in oil prices is due to the low value of the dollar. Reducing interest rates puts further pressure on the greenback. That’s one reason I don’t think we will see another cut or at least real hesitation before cutting rates further.

I agree.. in the run up to the meeting I said I was pretty sure we’d see crude surge if the Fed did cut rates significantly - it has to, given the perceived impact lower rates should have on the Dollar. However, with crude prices not yet seemingly feeding through into gasoline prices etc, we have the curious situation of spiralling crude oil prices without there seeming to be much of a consequence anywhere. Perhaps traders are all too busy selling eachother crude oil contracts to notice that nobody actually needs any more of the stuff at the moment? After all, there are something like 10-12x as many crude oil contracts traded as there is the physical commodity.. kinda funny when you think about it.

I really think crude is setting up for a fall, and I think Bernanke just made clear that irrespective of crude, or gold, he is going to ensure he takes whatever steps are necessary to keep growth stimulated - providing genuine inflation doesn’t seem in danger of gathering momentum again.

There is a trend among oil producing nations like Iran, Russia and Venezuela to trade oil in Either Euros or Rubbles. The movement away from Petrodollars is seen as a further sign of the weakening of the dollar (and of US Foreign Policy). With the weakening of the polar ice cap and countries scrambling for fishing right and oil exploration right, the US may soon see its self at war with Canada.

By the way: Greenspan was on PBS news last night talking about his book. He only used the word “Exuberance” once!  He called the housing issue a “Bubble” and thinks the Fed made the right call. He claimed he was not a Republican, was in fact a Libertarian with rarely anyone to vote for.

[quote author=“willrob”]With the weakening of the polar ice cap and countries scrambling for fishing right and oil exploration right, the US may soon see its self at war with Canada.

No need for war as Canada has already given up all those things in NAFTA.

The part that really hurts is that over the last few years while my Apple investments have risen dramatically, the US$ has depreciated against the CDN$ by a huge amount. 

Sometime in the next couple of weeks it will be at par, whereas 2 years ago it was trading in the low 60 cent region.