Posted on 12/11/2007 5:07:21 PM PST by TigerLikesRooster
Ping!
I’m a bit surprised at this.
Way to go Fed! Cave in to the importers and merchants, and see what happens! You should have cut it a half of a point, so we can get some US manufacturing and strength going.
I’m going to anthropomorphise the market and state that it’s throwing a tantrum because they didn’t get as big a cut as they wanted—it’ll rebound tomorrow after they’re all cried out.
However, I think people forget that given the current high level of the DJIA of over 13,000, dropping 300 points has negligible effects.
This is very complicated. The market was rising in anticipation of a 1/2% cut, and with the 1/4% cut it had to back up about halfway. That may sound simple, but it is simplistic rather than simple. The whole market is more than just the DJIA/NASDAC, and includes commodities and bonds and other instruments.
This was the same BS that Greenspam did to run the economy into the ground, only worse as he was RAISING rates, instead of a puny .25 rate cut.
Maybe. The other thing is a kind of rule for the stock market, which is that it always overcorrects at first and comes back gradually. The reaction today is probably an overcorrection and the index will bounce back some tomorrow.
Why does the Fed think that high interest rates caused the problem [so think lowering the interest will solve it]?
I suppose playing with interest rate is the only way to show they are still in charge.
The big disappointment today was over two things, neither of which was the FED funds rate cut of .25%. That was expected and already discounted. The market probably would have sold off somewhat if that was all that happened, since it had rallied lately and was overbought.
The problem was that the market was hoping for a .50% cut in the Fed discount rate, and only got .25%. This rate is too high compared to current bond rates, and is punitive to the credit markets. Also, the statement was considered wishy-washy, as it did not show conviction but rather a wait-and-see attitude. This makes investors feel that the FED is groping in the dark rather than taking control.
Such is life. I think I’ll take my mutual fund and buy real estate.
The market is like a spoiled child. If it doesn't get what it wants, it throws a tantrum.
And the Fed had more to consider...maybe it's waiting for more interest rate cuts in Europe so the dollar doesn't go into free-fall...
Buy speculation, sell news.
I daytrade every day. That said, I have enough ways to make money without making a bet on what the market will do after the Fed decision. I never play the Fed. J P Morgan Chase is one of my favorite stocks. It traded at 48 right before the decision was announced, it went down to 45.50 after the announcement. I cannot remember a solid financial Dow component making such a move on a Fed decision and I have actively traded since BEFORE online trading. You said it was simplistic but you were right, and for the people who play the market it was a pure bet. If you shorted the financials, you made a boatload of money. I am not sure if the market would have bounced too much to the upside if the Fed had a cut a half a point, but there is a good chance the shorts would have been squeezed today, at least in the short term.
Maybe because 17 consecutive rate increases were too much?
Elevator going down.
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