according to everybody today's reason for reversing yesterday's losses was that people started to be sure that cut will happen - for the fuck sake - where did this came from? (Bernanke did not say anything material in the letter to the senator). so let's have a small poll here. what do you think will happen? And maybe what do you think should happen on or before Sep-18? And what about Trichet on Sep-6?
if by sep 18 markets will be down big,we will get .25 if markets will be close near highs we dont need one.simple as that.
I'm figuring 25bps and that's it for the year. Bernanke wants to show that he recognizes what's going on, but without the full "Greenspan put", which after LTCM amounted to two cuts of 25 each. Trichet, who knows? You can't predict what a moron will do, any more than you can model panic. Up until a few days ago I would have said that he would actually raise into this debacle, as he stated he would, but now I'm not so sure. Not that it matters. Both Bernanke & Trichet are so fixated on proving that they're BSD's that they have raised rates beyond what is necessary to fight inflation. I don't know about Europe, but over here the only effect is to actually cause inflation, by slowing down the economy, which hits productivity, which lowers the potential GDP, thereby causing more inflation than would otherwise be the case. Eco 101 stuff. Apparently Bernanke slept through that class, though. Either that, or he's so intent on proving a) he's not Greenspan, and b) he's not Helicopter Ben, either, that he's willing to throw the whole economy in the toilet to prove his point.
The Fed as well as Pabst are concerned that cheaper borrowing costs vis a vis a lower Funds target is more likely to find it's way into the inflated Treasury trade rather than into the depressed corporate/mortgage market. There's no shortage of liquidity (10's traded 4.50 this morning) just a shortage of fund investors with balls. Oil was up how much today? Was that Wheat I saw up 22 cents? Let's not forget that deflated, panicky NDX.........
market bangin around between 50 and 200 dma. Don't read too much into it. also, wouldn't the banks be on FIRE if there was a rate cut on tap?
ok - here are my 2 cents. A) Trichet is not a moron - in fact he is likely the best central banker around. He communicates clearly (as opposed to Bernanke) and laid down a clear plan what he wants to do. Of course the plan can change if circumstance change drastically. B) to think that monetary policy is dictated by the level of a stock market is naive to say the least. Monetary policy should depend on economy and possibly on keeping financial system to function as it should. On the first I doubt we get very weak economic data in the next 3 weeks (except for housing). For housing the cut would likely prove to be counterproductive anyway as the inflation expectation shift the long end of the curve. Therefore the cut could come only if we have some major problem with the financial system - which basically means some kind of a very large default of bank(s). Even then it is doubtfull that cutting fed funds helps a single bit as the crisis management must be done through discount window type of tool. There is one more interesting bit that many people forget about - the meeting is happening 1 day before CPI release (on the day of PPI release). I guess that FOMC can get these figures in advance. These numbers are unlikely to look nice - just imagine cutting and 1 day later seeing inflation going up - the mess we saw during the last few weeks would be nothing in comparison what would follow.
Ya its like XLE XLK and XLI in 1 corner and XLF XLV XLP in the other. Never seem the SPY and XLF make such a wide divergence. Gonna be wild anyway you slice it.
that's it......... cut rates so we can make this graph go vertical....... I mean are we going to need $500 worth of credit for every $1 of GDP???? it has become laughable the way the whole thing is looking....