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#1 NAV

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Posted 29 November 2007 - 09:03 PM

They said "Fed is pushing on a string" back in 2003. Then we got this massive rally in stock market and a huge bubble in real estate. Now if Fed was pushing on a string, then how can one attribute the Fed policy for the stock market rally or the RE bubble ?. Maybe then it was not the Fed. Maybe it was the crowd or what we call as market forces, which caused it! Now if it was not the Fed who caused it, then why blame the Fed ? Now if it was the Fed, then apparently it was not pushing on the string. The Fed then is omnipotent in our system and should not be faded. But then today, the old argument has picked up steam, that the Fed rate cuts are useless and will only lead to lower market prices, like it did in 2001. So now the Fed is pushing on a string again. So essentially we are saying that market forces control the Fed policy and the Fed is just a facilitator. So Fed cuts will be ineffective this time around in halting the stock market decline. In other words the Fed did not create the RE bubble, the stock market rally, the commodity rally. Right ? Blaming the Fed and calling the Fed impotent is utterly oxymoronic. Either they control or they don't. So what is it ?

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#2 SemiBizz

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Posted 29 November 2007 - 09:14 PM

Gawd, isn't it more than obvious other than when they deliberately lowered and raised by a 1/4 pt per meeting they have never had control. We're not in that scenario. Other than that, Rick Santelli and his friends make the policy... Think of the Fed as "Cirque de Soleil" otherwise just a bunch of theatrical clowns...

Edited by SemiBizz, 29 November 2007 - 09:17 PM.

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#3 NAV

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Posted 29 November 2007 - 09:20 PM

Gawd, isn't it more than obvious other than when they deliberately lowered and raised by a 1/4 pt per meeting they have never had control. We're not in that scenario. Other than that, Rick Santelli and his friends make the policy...



Think of the Fed as "Cirque de Soleil" otherwise just a bunch of theatrical clowns...


Gotcha. Then Fed is not to be blamed for any of the bubbles that has so far been created. Is that correct ?

Edited by NAV, 29 November 2007 - 09:21 PM.

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#4 ogm

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Posted 29 November 2007 - 09:41 PM

NAV, Its the business cycle. Fed simply follows it and doesn't lead. They started cutting when the cycle was on decline last time in 2001, cut too low just when the new cycle was born which helped fuel it, and now cutting again as the cycle turns down. Fed can't change the business cycle. Will they cut now or not, doesn't matter. The cycle turned down. Corporate profits turned down. Market is turning down. Trees don't grow to the sky and economy is cyclical. All you need to know. The market is signaling the Fed that the economic cycle is turning down, and they need the rate cuts to cushion the blow. But the blow is here, its real. Thats why the Fed is acting frenticaly. What did Bernanke and Konh say... conditions have worsened... thats why we'll cut more. Does that sound like good news to you ? Repeat that again... CONDITIONS HAVE WORSENED.

Edited by ogm, 29 November 2007 - 09:50 PM.


#5 atlasshrugged

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Posted 29 November 2007 - 09:49 PM

I basically blame everything on Jimmy Carter...even today

#6 SemiBizz

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Posted 29 November 2007 - 09:53 PM

I dunno, I see expansion and contraction on a different level. In case some haven't noticed, there's a bit of a stealth war going on between China and the US. The US economy is being systematically cooled here either by design or by default. We're about to test out this whole notion of "decoupling". Let's see now, does anyone remember when we stiffed Russia on the Olympics? We might just be doing that again soon...to China. Federal Reserve Board is some of the best theatre in the World, don't knock it....

Edited by SemiBizz, 29 November 2007 - 09:53 PM.

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#7 NAV

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Posted 29 November 2007 - 09:53 PM

NAV,

Its the business cycle. Fed simply follows it and doesn't lead.

They started cutting when the cycle was on decline last time in 2001, cut too low just when the new cycle was born which helped fuel it, and now cuttingf again as the cycle turns down.

Fed can't change the business cycle. Will they cut now or not, doesn't matter. The cycle turned down. Corporate profits turned down. Market is turning down.

Trees don't grow to the sky and economy is cyclical. All you need to know.


Exactly my point dude. It's the CROWD and it's greed and fear which causes stock market rallies and declines. It's the CROWD's fear and greed, which causes economic booms and contractions. It's the CROWD's fear and greed, which moves the Fed policy. So Fed is just a facilitator. Don't blame the FED for anything. Blame the greedy folks for any bubbles. It's the greedy lenders lending and the greedy borrowers buying homes on 10% margin or zero-down or whatever that created the real estate bubble. So FED is irrelevant as far as the market action is concerned. Yet there is so much of focus on FED in all stock market discussions. That's the only conclusion i can arrive at.

I agree with you whether they cut here or not doesn't matter. The market is headed higher after this correction (if it's not over yet).

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#8 ogm

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Posted 29 November 2007 - 09:57 PM

I agree with you whether they cut here or not doesn't matter. The market is headed higher after this correction (if it's not over yet).



Well, I'm kind of have the opposite opinion :) The market is headed lower if they cut or not.

Conditions of the business cycle got worse, like Bernanke and Kohn said. Another 25-50 bp will just cushion the blow.... MAYBE. But they won't change the business cycle.

Corporate profits WILL turn down next year. They already are turning down. 5 retailers warned today. 5 retailers today alone. 25 bp won't bring the customers to the stores.

#9 vitaminm

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Posted 29 November 2007 - 10:04 PM

I basically blame everything on Jimmy Carter...even today




During Jimmy's time those who had savings were very happy with 12-15% money market return without dealing with volatility of stock market!!
vitaminm

#10 atlasshrugged

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Posted 29 November 2007 - 10:08 PM

I basically blame everything on Jimmy Carter...even today




During Jimmy's time those who had savings were very happy with 12-15% money market return without dealing with volatility of stock market!!



ya but inflation was 20%!!!!