You're a bright guy who I usually agree with but your missing a few relevant points. 1. Fed Funds have been trading below their 5.25 target for weeks. Hence there's already been an unannounced de facto cut of at least 25 basis points. 2. For years global government credit markets have been at historically low yields. With all the ballyhoo about rates collapsing in this new "credit crunch" environment, the 2 year hasn't even rallied .3815 to it's 2003 low yield. The moving average of Bond yields this millennium is only 4.75%. Even ABSENT the market events of late, we'd be looking at a cut. I agree it sux. I've been short Bonds for 3pts now and I'm getting absolutely annihilated. Bonds are the strongest in relation to equities in years.
Oh Ivan, we're just having some fun.... everyone here is way smart enough to see it all unfold.... I even like it when dhpar flames me... It's just a pity to see this country hammer itself into the ground I own some gold and I have no debt..... I just watch the parade go by....
Yep, we got to get the savings rate up in the US, but we're going to cut interest rates in order to do it. All eyes next week to see the markets react to the whole 25bps cut we're going to get.
yea really, anyone buying a 10 year treasury and holding it to maturity is going to get butchered an opinion of course
Point 1 I commented to. Point 2 I didn't, but thanks for mentioning it. But what I'm saying - and it goes in line with both the points you mentioned - is has this occured before when the market was really off on what the Fed actually did? Does anyone know of any reference to a point in time when the market was so one sided on what the Fed would do, and then the Fed went and did something different? Cheers.
What I hear from Benny is that he is completely unconcerned about what he cant control with rates...ie price of oil, gold, wheat, corn etc..... he seems to be infatuated with "inflation expectations" as if economists have a mythical insight 12 months out..... the gold market, at least today, is saying Benny is 3 bricks short of a full load... If you ask Benny what time it is, he'll tell you how to build a clock
It looks to me no matter what Bernanke is set to disappoint. Bulls will not get enough of a cut to make them happy. Bears can't be confident that there will be any end to the cuts. Reignite inflation so you can start to do battle with it again big Ben. Don't ever let another business go under no matter how badly they leveraged themselves or how bad their business plan was, just as long as they hire enough people. If you amass any dollars, who cares because you will have to take constant risk just to stay even with the dollar decline. Seniors, you better stay invested in equities, but you have to guess which ones since the earnings can't be trusted with all the easy money laying around. This is nuts. Here we go, Ben mounting up to do battle with some more inflation windmills.
- well he is an academic after all. what a great post - that sums it all. And how better it can end than when Ben a.k.a. Don Quixote sets to a war on his 10 gallon a mile Buick a.k.a. Rocinante. Let's give him a push guys. Fortunatelly most of the time it is going to be a downhill ride.
The past year. Look at a chart of the 2yr. Several times the market expected a round of cuts-most notably in the aftermath of 2/27. Believe it or not, December/07 Fed Fund futures were actually several points higher (in price-lower in yield) late last year than presently. They broke almost 100pts into the June low and have rallied 75bp since. Look at the curve today. Dec FF is giving back 6bp while the Long Bond is unchanged at 4.63 (62bp over the targeted funds rate).
Oh - so they cut already by 125bps today. No wonder I missed it through all this posting. No surprise anyway - had to be helluva discussion at the video-conference.