This move has no benefit for equities

Discussion in 'Trading' started by detective, Dec 12, 2007.

  1. Equities feed off of low interest rates, not Fed funding for banks. This is a band aid measure by the meddlesome Fed to try and put a stop to the credit crunch.

    People are having problems because of credit risk, it is not a funding issue. Markets are overexuberant right now, but these overthought measures only serve as PR measures to try and calm the markets when there is nothing that will save the credit markets except time.
  2. rc5781


    makes for nice trading, though...
  3. The bubble HAS to burst right?

    I'm only 25 years old guys.. How far will this go??

    How long can they put this off??
  4. Exactly. But we're talking about equity traders here.

    Not the most intelligent people.
  5. The Fed is in a box, inflation is clearly high despite the cooked CPI stats, the economy is noticeably getting weaker, damned if you do, damned if you don't.

    Cutting by 50 bps in one meeting is really only necessary in a full blown recession, not when the economy is still growing with inflation running high. Really not a great place for the Fed to be, and they know it.
  6. The question is why do they have such a short-term outlook on things.

    Give it 6 years and let it work itself out. I mean trying to save off the recession of '08 isn't going to be the least bit helpful in the long-run.

    Just want to make things worse I guess.
  7. You're not kidding..

    JoeSixPack is in trouble..

    By the time he gets a piece of this liquidity injection Bud Lite will be 15.99 a 6-pack.
  8. This coordinated effort doesn't help stocks, it only serves as PR to show that the Fed is on the case when in fact their only tool is to cut interest rates down to 1% and that will bring along massive long term repercussions and inflation.

    People are quite sanguine right now, thinking this will help to alleviate some of the liquidity issues but it is a credit problem, banks don't want to lend because the economy is bad and there is a ton of credit risk out there.

  9. whats with all these stupid postings? it seems like you are crying just to be educated a little.

    If banks have an easier time obtaining funding without the discount rate usage stigma, then LIBOR comes down to match the fed fund rates. ARM mortgages and other consumer debt is tied to LIBOR. Then the consumer is less squeezed, and possibly the foreclosure situation is improved (even slightly is worth something).

    And less foreclosures means higher value of subprime debt; which means less losses for banks (equities) and all of the correlated markets which are affected.

    This is possibly as effective as a 75bp discount window cut, and shores up the dollar against some of the euro currencies.
  10. Thanks to GW Bush, "not on my watch"
    #10     Dec 12, 2007