If you bet on a surprise cut you will be throwing money right down the drain. IMHO.
The Fed has the dollar, worldwide credibility and inflation to consider...I do not want the purchasing power of my currency debased...I do not care about those who want something for nothing (ie: people with 2/28 loans about to reset)...who want a bailout so they can continue to drink wine on a beer income, nor do I give a damn about Jim Cramer's hedge fund friends over at Goldman.
The Fed has been boxed, and at most they will move incrementally as to deflect the critics as best they can and there is plenty to criticize...Greenspan created this mess, he is an embarrassment, but now that it has happened, risk does need to reprice, or else we are going to bounce from one bubble to another, the next one will be a reflating of the stock market bubble.
Central bank policy in the USA has been a joke since at least 1998.
In my experience the FED has always had control of our money supply. Lately with private equity and the carry trade becoming the 800 lb. gorilla a lot of the clout of the FED has been reduced. With money moving freely outside of the banking system the FED can mostly look on. Fed funds and discount rate cuts have little effect on mortgage bonds held by European banks. This time it seems and may be different. onesigma
Yeah - suddenly lenders are stuck with the realization that they will hvae a very hard time selling the risk off anymore.
Fine for banks with depositors, as they can back the credit -- but non-bank lenders (err non-capitalized or undercapitalized lenders) are toast.
The bigger problem is that all credit risk is in question, not just the mortgage credit -- nobody trusts what anyone has, nobody trusts counterparty claims, so seize we do, and seize we will until it gets flushed out.
NOT being actively flushed out practically /at all/ means to me that these firms are losing big bucks by not doing business -- the only way they would sacrifice that ongoing business is if there was something bad at the root of this whole thing. If it was gonna mean a pittance of a loss to these firms then surely they woulda come clean by now.
I still just get this feeling that the global 'idea' of money (since money is only an idea or confidence anyway) has one of its major underpinnings that is sufferring a need to revalue -- that revaluation is gonna hurt alot apparently, or it woulda already been done so these firms could get back to their business. The longer this goes on the less confidence anyone will have in teh monetary system, and the more people and business will pull back from doing business. It has recession or outright depression (if the system collapses) written all over it.
Teh fed flushing the system with more cash means that theres more liquidity - but NOT the alleviation of any credit or counterparty risk whatsoever -- its funny as heck that the fed infuses money and it all goes into treasuries and drives rates down. I find that ironic.
Weve been talking about the fed being in a box here for months. I agree that I think its come to pass. I just dont want to lose the dollar. Thatll make /everyone/ poor for the sake of the top-tier greed-monkeys that dont wanna fess up.
Of course the way all these big-wigs have been running around meeting each other, maybe fessing up would totally destroy confidence too -- maybe the lesser of 2 evils /is/ a slow pulling in of business horns,and recession - the alternative being to disclose everything all at once and have a run on every bank in the world.
Heres my investment play: Potable water, Ramen Noodles, Canned goods, Cement, and Smith&Wesson !