Rate Cut

Discussion in 'Trading' started by Point Man, Jun 16, 2003.

  1. Why does Greenspan need to cut rates you may ask? The US economy appears to be showing signs of recovery. Wall Street has rallied smartly this year. Consumer confidence will surely return. Why, why, why? IT IS ALL ABOUT JOBS Did anyone look at Thursday's jobless claims? The data was underestimated again and the revision was worse. Jobless claims have consistently been above 400k for months on end. People are still losing their jobs at an alarming rate. When is the last time you have heard that Corporate America was actually HIRING? It was 1999. When Corporate America starts hiring again, is when confidence will return. Everything else is artificial.

    Throw the 2004 Presidential Election in the mix and what do you have? You have a President that is doing everything in his power to win a second term. Give me a break. Bush started a war. He won the war (that was a no-brainer), but is losing the battle. Weapons of mass destruction have not been found. Americans are still fighting and dying in Iraq. We have not found Hussein or his sons and Bin Laden is still on the lose, dialysis machine and all. If the election was today, the only thing Bush could beat is his dog.

    To win re-election, Bush only has one bullet left in his smoking gun. He has to turn this economy around and he has to do it RIGHT NOW. Rates are going lower still. This securities markets rally is for real and it is far from over. By the spring of 2004, you will be refinancing AGAIN at 2%.
  2. not to mention that lowering interest rates goes against his strong dollar policy.
  3. Timing is everything, but the dollar is in big trouble. Anyone notice the huge Head and Shoulders Bottom on the weekly and monthly Yen charts?

  4. Agreed! 100%

    SP 1210 by Jan. 01, 2005.

    yes that's right.

    Then SP 660 by mid 2007.

  5. I read an article in which a mortgage broker said banks start losing money if rates fall to 3.5 % or less. Don't ask me why (I know cost of creating capital is part of it) but I'm sure there plenty of others on these boards who can explain why.
  6. TGregg


    That would be interesting to understand. I wonder how much of that is due to the costs of handling the loan (like mailing statements, tracking everything, beating up deadbeats, etc.) and how much is due to the initial setup. . .
  7. I don't get it. Why do they need to cut rates again ? The market has rallied a great deal, the dollar has fallen, the economy has shown signs of improvement, long term rates are at 50 year lows, yet everybody is talking about a 50BP cut. They will be left with only 75 BP to cut if they ever needed to. Can't see any reason to cut rates again. I don't believe the Bush administration can force the Fed to play their game.
  8. after a certain point rate cuts do nothing. If you consider inflation, we are at near zero real interest rates right now.
  9. The FED and Greenspan have been TALKING down rates ever since the last FED meeting on May 6th.

    I doubt the FED wants to lower the FED target rates any lower from here. Too many negative implications would be involved with Trillions in money market funds and dollar losing value.

    My guess is that the FED would hold steady with rates and tell us that a more positive environment has taken hold and that the economy is showing modest signs of strength!

    As for Deflation? What deflation! This was purely created by the FED recently to jawbone or talk down market interest rates, which they have succeeded to do. IMHO< The PPI and CPI are indices that dramatically underestimate what really is happening in "price land".

    About 4 or 5 years ago the gov't said that the CPI/PPI overestimated inflation and that they were going to change the way it is calculated. Why all of a sudden the change? Because the gov't found a clever way to reduce its costs. By manipulating the CPI lower, the gov't passed on lower cost of living increases to retirees and welfare recipients.

    Anyway, the FED has now created another bubble! LOW INTEREST RATES= HOUSING BUBBLE And soon it will POP!!!

    I hear many people talk about the housing market and how its not in a bubble. Bull $hit I say. Several factors have happen to created this bubble.

    1. Capital gains reduction on House gains, have created a mini trading market for housing. I know several real estate speculators that have flip homes like they were trading stocks!

    2. Lower, and lower interest rates have made it easier for people to buy a large and larger mortgage.

    3. Double digit per year House price gains over the last 5 years is unsustainable, especially on the WEST and EAST coasts!

    The FED does not need to lower rates any further!

    BUY the Rumor, SELL the Fact.... interest rates have reached their low yields!
  10. malcom x

    malcom x

    fed will cut rates to show it is fighting deflation. the cut will be big, .50, to show that it is serious. once the rate cut and new tax plan work it's way through the economy, the fed will have created an inflationary environment. pay very close attention to what the fed does with m-1 money supply. that is where it will stimulate the economy. the only problems are how high is the cost of terrorism? how stupid are the banks that lend (or don't) lend money? greenspan can't afford to let the housing bubble pop. The us economy isn't like japan. americans are spenders, not savers. commodity prices are starting to rise. don't be caught short next years hogs or cattle. if you do, you'll be a guest at a big bar b que.
    #10     Jun 17, 2003