Fed Raises Discount Rate

Discount rate raised from 0.25% to 0.75%. No change to Fed Funds rate.

Might spice up the markets tomorrow.

 

Pop this bubble finally!

 

from 0.5% to 0.75%

 

The amount is not the issue, it's a turning point.

 

good news for traders. rate hikes are imminent

 

Is discount that important? And ..... Why before expiration day? Some people might get burned by the timing of this.

 

Bernanke owns a lot of out of the money puts, he wants them to be in the money.

 

One of the more profound observations I came across reading a Quant book on alpha strategies, was that increasing rates is a sign the economy is improving. He showed that contrary to common thinking, as the rates start going up, the market tends to move in the same direction.

Think of how the 1st of a succession of rate 'cuts' often signals an impending crash. If you go back and look through the historical record, you'll see these facts.

Be careful to extrapolate common perceptions.

 

What book?

 

'Finding Alpha', E Falkenstein.

Although he discussed the rate increase phenom, I pretty much discovered the cut phenom on my own.