yes, the treasurey yields have been dropping signficantly (they are already anticipating a rate cut, either now or immediate future). Short-term rates dropping will provide more liquidity into the markets, long term rates are also dropping (30-yr T Bonds). As I place my trading emphasis primarily on chart analysis, I can tell you that 30 yr TBOND futures has potential to rise back to 131 from 107 (this would put rates back down to historic lows). As low as long term rates may seem now, they will be very attractive a couple months from now. Cutting rates are only part of the solution, banks are going to have to work with lenders to help them hang on to their homes, it will behoove no one to increase the number of foreclosures and carry bad debt. As to making a run on banking institutions, this is well within the realm of possibility, it was not that long ago the S&L's all went belly up, thanks to Gov't deregulation during Reagan tenure. Hundreds of thousands lost their entire life's savings as their investments were used to pad the pockets of the directors / owners. This situation is quite a bit different but fear could turn this on very quickly. BSC had already refused redemption (to return funds back to investors). How would that make you feel if your bank would not release your savings back to you? Secondly, as housing and real estate plummets, markets are in turmoil, where is a good place to invest? I will take what cash I have and buy bullion. This is as a good a hedge against falling dollar as any.
Not sure if FED really understands how serious the scope of housing market is or long term implications. The Home Builders are tanking, this impacts construction and materials, lumber (prices drop from 460 to 260) over past few years, consider all the by-products of home building, from the macro to the micro, all companies will be effected. Those mortgage companies, other banking institutions will fall into bankruptcy, such as AHM, near 7,000 have lost their jobs, how many of these families have enough savings to pay their mortgage while they find new jobs? How many will have to sell their homes on the market further exsaberating the already flooded market? How many which could have continued to pay their mortgage will now have to foreclose? This problem is not about M&A, its not about saving Bear Sterns, its about steering off an economic disaster. If you look at % of losers, a number of mortgage companies, real estate, home builders, banks are all diving, losing 80% or more of value from a few months ago. All CNBC has been talking about Bear Sterns, (other brokerage firms) and M&A at risk. This is much wider problem...I hope I am wrong but the charts really tell the tale, FED will cut, Markets will rally Hard (new highs) and then we will experience a very severe sell-off. Use this information as best fits your investment style. Do NOT get caught up in the europhia when DOW makes new highs. The only thing which would negate this scenario is if we blow past 14,500), otherwise be very cautious.