Anybody getting bearish again?

Discussion in 'Trading' started by pumpanddumper, Dec 11, 2007.

  1. Interesting take:

    Fed Funds Rate Down to 3% in 2008?

    According to Larry Kudlow writing in his most recent column:

    "The Fed also must undo the inverted Treasury yield curve whereby the 4.5% Fed Funds rate remains well above the 4% 10-year Treasury rate. This situation has prevailed for 18 months (see shaded area in chart above); unless it's fixed immediately, it represents an illiquidity threat that increases the odds of recession. A 3-month Treasury bill around 3% is pointing the way for the fed funds rate."

    Over the last half century, the Fed Funds rate has been below the 10-year Treasury yield by an average of 0.87%. Assuming that the 10-year Treasury rate remains at about 4%, that would mean that the Fed Funds target rate would have to get down to somewhere between 3% and 3.25% to restore the historical relationship between the two benchmark interest rates (see chart above). In that case, a 50 basis point rate cut in the target Fed Funds rate today to 4% would be a good start, and additional rate cuts next year could be expected.

    Interestingly, the Fed Funds futures contracts for December 2008 are predicting a Fed Funds rate of about 3.4% a year from now.

    --------

    I'm a little surprised all those who wanted rate hikes earlier this year aren't out calling or a hike now. Market expects Final Q3 GDP next week to be 4.9%. And oh yeah:

    [​IMG]

    Commodities go ka-ching; buyers go, 'Ouch'
     
    #11     Dec 11, 2007
  2. That was easy money.
     
    #12     Dec 11, 2007
  3. You still short?
     
    #13     Dec 11, 2007
  4. rogcas

    rogcas

    wait for lehman's results

    credit default swaps look interesting!
     
    #14     Dec 11, 2007
  5. Yes, I'm loaded with DXD and FXP right now. Will lock in some profits soon and let the rest ride.
     
    #15     Dec 11, 2007
  6. S2007S

    S2007S


    Still have DXD and FXP myself

    Just sold my TWM at $69.50 for a $3.00 profit.


    Looking for FXP to jump back up.
     
    #16     Dec 11, 2007
  7. S2007S

    S2007S


    Still have DXD and FXP myself

    Just sold my TWM at $69.50 for a $3.00 profit.


    Looking for FXP to jump back up.
     
    #17     Dec 11, 2007
  8. I'm dumping FXP at $72-73 soon.

    Keeping DXD long till low 50's.
     
    #18     Dec 11, 2007
  9. gobar

    gobar

    i am seeing santa bear rally
     
    #19     Dec 11, 2007
  10. Santa blew his load too early with the C bank infusion and rate cut hype.

    I hope this leg down is more severe than the last two 1000 point swings.
     
    #20     Dec 11, 2007