so Bernanke's statement came in and FED is basically staying pat. The FED at some point will have to ease, otherwise any growth in the economy will be thwarted. When growth is primarily based on credit and easy money, its not real growth anyway. I was looking for FED easing because I expected that to be the catylist for a big upside move in the market...we will likely still get it once the market digests the release.
As to the FED, I've read some pretty disturbing theories as to how this situation has all been orchestrated. This sounds more like left-wing rhetoric, but if you think about it, you really have to ask yourself, ok, given Greenspan's credentials as an astutue academic in Economics, why would he knowlingly decrease rates to 1% (27 consecutive rate cuts), with full knowledge that credit expansion will ultimately lead to economic collapse?
I am probably very similar to the average amercian, not knowing really how serious the housing problem and sub prime mortage is. We are spoonfed cerain spins from the news. As to the real exposure we just don't have the visibility. For those who are up to the challenge, read the link below (dated last Feb), and let me know if our government is really not that sinister? GOD help us all if there is any truth to this.
Once you base your assessment of the actions of the boys at the FED on the simple truth that their one chartered responsibility, that of being in charge of maintaining the value of the dollar(choke)has been a collossal and purposeful failure and that the crash of '29 can be easily laid at their feet, the rest becomes easy.
They don't care about anything but extracting wealth from the people and funneling it into the hands of the elite. That very same wealth is being channeled through foundations which continue the effort to further infuse our country with socialism. The very same cookie cutter operation is going on in any country with a central bank that creates fiat money.
Moreover, the Founders, and Jefferson expended many words on the subject, (excluding the traitor Hamilton) didn't want there to be a central banking entity because they knew what would happen just like Andrew Jackson knew when he put an end to the central bank of his era.
"I was looking for FED easing ...". I am probably very similar to the average amercian, not knowing really how serious the housing problem and sub prime mortage is."
Exactly! You not only don't seem to appreciate the enormity of the housing debacle that is unfolding, but also seem to not understand the actual character of the problem. I've tried several times to explain that 20%-30% of the dollar amount of the mortgages taken out in 2005-2006 represented nothing more than speculative pressure. Back in 2004 I was reading that over 20% of ALL homes sold in Sacramento County that year were sold to speculators. This empty value cannot be recovered by lower Irates, unless you start offering mortgages at 2% or less! And that just ain't going to happen.
Add to the evaporated market speculation the fact that all previous bubbles over-shoot on the way down and you could easily be looking at declines of 40%-50% in some homes prices from the peak in the most heated of markets. Add in fewer lenders still in business, higher credit requirements, higher mortgage rates, deteriorating comps, resetting ARM's, higher unemployment (housing sector employees), and this is a story that we will be talking about for years.
You may be right that the Fed will try to soften the blow, but looking at all the negatives a percent or two lower Fed rate won't save our homes, but it will sink the dollar.
bogfit... the key as I see it, will be the large number of ARM's that come due around the first quarter of 2008. There's a huge amount of debt out there, and until it gets paid off, an easing of rates would only show weakness in our economy, not a shot in the arm that many think would be just what the doctor ordered. Encouraging more easy credit that's been so abused and the very cause of the problem is no way to make it go away. The bills need to be paid, one way or another, and people who have been lead to believe that the government can give them a free lunch will eventually find there's no more money left. The only reason we live in a free country, is because their freedom has been paid for by the soldiers that gave their lives defending their country from tyranny many years ago. They don't teach that in school anymore. The test always comes first, the lesson always comes later. History always reapeats, but nobody ever learns anything from it. Read Kondratieff and you'll learn the reason why we don't understand what's happening.
your preaching to the choir...I know only too well the ramifications of economic disaster which awaits us all.
I think the links I have posted correctly reflect my view. You took my statement a little too literally, such that most americans are not fully aware of what catastrophic events are already set in motion.
The markets will shrug off this bad news, it chooses what to ignore and to take into account. Going into a blow-off is like stretching the proverbial rubber band to its limits and then when it snaps, the other extreme will occur. We are seeing this now with housing values in certain areas. We'll experience this with stocks as well.
Some who are predicting this 2nd depression are advocating staying in cash (some pm's) but mostly cash, (t-bills). Cash would be ok if you bought Swiss francs (which is backed by Gold), but money fleeing into treasuries will be a lost cause, as you stated, when the dollar plunges, what is the point of having U.S. dollar denominated investments if dollar is near worthless paper.
Not the government but CBs. The power to create money gives bankers a power to control the governments and their people.
That's also why I feel the FED will raise rates before it ever lowers them, but if they do lower then initially it will be to sucker more people and get them in more debt before finally pulling the rug from underneath them.
This is why its so amazing that the markets are acting like a huge bunch of teenagers dancing away on a rickety fire escape. Sooner of later, its all going to give way and they will all plummet to their ends. The Fed keeps the music going at a beat that they figure will make everyone not dance so hard. They don't get the fact that the anchors are already pulling away from the wall. They're slowing down the inevitable instead of just stopping the music and pulling everyone to safety. People would be pissed but at least they would live to dance another day. Where is Paul Volker when you need him? Of maybe John Galt?
One of two things will occur. The markets are going to continue to march northward (irrespective of FED cut or neutral stance), the markets may get so carried away they gain such strong momentum and blow into new highs. Bernanke may then take this opportunity (such as Greenspan did) and pull the trigger on higher rates. With the economy in such frail state, additional tightening will kill us all. No matter how high the markets go, this is not representation of strength of economy, but false sense of europhia causing many consumers, banks to invest in stocks and try and capture bigger returns. Much of this money will be dumped into the market in same buying cycle causing the big surge in prices.
If housing / mortgages / economy continue to suffer, the FED may actually come in and do the responsibile thing and reverse monetary policy to easing. This would help salvage considerable number of home-owners to have opportunity to refinance and keep from foreclosures. The current damage to consumers and financial institutions is already done, any cut now or later would not reverse this damage, but would help stem the bleeding.
We are really close to the tipping point and depending on what the FED does in the near future will determine how much time we have left.
So here is my scenario, before this markets tops out, it will be in the form of a blow-off top. A bull market of any magnitude ends with an unbelievable amount of buying frenzy. If we get a big correction w/o this huge explosion to the upside, the market will recover and we take another run at new highs. If we get a blow-off top, the target is right around 18,500 (this is conservative by some other analysts), the downside target would be back down to around 1800 or lower (in a relatively short time frame).
In '87, the 500 point decline over 1 trillion dollars got washed out. Under this scenario (which is very much a possibility), we would be looking at around 40 trillion dollars wiped out. The panic would spread globally since you cannot contain fear, margin calls, plummeting dollar would hemmorage global economies who have bought our debt and largely depend on U.S. for trade.
SLW 13/31 up .32 cents on 2.4 million shares. Again light volume. The technicals are picking up a little steam, but the downtrend line is still in force on the hourly for the past 2 weeks. The high today bumped right into the overhead resistance that will need some grinding to work off. There are still too many willing sellers coming in at this point more than willing to lighten up on their shares. But it's due to the weight of the general market atmosphere right now. Fear is dominating the markets and these kind of shifts always take time to play out. Things remain oversold, but oversold markets can drag on beyond belief at times. So patience is needed, especially when the FED as expected, did nothing. When they finally do cut those rates, it will signal the beginning of the end for the dollar, and everything gold and silver will be king. They can print just so much money and try to prop up the dollar for so long, before they have no choice but to cut rates anyway, and the rest will be history.