# How much will the Fed cut on March 18th?



## dhukka (18 March 2008)

Just saw this headline on marketwatch.com



> *Fed fund futures suggest cut to 1.75% a small possibility*
> 
> The rise in Fed fund futures Monday morning not only suggests that a one-percentage-point cut to 2% in the Fed funds rate is fully priced in, but that there's a slight chance of the Fed cutting its base rate to 1.75%. The April Fed fund futures contract rose to 98.03.



A week ago I would have said a 50bps cut to the Fed Funds rate was the most likely outcome of Tuesday's Fed meeting. However in light of recent events such as the demise of Bear Stearns and the Federal Reserve making moves that haven't been seen since the great depression the odds of the Fed doing more than 50bps have risen substantially. In fact a 100bps cut is fully priced into the Fed futures. 

So whaddaya reckon? Will the Fed warm up the helicopter or will they wake up to themselves and stop trying to fix the problem with the same medicine that created it?


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## wayneL (18 March 2008)

A straight out crap shoot ... 1%.

But who knows, The Fed and the Wall Street muppetologists are now merely reacting via their collective limbic system.


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## MRC & Co (18 March 2008)

wayneL said:


> A straight out crap shoot ... 1%.




I agree, think it will be a nice, round, symbolic number, so 1%! 

Will be good for a short-term bounce hopefully!  

Anybody have the latest shorting or put/call ratios information?

Extreme pessimism and we might see a very nice rally for equities.


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## Trembling Hand (18 March 2008)

MRC & Co said:


> I agree, think it will be a nice, round, symbolic number, so 1%!
> 
> Will be good for a short-term bounce hopefully!
> 
> ...




If you are hoping for a rally that's probably the worst thing right here. A good old fashion panic is whats needed or any rally from the fed will just get dumped on. Not sure if you have noticed but the shorts control this market.


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## chops_a_must (18 March 2008)

Ben Bernanke, he's our hero...


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## MRC & Co (18 March 2008)

Trembling Hand said:


> If you are hoping for a rally that's probably the worst thing right here. A good old fashion panic is whats needed or any rally from the fed will just get dumped on. Not sure if you have noticed but the shorts control this market.




Im not hoping for any rally as I am loaded with gold at the moment.  But it is something to look out for.  Have a look at historical data, IRs generally determine short-term trends.  

Which shorts control the market?  Members, specialists, public, floor traders?  I dont subscribe to any information on this, but am interested to know.


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## sam76 (18 March 2008)

Early days yet but I was expecting a bigger fall. 

I even stayed up late to watch


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## BradK (18 March 2008)

Oh, I thought today was going to be the day that hedge fund managers and those bastards who shorted QBE threw themselves out of 10th story windows... what a shame... it seems to be bouncing off the open. 

cheers
Brad


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## wayneL (18 March 2008)

BradK said:


> Oh, I thought today was going to be the day that hedge fund managers and those bastards who shorted QBE threw themselves out of 10th story windows... what a shame... it seems to be bouncing off the open.
> 
> cheers
> Brad



GS account no. 95 buying I expect.


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## BradK (18 March 2008)

LOL... what was that wayne? I dont understand what you are saying... and yes I do hold QBE for a bargain at $25.98 after waiting AGES to get them under $26. Thought I was so great.... but will hold from here until 2045 to wait for the recovery. 

Not holding many... and makes the crash/depression all the more entertaining. 

Cheers
Brad


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## sam76 (18 March 2008)

Did I just see some green???


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## Kauri (18 March 2008)

they may have enough to prop to the Dow, but it seems the broader S+P is beyond them... so far...   
Cheers
...........Kauri


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## nizar (18 March 2008)

Kauri said:


> they may have enough to prop to the Dow, but it seems the broader S+P is beyond them... so far...
> Cheers
> ...........Kauri




Well you know what they say...
Easy to make 30 companies look good, not quite for 500....


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## sassa (18 March 2008)

nizar said:


> Well you know what they say...
> Easy to make 30 companies look good, not quite for 500....




And it was Lehman and Deutsche who led the buying when the S & P fell under the January low.On behalf of the ppt?


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## Aussiejeff (18 March 2008)

MRC & Co said:


> I agree, think it will be a nice, round, symbolic number, so 1%!
> 
> *Will be good for a short-term bounce hopefully!*
> 
> ...




Ummm. Prolly make that "a *very short-term* bounce hopefully!" Like, 1 or 2 days?


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## Julia (18 March 2008)

Wayne (and others with a similar view), given you are opposed to what the Fed is doing, can you say exactly what you think should happen instead and describe the effect you believe that would have on global markets?


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## wayneL (18 March 2008)

Julia said:


> Wayne (and others with a similar view), given you are opposed to what the Fed is doing, can you say exactly what you think should happen instead and describe the effect you believe that would have on global markets?



Well we really have to go back to 2001. They should never have created this bubble in the first place as here is where it was aways going to end.

Had they have let the 2002-2003 recession happen naturally, it would have been relatively mild, and we would in all probability be growing our way out of it nicely by now.

As it is, they have endangered the whole system, make no mistake, the western economy is in deep peril... and gifted the baton to the east and south Asia in the process.

As to what they should be doing now? They probably have to pump prime now, or we end up in a situation of cascading cross-default... and that is Armageddon time. At the same time, they should not be bailing out institutions from the cesspit of their own creation and socializing the losses to Joe & Jane Sixpack. Just not kosher.

I mean, Austrian economists have been warning of this for years. Nobody can say it was unavoidable, it was deliberately created.

Now the law of unintended consequences takes over. 

Meanwhile, savers and the prudent get screwed.


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## MRC & Co (18 March 2008)

Aussiejeff said:


> Ummm. Prolly make that "a *very short-term* bounce hopefully!" Like, 1 or 2 days?




Who knows, I cant imagine it would last too long either, not in this current state.

But never underestimate the strength of momentum.  If it starts moving uniformly throughout the DJ, S&P, NASDAQ and Russell 2000 I might just hop on for the ride.

Isnt there something about the utilities leading the market also?

Just the fact I have already seen total scepticism by posting we MIGHT see a QUICK bounce following a Fed rate cut (which is historically what happens), makes me think it is even more likely.  Of course, I will wait to see price movement, especially near close to validate my reasoning.  Without price movement, it remains just a theory and I will not jump on board.

Good luck!


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## wildmanchris (18 March 2008)

Let the forest burn, it will grow back stronger than before.

Silly silly fed......


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## sassa (18 March 2008)

And what will be the effect on market spreads if the Fed goes 100 basis points tonight?


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## Awesomandy (18 March 2008)

Usually, just before Easter, fund managers like to reduce their risks, and given the recent market situation, I'm guessing that they would be closing their shorts this week. Well, it's a bit of an educated guess, so please don't quote me.


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## MRC & Co (18 March 2008)

Well it appears Europe is pricing in a sharp Fed cut as I type.


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## vishalt (18 March 2008)

I really don't know if Bernanke is feeling confident, or deep down in his heart he is feeling like an idiot. 

Inflation the US is OUT of control and lower interest rates have hardly spurred any growth - all though it takes time to feed into the economy only if inflation is maintained, which it ain't.


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## wayneL (18 March 2008)

wildmanchris said:


> Let the forest burn, it will grow back stronger than before.
> 
> Silly silly fed......



Another Austrian. 

Unfortunately, modern economic theory is a load of b0llox which doesn't recognize natural cycles.


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## sassa (18 March 2008)

MRC & Co said:


> Well it appears Europe is pricing in a sharp Fed cut as I type.




European markets powering ahead and all futures gaining momentum.


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## korrupt_1 (18 March 2008)

Was watching ABC Alan Kohler report tonight...

Two interesting charts...

1st is that the Aussie market has tanked 25% compared with  theS&P 500 only 15%

2nd chart is that the FED is running out of ability to cut rates... soon the rate will be below CPI which is not good.

Mods: not sure if i'm allowed to post ABC TV charts? Are they copyrighted? If so, please remove them.


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## MRC & Co (18 March 2008)

sassa said:


> European markets powering ahead and all futures gaining momentum.




Sure are, will be an interesting next couple days.  If it closes higher, I would expect Tuesday open to follow on (based on historical probabilities), not sure if the Friday-Monday rule applies though after such a long break........

I thought sentiment and seasonality reasons would give us this bounce, interesting to see if it trumps all technical indicators.......

I will be sure to note in the trading diary the outcome either way it goes.


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## overule (18 March 2008)

sassa said:


> And what will be the effect on market spreads if the Fed goes 100 basis points tonight?




Have a look at the European market. They are already reacting to what's coming!


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## MRC & Co (18 March 2008)

overule said:


> Have a look at the European market. They are already reacting to what's coming!




Might want to read up, already noted.


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## overule (19 March 2008)

MRC & Co said:


> Might want to read up, already noted.




You dont have to point that out.


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## MRC & Co (19 March 2008)

overule said:


> You dont have to point that out.




So why repeat?


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## mayk (19 March 2008)

and the better sense prevailed they cut it by only 75bp.

http://www.msnbc.msn.com/id/23680394/


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## wayneL (19 March 2008)

mayk said:


> and the better sense prevailed they cut it by only 75bp.
> 
> http://www.msnbc.msn.com/id/23680394/




"*only* 75bp" LOL

Punters are disappointed too.... dittums.


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## wayneL (19 March 2008)

wayneL said:


> "*only* 75bp" LOL
> 
> Punters are disappointed too.... dittums.




Well they like it after all. LOL

FOMC days are always a bit of a laugh.


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## mayk (19 March 2008)

now , just hoping we break the previous tuesday record and go to +500 for DOW. 

the main point was the fact that core inflation was not at levels feds were happy at. The cut was voted 8-2. So punters like the fact that they got a better deal. 

In the end it is all about perception and confidance building measure. The news is as good as you preceive ( or spin it ).


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## nizar (19 March 2008)

So when the feds funds rate goes to 1%, is that when our markets will find a 2003-style bottom?

Coz thats what the rates were in 2003.

Thoughts?


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## Aussiejeff (19 March 2008)

Hahaha!

The Benny-Med Emergency team have given the Dead Cat a zap with their shock paddles..... see that poor ol' puddy-tat jump 'n twitch!

I wonder how long the mangy moggie's ticker can last a this rate?


LOL



AJ


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## wayneL (19 March 2008)

Aussiejeff said:


> Hahaha!
> 
> The Benny-Med Emergency team have given the Dead Cat a zap with their shock paddles..... see that poor ol' puddy-tat jump 'n twitch!
> 
> ...



LOL!

I can't get the image out of my mind now... seriously funny! Poor puddy.


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## Aussiejeff (19 March 2008)

Hehe.

Dr Georgie Porgie also gettin' in on the Lifesavers act...

_"GWB said (today) the Fed and the US Treasury Department were closely monitoring the situation in the financial markets that if further action were needed it would be done *"in a way that does not damage the long-term health of our economy"*_.

Read more of the Wise One's Words here:

http://www.news.com.au/heraldsun/story/0,21985,23400845-5005961,00.html

Rejoice, peoples of the World! It seems we have worried for nought - all's well after all!! The gloom is over and we can:

Buy, buy, buy stocks. 
Buy, buy, buy goods.
Buy, buy, services.
Buy, buy houses.

Oooh.... I'm feeling all a'tingle with goodness.... thank YOU Mr President. You have made my day! 


LOL


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## nioka (19 March 2008)

Aussiejeff said:


> Rejoice, peoples of the World! It seems we have worried for nought - all's well after all!! The gloom is over and we can:
> 
> Buy, buy, buy stocks.
> Buy, buy, buy goods.
> ...




Or did he say ;

Bye bye stocks
Bye bye goods 
Bye bye services
Bye bye houses 

Bye bye George B. Next thing he will be joining John H on a world speaking tour.


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