Posted on 09/15/2007 3:59:55 PM PDT by shrinkermd
IF FAITH IS A STAUNCH BELIEF THAT requires neither proof nor evidence, then the stock market has it in spades.
All of that faith lately is placed in the government's monetary policy. Come Tuesday, investors believe, quite fervently, that the Federal Reserve not only will cut interest rates, but will lower borrowing costs enough to breathe new life into the ailing U.S. economy.
So resolute is that trust that it remains unshaken in the face of yet more worrying signs. U.S. industrial production ticked up just 0.2% in August...,market continues to slip.
But economic weakness can only appeal to the Fed's benevolence, and the aging but still-hopeful bull market chooses to dwell not on the malady, but on the relief the medicine might bring.
Rate-cut hopes lifted stocks last week, and the market recouped all the losses suffered Sept. 7, when a shocking government report showed employers cutting payrolls last month for the first time in four years...
... There is, of course, reason for the market's faith, since historically stocks have rallied when the Fed begins to cut rates. Since 1970, the S&P 500 has risen by an average of 5.5% in the three months after the central bank first cut rates
...Cutting a quarter percentage point off benchmark rates of 5.25% will leave a horde of crestfallen traders and trigger short-term selling. A half-percentage-point cut, served up with the promise of further leniency, will help bulls feel that their faith is being rewarded, and that could encourage another round of buying.
(Excerpt) Read more at online.barrons.com ...
Yawn - To this author (along with 95% of the MSM) the U.S. economy MUST be ailing whenever a Republican is in the WH (regardless of facts). Reality is we are in the 6th year of expansion coming out of the Clinton/Greenspan caused recession.....
The Fed should cut rates this Tuesday.....and I suspect they will. That does not mean our economy is bad.....It simply means rates are too high (and our productivity as a nation allows for lower costs of money....without inflation).
I think the timing of Greenspan comments are to calm the market. Soon they will bring out Abby Joseph Cohen. Rates to stay unchanged in my honest opinion.
I think Bernake pees in the cornflakes of the market and rates hold steady. He correctly defends the dollar and holds off inflation. There is no liquidity issue. It’s a bubble, and the solution is just time. Time required for all of the mortgage backed stuff to reprice itself.
When we have $80 dollar oil and the dollar at an all time low against the Euro, it is not the time to lower interest rates.
As my friend Ben Stein says, when people panic, buy, when people are greedy, sell.
Wouldn’t hurt if the Fed rate drops a quarter to 1/2 percent. The rate increased rather rapidly.
If there is a rate cut - market sells off modestly. The market has been rallying for days in anticipation of the cut. It's ALREADY priced in. After the announcement, there's nowhere to go but down. However briefly, or however long.
September and October have historically seen the biggest market sell-offs. They don't come around that often, but they sure are historical when they do.
As to if either event will be a buying opportunity or a selling opportunity is your call.
I’m not sure Bernake has as big an ego and Greenspan nor as legacy conscious as of yet
Thats what I’m hoping the Fed does. The only ‘liquidity’ issue out there is with the mark-to-model tomfoolery. All the mark-to-market stuff is fine.
Yeah, the hedge funds will take it in the shorts, but that is their problem. They failed to account for reality. All the hard asset funds will do well. Companies on the market are on solid ground. P/Es are a little high, but that will shake out with the normal course of business.
Now if only the consumer will follow... Debt is okay within reason, but debt for debts sake is dumb. People have to realize that they aren’t corporations, and live just below their means, saving just a tad for the rough times the Dems seem to want to bring with increased taxes.
Productivity has nothing to do with interest rates. We are have 300% of GDP in debt and the debt has swamped productive investment. People speculate in houses and speculate in the market (the companies they invest in speculate in CDO's which is debt).
While the US citizens remain productive, the US government (The Fed and policitians) have turned the country into a debt basket case. Now the Fed can lower all they want and people are no longer going to borrow to speculate anymore. Now it's time for plan B which is pure inflation.
“Buy American Can and sit on it.”
Debt for speculative purposes is dumber and debt to fund consumption of inported goods is dumbest of all. The consumer is not going to borrow, nor are corporations. Consumer debt is too high already and corporations are factoring in a recession. That leaves the govt and they will borrow even more, but in the long run it will never be paid off without major entitlement cuts and/or inflation.
And productivity does have plenty to do with inflation (and countering it occurring). The Fed rate was foolishly increased to much by Greenspan.....a full 1-2% should be cut over the next year -
Our deficits today are less as a % of GDP than in much of this nation's past.
Should the FRED spoil the (RINO) fun?
Yes...
yes, and...
YES again.
It is mostly priced in, but when it is finally announced it will provide a modest boost to the market.
“Now the Fed can lower all they want and people are no longer going to borrow to speculate anymore.”
“Now it’s time for plan B which is pure inflation.”
I think the first sentence is wrong. I have faith in people to spend money they don’t have.
I agree with the second sentence. I see inflation coming (really already here) to devalue the US debt.
Once BB starts inflating, productivity will decrease since it relies on real investment, not speculation or extra purchasing made in anticipation of inflation.
I partly agree that they would borrow and spend, but what people won't do anymore is borrow to buy a speculative piece of real estate. That party is over.
Now it’s time for plan B which is pure inflation.
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I think you’re right with that ... I am debt free except for my home mortgage so I won’t gain by having my debts inflated away but I will be in the market leveraged to the max taking advantage of it... The only other possibility I see is bringing LOTS of industry back to the states through implementation of the FairTax and growing our way out...
We are in 100% agreement here -
However, I don't believe we will see either big inflation numbers....nor will we see a huge devaluation of real estate (outside of a few select regions).
The same dire doom and gloom views you have on debt, deficits, inflation has be touted since the mid 80's..
An economy of our size and fluidity can't save itself out of debt.....It has to grow itself out. The old a rising tide lifts all boats theory....
Best regards,
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