19 replies to this topic

[ogm]

This one's a no brainer....

And yet the poll opinions differ significantly. Looks like quite a few people may be surprized

Edited by ogm, 30 August 2007 - 09:03 PM.

[ed rader]

This one's a no brainer....

And yet the poll opinions differ significantly. Looks like quite a few people may be surprized

wow OGM you've done a 180 from your previous bearish outlook.

say the FED does cut rates...how will it be any different from the last easing cycle when the market continued to tank for a coupla years?

ed rader

[pdx5]

wow OGM you've done a 180 from your previous bearish outlook.

say the FED does cut rates...how will it be any different from the last easing cycle when the market continued to tank for a coupla years?

ed rader

That is a great question ER! Why did'nt I think of that???

[ed rader]

wow OGM you've done a 180 from your previous bearish outlook.

say the FED does cut rates...how will it be any different from the last easing cycle when the market continued to tank for a coupla years?

ed rader

That is a great question ER! Why did'nt I think of that???

a few things i remember from the last time:

1) at first, no would would use the B word (bubble) lest he be ridiculed. until very recently you were laughed at if you used the R word (recession).

2) no way the nasdaq would drop below 3500.

3) the Fed could safely drop the overnight to 3.5%...then it was 2.5%....then 1.5%....and then 1%

i think some of us are giving the FED far too much credit. i think at some point there isn't a darn thing the FED can do but wait for the bottom like the rest of us .

ed rader

[ogm]

wow OGM you've done a 180 from your previous bearish outlook.

say the FED does cut rates...how will it be any different from the last easing cycle when the market continued to tank for a coupla years?

ed rader

There are quite a few differences between now and 2000-2001. I was correctly short tech and dotcoms during that whole bear market. And quite a bit longer into the bull market unfortunately, which has cost me a good chunk of profits Fortunately I was long Gold from the 270 area. I dumped it since and not planning on buying it again.

Just to mention a few differences ...

- Valuations. I look at a lot of stuff and it just looks cheap with good cash flow. No 1000+ P/E's or any BS like that.

- Sentiment. ( that was an all out public stock chasing frenzy... now we have doom and gloom so thick you can cut it with a knife )

- Employment not falling apart ( Remember what employment numbers looked like during that bear market)

- Corporate balance sheets are clean (with exceptions of a few financials) Back then we had tonns of goodwill, corporate scandals, Spitzer swinging his bat left and right, And so on. Not so now.

- Insiders are buying as opposed to unloading in droves. ( back then insiders couldn't get out fast enough, now we have Insider buying highest in years)

-Corporations buying back stock in record numbers into this dip. almost 100bil in buybacks announced in August.

- we have 2 Giant economies in the countries that account for 50% of the world population growing at 10% rate year. (China and India) Not to mention all smaller countries. That is huge support.

There are more differences. But these are the main ones.

Overall, this is just a different environment.


P.S. Interesting poll results.. 50-50 split. Someone will be surprized

Edited by ogm, 31 August 2007 - 04:51 AM.

[phil_hubb]

The only easing by the Fed in September will be maybe another 50bp in the discount rate. This would take it down to 525bp, equal to the fed funds rate. They came right out and said they were going to handle this through the discount window. Wasn't anyone listening? They really need to kill the commodity bull before they lower the funds rate. Otherwise, commodities will roar back up and stagflation will take hold. The Fed might then have to borrow a play from Volker's playbook, which would be awful at this point. Bernanke's reputation would be destroyed and perhaps the Fed as well. jmo

[ogm]

The only easing by the Fed in September will be maybe another 50bp in the discount rate.
This would take it down to 525bp, equal to the fed funds rate.

They came right out and said they were going to handle this through the discount window.
Wasn't anyone listening?

They really need to kill the commodity bull before they lower the funds rate. Otherwise, commodities will roar back up and stagflation will take hold. The Fed might then have to borrow a play from Volker's playbook, which would be awful at this point. Bernanke's reputation would be destroyed and perhaps the Fed as well.
jmo

There is nothing they can do about commodities. Its supply and demand story. Not monetary inflation. They know it very well.

Supply and demand will regulate themselves. Look at Uranium for example.

Edited by ogm, 31 August 2007 - 05:11 AM.

[OEXCHAOS]

It bails out the average Joe who needs to refinance, or the average Jane who has $50,000 is educational loans, or John Doe who wants to buy a house at a cheap price but can't find a bank to loan him the cash with 10% down and a price 20% below appraisal.

The sharpies have already lost money.

This is to just keep the economy from falling apart and the most innocents from being hurt the most.

Mark

I guess I don't have a brain. I don't know what the Fed will do. I hope not cut rates. The people engaging in this behavier that has caused this mess deserves to lose a lot of money. For the Fed to bail these sharpies out would be an outrage.

toni

The only easing by the Fed in September will be maybe another 50bp in the discount rate.
This would take it down to 525bp, equal to the fed funds rate.

They came right out and said they were going to handle this through the discount window.
Wasn't anyone listening?

They really need to kill the commodity bull before they lower the funds rate. Otherwise, commodities will roar back up and stagflation will take hold. The Fed might then have to borrow a play from Volker's playbook, which would be awful at this point. Bernanke's reputation would be destroyed and perhaps the Fed as well.
jmo

Just what are folks going to need commodities FOR if this economy goes into the pooper? Not building homes. Cars? Who's buying those in a deflationary recession?

The economy is going to slow. Asia (the hot spots anyway) is going to get hit hard within the next 6 months. Probably sooner than later, but we have to give them more room and also give room for the Fed to perfectly liquify (it could happen, maybe, if they are really really really lucky).

Mark

[humble1]

yes: a total of 3/4, one meeting at a time. it will not make any difference.

[ogm]

yes: a total of 3/4, one meeting at a time.

it will not make any difference.

The rate cuts by themselves, maybe won't but...

They can introduce other ways to bail homeowners out. Look at Bush coming out with something, Senators. They will do something to bail out homeowners and themselves. They will create government programms that will let people out of AMRs. Don't know what exactly, but they will. Don't forget elections coming up, and each party will be stepping over themselves to engeneer a bailout.

Yes, US economy will probably slow a bit. But there is 2+ bil consumers in the world itching to load up on merchandize. Global economy isn't going to cool off because of a few subprime loans.

Market is starting to anticipate the solutions.. All risks are now to the upside.

Edited by ogm, 31 August 2007 - 10:44 AM.