rumors, rampant and credible, on the street this morning

this early morning , pre-opening, rally is being attributed to widespread rumors on the street about a septmeber 1/4 point rate cut. until a few days ago i doubted that bernanke would cave in, but now i am not so sure. yesterday i heard respected david jones call for cuts which would total one full point. i suspect he meant over the next four meetings. now (this morning), during an excellent bloomberg interview, ed hyman put more pressure on. ed hyman has been the top voted economist by institutional investors for twenty-seven years. pretty impressive ! i remember him from the old roukeyser (sp?) show when he first started. people and the fed listen when he talks. hyman and his firm are very bullish on stocks, but he admits they didn't see this decline coming. how much he may be talking his book to help their position - or to get out - is unknown. these are rumors still, but the street people believe them and so do i. so, i guess the question now is: how much is being priced in ? will the critical bernanke speach later this week confirm or discourage such talk ?

Edited by humble1, 29 August 2007 - 07:06 AM.

Is the rate cut gonna fix all the problems? Before you answer this question show me with facts.....Not what you read from others......During Greenie years.....Rates went down what did the market do?.....Does it matter it is a quater or half point?.

Is the rate cut gonna fix all the problems? Before you answer this question show me with facts.....Not what you read from others......During Greenie years.....Rates went down what did the market do?.....Does it matter it is a quater or half point?.

rate cut will not solve anything. The market will follow reates, cut rates market drops. Why is that she asked? The FED will only cut rates if the real economy is heading into recession and a recession is not good for stocks so the market goes down. Once they start raising rates it is because the economy is overheating and that is good for stocks so they go up.

Rate cuts are already priced in at least in the futures. Time to prepare !!

traderpaul: no, i don't think rate cuts will do much of anything to stop the cascade in equities or real estate or consumer spending. the debt bubble behind these things is much too large. i didn't mean to imply otherwise; i was just pointing out what was going around pre-open - an important change in expectations because of the quality of the people screeching for a cut. massive debt reduction and liquidations are the only cures. the medicine is coming: open wide ! if this opening hour is the high for the day we could have something ugly again, imho.

Edited by humble1, 29 August 2007 - 08:50 AM.

Rate cuts will allow reasonable refi's (with appropriate arm twisting) for many. That will help avoid debaclegeddon. Once stabilized, the economy will still suck, but the excess liquidity will find it's way back to financial assets. Mark

eventually; i do agree with that: but after much, much pain and political blaming and opportunism. "the way" teaches us that there is a time for everything. this simplistic mantra can save and make a LOT of money, lol. there are seasons and cycles. the time frame i am looking at is three + years. the bank people are scared to death because write-offs and write-downs and such mean lay-offs for THEM and they are tightening credit on their own and in a drastic way. yes, there are people who are constantly offered more credit: you and me and most people here. but the ones they are extending this credit to are those who don't really need or want it. now, when the low comes, after a HUGE cleanout, it will be the best buy in centuries, imho. the mechanism for that low will not be voluntary bank help and re-fis, imho, but a MASSIVE government bailout, using partly the GSE's to fi and refi real estate and maybe even credit cards. richard duncan, well respected with his "the dollar crisis" book, talks about the HUGE borrowing power of the fed gubmint. this will come as a shock to many, but the numbers work. that avenue will only come politically viable in the next (probably democratic) administration after they have "taught" the country a lesson and gotten all the mileage they can and bashed the current people enough. it also works into bernanke's career plan and the accepted behavior of a new fed head: get your credibility early even if it means deep recession and market collapse (greenspan, volker, et alia). the set-up is perfect. (that was not a political statement or wish: i have seen too much to be political; i don't like any of them. lol!)

Edited by humble1, 29 August 2007 - 09:56 AM.

Rate cuts will allow reasonable refi's (with appropriate arm twisting) for many. That will help avoid debaclegeddon.

Once stabilized, the economy will still suck, but the excess liquidity will find it's way back to financial assets.

Mark

Mark,

Your response is exactly my thought process. I wonder if we'll get this one right or at least come close.

This is really a global problem, and I am sure the solution will be engineered not just by BB, but the other effected central banks - yesterday it was a firm in Singaore admitting big problems with US MBS - I guess the American consuber did not realize just how many people in how many parts of the world he was saving by maxing out those credit cards and doing those refis.... but really, it doesnt matter as long as everybody reflates together - the ony people hurt are the LT creditors - read pension recipients - the money wil be worth nothing by then. Already, they are moving to increase the retirement age here in Germany, and discussion 72 instead of 62/5. klh

Rate cuts will allow reasonable refi's (with appropriate arm twisting) for many. That will help avoid debaclegeddon.

Once stabilized, the economy will still suck, but the excess liquidity will find it's way back to financial assets.

Mark

You mistakenly presume that only rising rates are the cause of the real-estate mortgage crisis.



That is only one component.



The other and more important one is that good paying jobs are vanishing in the US for more and more. The jobs that are available pay way less -- pressured by globalization.



Add to that the fact that teaser rates that were used to suck people into buying with nothing down the last two years, were so low, that even with lower Fed Funds rates those mortgages will reset higher.



People were given mortgages without vetting and the assumption was made that if one had paid their credit cards on time in the past that would make them a good credit risk. WRONG. If one does not have the money one cannot make the payments.



Real - estate is done for and done for a very very long time.