# Fed rate cut?



## Captain G (22 January 2008)

When do people think the US Fed will cut rates and by how much to stop the fall ?? If not are we doomed ??


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## Nyden (22 January 2008)

*Re: Fed rate cut ??*



Captain G said:


> When do people think the US Fed will cut rates and by how much to stop the fall ?? If not are we doomed ??




By the time it gets to that, the market will be hoping for a full 1 point cut, will only get .75 - and massively decline 

Could happen, but in all probability; market is hoping for .75, will only get .5, and same situation...


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## Captain G (22 January 2008)

So would it be fair to say that our current market value has already got some form/ expectation of US rate cut loaded into it ?? And if it's not large enough we'll go down big time ??


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## Nyden (22 January 2008)

Captain G said:


> So would it be fair to say that our current market value has already got some form/ expectation of US rate cut loaded into it ?? And if it's not large enough we'll go down big time ??




Of course it does. It did last time as well, we had a massive *sell down* after the previous cut!

Will it happen this time as well? Difficult to say, perhaps the gov will be more aggressive this time, but - let's face it, if they're too aggressive, it reeks of desperation, which will also scare investors away!!


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## trinity (22 January 2008)

> Will it happen this time as well? Difficult to say, perhaps the gov will be more aggressive this time, but - let's face it, if they're too aggressive, it reeks of desperation, which will also scare investors away!!





kinda sounds like, "damned if you do, damned if you don't".    Will a Fed rate cut "cut it"?  What will save the markets this time around?


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## Nyden (22 January 2008)

trinity said:


> kinda sounds like, "damned if you do, damned if you don't".    Will a Fed rate cut "cut it"?  What will save the markets this time around?




That's exactly right. That is where the fed find themselves I'm afraid.
They either inflate the economy, or let it sink. Neither choice is desirable.

Heck, even if they inflate it; they still run the risk of letting it sink


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## Bushman (22 January 2008)

Nyden said:


> That's exactly right. That is where the fed find themselves I'm afraid.
> They either inflate the economy, or let it sink. Neither choice is desirable.
> 
> Heck, even if they inflate it; they still run the risk of letting it sink




They will sacrifice the dollar to save the economy.


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## Nyden (22 January 2008)

Bushman said:


> They will sacrifice the dollar to save the economy.




But that isn't a guarantee of a 'saved economy'
They could make things worse, what was that about recessions being healthy / needed?


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## chops_a_must (22 January 2008)

Bushman said:


> They will sacrifice the dollar to save the economy.




How can you save a CONSUMER econcomy by deflating the currency? The whole economy relies on the buying power! It's already partly the cause of the problem.


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## Nyden (22 January 2008)

chops_a_must said:


> How can you save a CONSUMER econcomy by deflating the currency? The whole economy relies on the buying power!




Yep. They'll lose their international buying power. Made In China, anyone?


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## 2020hindsight (23 January 2008)

well you were pretty close there Nyden 
 0.75% 
 saved the day yes?
thanks crise
(and they openly predict more rate cuts in a month or so - think I heard it right) 

Now - ? what will Aus Reserve Bank do?  (inflation higher than expected etc etc)


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## Nick Radge (23 January 2008)

Here is some recent history of Fed rate cuts and there impact on the S&P 500...






_This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision._


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## doctorj (23 January 2008)

Very interesting Nick.  Have you analysed the indicies following rate cuts over a greater timespan?  

Macroeconomically, the chart makes sense - the fed is cutting rates as it gets evidence of a slowing economy.  The statistics it uses to make that assessment come out more frequently than company profits and with the impact of inventories, many companies can sustain production in the face of falling sales resulting in a time lag.

What would be more interesting is a longer term analysis looking at the typical length/depth of the contraction following the start of rate cuts.


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## Nick Radge (23 January 2008)

doctorj,
Specifically no I haven't as such but I am aware of the 'cumulative' impact of rate cuts which is what we saw back in 2002 - 2003.

The best indicator I have found for economic contraction is the unemployment rate and that says to me that the US is firmly in recession now.


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## 2020hindsight (23 January 2008)

nick
that red arrow is a worry 
can't you talk to your contacts and change it somehow ?


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## Nick Radge (23 January 2008)

OK. My main man in Washington, Ben someone? said this would fit..







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## 2020hindsight (23 January 2008)

lol
don't you love the precision of these graphical predictions 

THe bit I liked on the news...
"If the Aus economy settles, then we will get a ratehike, which will make it unsettled
But if it doesn't settle, then they won't raise the interest rates, which will probably settle things...
and if you aren't confused, then you just don't understand what's going on" 

PS Maybe you should shorten that arrow a bit, lol - otherwise there's a hike of some sort coming up - probably me heading bush to find a log hut


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## doctorj (23 January 2008)

Nick Radge said:


> The best indicator I have found for economic contraction is the unemployment rate and that says to me that the US is firmly in recession now.



No disagreement here - when pundits start tossing around the phrase 'technical recession' you know there's every chance they actually believe the US is in a recession but have been told by their editor to dress it up nicer.

My completely gut feel opinion on this is that by taking hard rate cuts early the sky will either fall or the recession will be shallow and short lived, perhaps with a whole lot more delayed pain a few years down the track.


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## RichKid (23 January 2008)

Nick Radge said:


> Here is some recent history of Fed rate cuts and there impact on the S&P 500...
> 
> 
> _This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision._




That's great work Nick, thanks. Charts and stats really help to clarify certain assumptions. There's a chart by Elliott Wave International somewhere that I saw last year which has the Dow annotated with fed rate cut dates....will try to find it, might even be a video somewhere. Bear with me guys til I locate it.


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## doctorj (23 January 2008)

RichKid said:


> *Bear* with me guys til I locate it.



I love it !  Best laugh I've had all day


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## dhukka (23 January 2008)

doctorj said:


> Very interesting Nick.  Have you analysed the indicies following rate cuts over a greater timespan?
> 
> Macroeconomically, the chart makes sense - the fed is cutting rates as it gets evidence of a slowing economy.  The statistics it uses to make that assessment come out more frequently than company profits and with the impact of inventories, many companies can sustain production in the face of falling sales resulting in a time lag.
> 
> What would be more interesting is a longer term analysis looking at the typical length/depth of the contraction following the start of rate cuts.




Was discussed here;

During the last Fed easing cycle they cut 500 bps in 2 and a half years and the S&P500 fell 50% over the same period, however every time is different, 1990-91 saw much less carnage in the stock market.


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## doctorj (23 January 2008)

Cheers


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## 2020hindsight (23 January 2008)

dhukka said:


> Was discussed here;
> 
> During the last Fed easing cycle they cut 500 bps in 2 and a half years and the S&P500 fell 50% over the same period, however every time is different, 1990-91 saw much less carnage in the stock market.



so lemme get this straight - you blokes are saying 
we're not out of the woods yet?

PS surely we won't see another panic like yesterday though ?


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## RichKid (23 January 2008)

doctorj said:


> I love it !  Best laugh I've had all day




hehehe, purely unintentional...I assure you   no one ever laughed at those quips when I made them in the bullmarket....glad it's taken in good humour.

Here's a brief article, there's a free EWI video on an aspect of this topic and (possibly) a more detailed chart but I can't find either, will try googling for them later.



> Fed Cuts Rates, Pushes On The String
> 9/18/2007 3:02:00 PM
> By Nico Isaac
> Elliott Wave International http://www.elliottwave.com/
> ...


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## lesm (23 January 2008)

2020hindsight said:


> so lemme get this straight - you blokes are saying
> we're not out of the woods yet?
> 
> PS surely we won't see another panic like yesterday though ?




This isn't over yet, think of last nights action by BB as a stalling or blocking action, which will just delay the inevitable. How it will play out, in real terms, remains to be seen.


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## Ken (23 January 2008)

I am no expert but you cant just keep printing money which is what they are doing.


I think there will be shift in financial power and I have no doubt China/Asia will take the mantle as the US dollar continues to lose its value.


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## ASK (23 January 2008)

Ken said:


> I am no expert but you cant just keep printing money which is what they are doing.
> 
> 
> I think there will be shift in financial power and I have no doubt China/Asia will take the mantle as the US dollar continues to lose its value.




Despite the shift away from the USD, I really cant see the Chinese Yuan or any other asian currency taking the 'mantle' anytime soon. Although the RMB is getting stronger (see annual growth figures) and I dont think you see alot of countries across the globe throwing around Asian units as a secondary currency. The US might have lost some of its financial power... but the greenback is a powerful powerful currency ... and it WILL rebound.


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## Kauri (24 January 2008)

Traders now reckon that a 75% chance of a 75 bp rate cut next week by the Fed is being priced into the market and this is behind the US bond yield slump back to the lows of this morning. More bad news  .. the US budget deficit will jump to $250 bln this year, according to the Congressional Budget Office though they are not forecasting a recession... mainly because GW told them not to..
Cheers
..........Kauri


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## barnz2k (31 January 2008)

US CUT RATES HALF POINT AGAIN

http://www.smh.com.au/news/world/us-slices-interest-rates--again/2008/01/31/1201714088847.html


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## Aussiejeff (31 January 2008)

barnz2k said:


> US CUT RATES HALF POINT AGAIN
> 
> http://www.smh.com.au/news/world/us-slices-interest-rates--again/2008/01/31/1201714088847.html




Big deal.

Which is exactly how the DOW reacted within the last hour of trade... 

Mucho *De Ja Vu* here. 

Put yer crash hats on folks...


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