Shocked by fed decision

gnome · Sep 20, 2007

Quote from S2007S:

How long can the federal reserve keep a recession from taking place?

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If you're talking, "how long before the US is actually in recession" (fewer widgets produced than last year), we could be there NOW... hardly anybody would know.

If you're talking, "how long before even the dumbest f^ck recognizes recession and the Gummint can no longer deny it"... could be 20-30 years, easy.

empee · Sep 20, 2007

nice article, thanks for writing. i agree with most of it, as do non right wing Neo Cons I would suspect.

dhpar · Sep 20, 2007

Quote from Babak:

Ummm... No. The Fed lowered rates to bring them in line with what the fixed income market was dictating to them (see graph).

Mike Swanson is a permabear and a gold bug of the first degree. He has been fighting against the bull market that started in 2002 tooth and nail.

And he has repeatedly called for gold to go higher... when it just meanders.
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and you continue to post this bullshit. we could not get a better prove than the recent market moves showing that fed fund futures market DOES NOT reflect market expectations about target rate...which many idiots (together with you) here suggested.

Babak · Sep 20, 2007

dhpar,
Why the personal insult? we're simply discussing an interesting topic.
To address what you say, I'm referring to the short term fixed income market, not the Fed Funds futures market. So I'm not sure what it is that you're saying exactly.

In any case, according to the FF futures market, a 25 bp cut was priced in 100% and a 50 bp cut had a probability of around 75%.

dhpar · Sep 20, 2007

Quote from Babak:

dhpar,

Why the personal insult? we're simply discussing an interesting topic.
To address what you say, I'm referring to the short term fixed income market, not the Fed Funds futures market. So I'm not sure what it is that you're saying exactly.

In any case, according to the FF futures market, a 25 bp cut was priced in 100% and a 50 bp cut had a probability of around 75%.
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you know why! you were already told to stop poluting thread with this crap on a different thread e.g.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=103613

stop advertising your blog in every post.
by the way your implied odds are wrong anyway...

Babak · Sep 20, 2007

I have not been informed by any moderator or Baron in private (IM) nor in public on any thread that I've seen. If you know of a message for me from the moderators on a thread, please refer me to it specifically, I'd appreciate it.

What you refer to as "crap" is my contribution to the discussion. I see no reason to stoop to insults, even if you disagree. Rather than write what I've already written on my trading blog, I post a link to it. Since it is a free blog, it isn't "advertising".

The numbers I gave are correct. You may verify them yourself if you wish. Here is another source:

http://tickersense.typepad.com/ticker_sense/2007/09/no-bull-imminen.html

dhpar · Sep 20, 2007

whatever

harkm · Sep 20, 2007

Quote from dhpar:

whatever
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Good comeback.

Scribe · Sep 20, 2007

Quote from Smart Money:

Since Bernanke and his buddies have access to the newest data, and see things as they develop, I think their seeing that our economy is like an airplane going into a dive because business activity alone can't handle the weight of the luggage that is the housing market and the credit crunch. Following the analogy, they have a better view of the altimeter than we do, and I think they are making adjustments that will slow the descent, but not end the descent.
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Ben should be looking for a safe spot to make a "soft" landing in his plane with a sputtering engine. Instead he has elected to pull back as hard as possible on the yoke to try and gain altitude. Stall speed is approaching.......

dtan1e · Sep 20, 2007

Quote from Smart Money:

Mymini,

That was a great post...one that I'll print out and read in detail.

IMHO, bubbles are only bad if they "pop". If they slowly deflate, and give people who REALLY need out, an opportunity to get out, it can minimize the carnage. In my overly simplistic way of viewing things, I think Bernanke and his buddies know that the credit crunch, and the associated subprime mortgage debacle can cause us great pain if we go from 90mph and slam into a brick wall. I think they are trying to slow the descent by offering a source of slightly cheaper money to the banks and hopefully influence the rate that people will lose their houses.

I think that all along, they've been watching as the business sector absorbs the potential losses in these areas. They knew about the pain, but were hoping the markets could work it out by itself. The realtor who can't find home buyers quits his job and works for big business. The people trying to sell their home are able to do so because a new factory just opened up in their small town and the workers need a place to live. And, the banks do OK because they can at least loan money to the businesses for their expansion to cover their mortgage losses. This process has been on-going, and has, IMHO, dampened the effect of the housing overhang, mostly because most Americans, except for people living in key areas, generally feel like their home value hasn't dipped much beyond what it was worth only a couple years ago.

But...if business fails, then there is a problem on all three of these fronts.

Since Bernanke and his buddies have access to the newest data, and see things as they develop, I think their seeing that our economy is like an airplane going into a dive because business activity alone can't handle the weight of the luggage that is the housing market and the credit crunch. Following the analogy, they have a better view of the altimeter than we do, and I think they are making adjustments that will slow the descent, but not end the descent. So I'm willing to bet that all future adjustments will be "behind the curve", rather than in front of them. It will take quite a bit of bad data for another cut. They want the orderly transition to continue. There will still be some pain, but it won't be too bad. . The more time that goes by, and the easier and cheaper that money is, the less damage that there will be.

FWIW, the rate cut is saving me a grand total of $20 a month on a Heloc. Thats it. I'll probably spend it and stimulate the economy. But my $20 a month, and the $20 a month from my neighbors likely won't cause rampant inflation beyond what we have now.

I know some believe that you can't softly close a bubble without creating another one. But perhaps you can trade a big one for a few small ones that won't cause as much harm to people if they pop.

SM
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the pain is not going to go away, its either take it in one shot or as a numbing kind of pain that drags and drags, what easing rate so there be more credit, sort of like saying the sub-primers r up to their eyeballs in debt & suggest they go get another credit card to help pay of the more urgent payments first, is that what you propose ?