US fed has cut discount rate half percent

[insider]

Unfortunately I believe we live in a society that has lost its identity (that's why you have people calling themselves some other nationality instead Australians and so forth) and because of this lack of identity a lack of self value is brought
so we turn to all these materialistic things for comfort... Lets just say people like to splurge on nice cars and so forth because they are compensating for insecurities and worried about what people think of them... They think with out it they are nobody... losers

 

[toothfairy]

......Until the :fan Then the borrowed $ that didnt make the $ has to be paid back, isnt that part of the problem we are in at the moment?

Our market had been good for years, if investors had not gained profits to pay for the current fall, they should be eliminated from the game anyway.
As for the beginners who have just started at the wrong time, that's the tuition fee they have to pay to stay & play. They'll figure it out in the long run. Don't have to punish them with higher rates.

 

[Pommiegranite]

TRUST

Its a bigger word than it seems.

I'm out and couldn't give a crap what the market does.

I have lost trust that the market will behave the way it is supposed to.

Until that returns....I'm out. And boy its gonna take a lot to convince me.

Too much panic....and I don't admit that I've played my part.

10% loss since April!!

 

[dhukka]

Level headed article from Minyanville's Todd Harrison

Yesterday, while we were trucking through the muck, we asked the question: What happens when the FOMC "shocks" us with a rate cut? Our answer was simple””at a point, we fade the trade. We've seen this movie before, in 2001, and after a sharp Snapper, the conditional elements that precipitated the snippage were more important than the scissors itself.

Particularly when a (soon to be ex-) Fed Governor said the previous day that the FOMC wouldn't act before September unless there was an outright calamity. Nice poker face, Jane!

Listen, we get the credit seizure and understand that cheap money (or credit, as the case may be) makes the finance-based, derivative-laden, debt-dependent world go round.

And we further understand that this is the last thing the Fed wanted as they attempt to punch their way out of the Box. Dollar to donuts--metaphorically and figuratively, the Chinese can't be thrilled to see their dollar-denominated assets devalue further.

Was it an accident that the FOMC waited until expiration Friday before the shave and an ursine haircut? No shot””they know full well that expiration exacerbates volatility and wanted maximum bang for their cut to shore up psychology. What they may not know is that negative gamma works both ways.

I played the fray from the long side yesterday, buying into the abyss and sweating out the "worst case" scenario. It wasn't a blind bet””I set my stops below BKX 101.50 and loved the way they traded in the face of broader disgrace. And, consistent with the discipline that has kept me in the game, I flattened out into the bell. If a fool and his money are lucky enough to get together in the first place, GG, I was happy to hit it and quit it.

So, what now? Consistent with what I've been saying, I'm layering into my first tranche of S&P puts with a stop above S&P 1455 (200-day) and BKX 111.50 (from where we broke down). I'm not being a hero, I'm simply trading, fading and staying discipline. It may be too cute””nobody catches every move””but I will say this.

With self-proclaimed floppers suddenly saying that this panacea will spark a 1500 point rally in the DJIA, I'm willing to take the other side of that trade in a defined risk way. I've seen that movie before too and, well, the sequel promises to be quite a calamity.

Good luck today.

R.P.

 

[springhill]

Our market had been good for years, if investors had not gained profits to pay for the current fall, they should be eliminated from the game anyway.
As for the beginners who have just started at the wrong time, that's the tuition fee they have to pay to stay & play. They'll figure it out in the long run. Don't have to punish them with higher rates.

I agree but unfortunatly they will have to reap what has been sown since '87and more so in recent years. And the crop may not be good
Dont you just love a good cliche'?

 

[theasxgorilla]

The point I am making is I don't think Aussies are particularly extravagant in world standard yet we are paying relatively high rate in a country that has so so much minerals that other countries apparently need.

You are right...Aussies live quite poor compared with a lot of Western European countries and parts of the US. And you can't fool people into spending more than they make/have without the smoke and mirrors of the modern financial system. In the olden days if you had 2p left in your purse a day before father was paid, that was that, you managed. Now we have credit cards.

Read Michael Hudson's essay, The Road to Serfdom. Don't worry, serfdom is used figuratively. We have a far better standard of living than prior generations, but its not in proportion to how hard we work or how productive we've become. We've got better tools and yet we are working harder than ever. The middle class is being manipulated out of a better life by people Hudson calls "the would be Lords". The MacBank CEO earns over 20 million AUD a year. His investment solutions are worth 400 times more per week than the average Australian.

 

[wayneL]

Level headed article from Minyanville's Todd Harrison

I like Todd, he is one smart cookie... and not prone to "bubblevisionthink".

 

[Kimosabi]

Goodbye US Dollar!!!

Everybody say hello to the Amero...



Proud new currency of the North American Union...

 

[wayneL]

From another forum fwiw:

Almost, almost everyone on the this entire forum has misunderstood what the Fed has done.

They have not created a swathe of unbacked cash to wash away everybodies woes.

They have not averted all the risks.

It is an overnight rate.

The move allows greater volumes to be traded. It is a move aimed to facilitate the sell off. It reduces the price volatility in the credit market stemming from lack of buyers.

It greases the wheels, allowing people to dissolve their positions in a more orderly manner.

The last thing anyone wants is panic. Panic is very expensive and very inefficient. It leads to disorderly pricing.

The best way I can describe what the Fed is trying to do is encouraging a queue to form at the exits. People are still leaving albeit there will be less collateral damage from a stampede.

The unwinding will continue for another ~3 months at least.

We still have no idea who is going to bear these loses. And it will take time for positions to unwind.

 

[theasxgorilla]

From another forum fwiw:
The unwinding will continue for another ~3 months at least.

We still have no idea who is going to bear these loses. And it will take time for positions to unwind.

If they release more money into the system, particularly as positions are liquidated from assets to cash, won't it eventually show up as inflation? Is this where the losses are to be hidden/obscured?

 

[insider]

If this cut was sooo special I think the Muppet Index would be trading a bit higher than it is...

 

[wayneL]

From the same source as before: (fwiw)

People who buy up positions in this window are idiots. Pure and simple.

It's a sell off. This is like an interval. There are no profits to be made by holding stock from here.

The people who hold lots of stock (investment banks) are still losing tonnes of cash elsewhere (securities), this just means they can finance their debts a little easier.

It will give them... oh I don't know? Say three weeks (depending on how solvent or liquid they are), to go over all their books mark everything down and think about announcing the fact that they have lost fortunes the size of which they were never qualified to oversee. Otherwise they are going to jail. And they will stay there for 25+ years. They have shown grosse negligence when it comes to pricing credit risk.

If you own any shares sell them today. Take an investment holiday, and come back after the big announcement is made. We are awaiting a huge fall.

 

[Pommiegranite]

I can't believe the market rallied off the back of this 'cut'.

I was bullish until this week...but this 'cut' is such an obvious desperate message.

The next message next month will be when they lower interest rates.

I know people are saying ' buy when there's blood on the streets' etc.....but surely we need that blood to have clotted first...clots removed...before we buy again?

 

[Pager]

I think the Fed did exactly the right thing.

Markets were very much on edge and panic was setting in, it wouldn’t have taken much to see an irrational melt down, but taking this action has given the markets some breathing space and to let the waters clear and see how deep problems run, maybe more to come but don’t think we will see the panic that was becoming more and more evident.

They have also said no bailouts, so those who are in trouble won’t be thrown a lifeline.

Cheers

Pager

 

[Awesomandy]

I think the Fed did exactly the right thing.

Markets were very much on edge and panic was setting in, it wouldn’t have taken much to see an irrational melt down, but taking this action has given the markets some breathing space and to let the waters clear and see how deep problems run, maybe more to come but don’t think we will see the panic that was becoming more and more evident.

They have also said no bailouts, so those who are in trouble won’t be thrown a lifeline.

Cheers

Pager

I'm not sure if there is a right thing to do, for the problem was created a long time ago, and anything they do now would be too little, too late. The way I see it is that this move has most likely delayed an impending crash. They are just betting on the off chance that the market will rebound from this, but the problem is, people who can't pay their mortgage still can't pay their mortgage, which is where the meltdown started a month ago anyway. My scenario is that we'll have a dead cat, (which would allow us to off-load any remaining longs) before another major slide down.

 

[theasxgorilla]

S&P500 closed up 2.46%...the weekend is here...looks like the Fed saved us just in time...I'm going to bed

 

[numbercruncher]

Does anyone really think this move by the Fed solves the problems in the financial sector? Mortgage brokers, banks and hedge funds are still saddled with impaired MBS and CDO's that nobody wants. A short term to solution to some short term funding issues.

I hear dead cats bouncing.

I think theyve stuck a bandaid over some open heart surgery. The bandaid will slow the bleeding but infection is bound to set in.

 

[mick2006]

I don't know about you guys but I get the feeling that some of the big boys found out about the discount rate cut late in the day on Thursday and that was why the dow rallied 300 points to finish level.

As for Fridays trade I think it is very much a relief rally and there could still be much worse to come.

 

[bingk6]

I think theyve stuck a bandaid over some open heart surgery. The bandaid will slow the bleeding but infection is bound to set in.

The actions of the FED clearly show their desperation. However what options do they have ?? There are really no good options available and ANY decision will be hammered one way or another.

The Feds are clearly of the opinion that if they did not act now, things will get out of control real fast and then there will be nothing they can do about it. It may well be that its already too late !!! If all you had are bandaids, would you apply it now, or do you wait until infection sets in ???

 

[resourcesman]

Like all of you, I think the effect of this cut is psychological rather than anything else and doesnt' have any real effects. But I think that the psychological effect is exactly what is important.

When we look back on this in a year's time when things are back in full swing, we'd probably see that a restoration of confidence was all that was really needed, because the real global economy would not be affected as much as it has by a hit to the US subprime market.

The one thing that could have caused these problems to spill over into the real global economy is a loss in confidence and the resulting diminishing supply of money and credit crunch. This confidence looks likely to be restored by this move and promised moves in the future.

That's not to say that we wont have further volatility, I'm sure we will over the next few weeks.