Thursday, August 30, 2007 9:01:51 PM
re Rate Cut: It seems that it is good to cut interest rate at this point even though he says that there are different ways to help out the subprime crisis.
$USD closed at support and will react. As we can see, $USD could be trading below $79 support if we see interest rate cut.
The Fed is also worrying about inflation, but we are concerned about deflation and recession.
If stock market underperformed, i.e. trading under SPX 1555 - bear market, public sentiment is conditioned that we are surely going into recession and also as some mega bears are soliciting a serious recession like 1929 which is comparing apples and oranges in our global economy.
I think that market breaking above SPX 1555 will help public sentiment as it will negate the mega recession speculators. After all, public sentiment is conditioned by, often, what they hear.
We are all paying attention to what market does as many are worrying about their 401k performance.
Market falling below the current support will further hype of 1929-like-recession. The bear hype has already damaged public sentiment since 7/19 top as news media keeps on drumming the same subprime crisis drama. It is true that we are having crisis; however, for those who are responsible with the financing are good.
On the positive note for the recent housing bubble and burst, many home owners had the OPPORTUNITY TO OWN HOME, and they are keeping the home. For example, my young nieces were able to buy home a few years ago because interest rate was low.
For those who did take fancy financing are living the consequences as their payment has risen because of the recent rising interest rate; however, many are also able to finance homes with low interest rate.
Higher house price with lower interest rate is working out similar as lower house price with higher interest rate.
Foreigners are also interested is US Housing, i.e. buying US houses/condos, lands and houses, real estates, do not get devalued over longer period.
I think that it is a must that we see stable financial market to help consumer sentiment.
It is not just about housing market, also about the rest of economy. Further deteriorating market will affect our economy as many could lose jobs falling into deep recession.
Therefore, for those who took fancy financing should be helped, if the Fed can, but the economy shouldn't be threatened by those who took fancy financing and paying the price now. It is simple math to figure out that they will be paying more money as interest goes up; but I guess they didn't expect interest will go up?
This is not 1987 when stock market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.
SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.
Breaking out of SPX 1555 in our global economy is reasonable.
In conclusion: Whatever necessary to manage stable market and economy, he will take actions whether it is a rate cut or surgical tactic. One thing for sure at this time is that breaking out of SPX 1555 in our global economy will help our sentiment.
~~~
Federal Reserve Chairman Ben Bernanke is under intense pressure to signal a rate cut when he takes center stage Friday at a gathering of central bankers in Jackson Hole, Wyoming.
~~~
Strengthening Dollar
Advantages
* Consumer sees lower prices on foreign products/services.
* Lower prices on foreign products/services help keep inflation low.
* U.S. consumers benefit when they travel to foreign countries.
* U.S. investors can purchase foreign stocks/bonds at "lower" prices.
Disadvantages
* U.S. firms find it harder to compete in foreign markets.
* U.S. firms must compete with lower priced foreign goods.
* Foreign tourists find it more expensive to visit U.S.
* More difficult for foreign investors to provide capital to U.S. in times of heavy U.S. borrowing.
Weakening Dollar
Advantages
* U.S. firms find it easier to sell goods in foreign markets.
* U.S. firms find less competitive pressure to keep prices low.
* More foreign tourists can afford to visit the U.S.
* U.S. capital markets become more attractive to foreign investors.
Disadvantages
* Consumers face higher prices on foreign products/services.
* Higher prices on foreign products contribute to higher cost-of-living.
* U.S. consumers find traveling abroad more costly.
* Harder for U.S. firms and investors to expand into foreign markets.
~~~
In recent days, CEOs, investors and politicians have been clamoring for the Fed chief to move quickly to ease the current credit crunch and keep the economy from sliding into a recession. Although the Fed helped calm the markets on Aug. 17 with a surprise cut in the discount rate, the call now is for a cut in the more important fed funds rate, which has been stuck at 5.25% for more than a year.
"Clearly, the risk of the economy overall going into a recession is heightened right now," complained Ara Hovnanian, the chief executive of homebuilder Hovnanian Enterprises in an interview on CNBC Thursday. "The credit market disarray is real. Clearly a rate cut would be helpful to the overall economy right now."
It's against the backdrop that Bernanke will deliver one of the most closely watched speeches of his chairmanship on Friday.
World-Wide Attention
Investors around the world are waiting to hear how he will strike a balance between the Fed's two primary mandates -- maintaining the economic health of the nation while keeping inflation in check -- while reassuring the markets that the central bank is prepared to cut rates if needed.
"It’s going to be very interesting to see how he walks that tightrope," Art Cashin of UBS said on CNBC Thursday. "I don’t think he’s going to be specific. He's got to walk the fine line of not hinting of whether he will or won't cut, but he's got to give some broad background, some measuring sticks."
Bernanke gave one clue earlier this week when he sent a letter to New York Sen. Charles Schumer saying that the Fed will "act as needed" to help the economy. The letter, which was made public on Wednesday, helped fuel a rally in stocks that day.
But there have been mixed signals. In the minutes of the Fed's Aug. 7 meeting, policymakers indicated that they were ready to cut rates but hoped that the markets would correct themselves and not force the
Avoiding Greenspan Mold
Fed watchers say Bernanke is leery of rushing down the path of his predecessor, Alan Greenspan, who has been criticized for running to Wall Street's aid with interest-rate cuts.
Many have blamed the so-called "Greenspan put" for fueling a housing boom in the early part of this decade and encouraging reckless risk-taking. Still, the resulting upheaval in the subprime mortgage market has put pressure on Bernanke to at least show he is sensitive to the stresses gripping world financial markets.
"As the evidence accumulates over the next few weeks ... the Fed may come to the conclusion that the risks to the economic outlook have deteriorated so much that it has to lower the fed funds rate," said Sal Guatieri, an economist for BMO Capital Markets in Toronto.
Still, many don't expect Bernanke to use Friday's address to go beyond the published topic of the relationship between housing and monetary policy.
"We expect Bernanke to try avoiding any signals on current monetary policy," Lehman Brothers said in a commentary on Wednesday, barring renewed market disruptions which might force him to do so.
http://www.cnbc.com/id/20511439
$USD closed at support and will react. As we can see, $USD could be trading below $79 support if we see interest rate cut.
The Fed is also worrying about inflation, but we are concerned about deflation and recession.
If stock market underperformed, i.e. trading under SPX 1555 - bear market, public sentiment is conditioned that we are surely going into recession and also as some mega bears are soliciting a serious recession like 1929 which is comparing apples and oranges in our global economy.
I think that market breaking above SPX 1555 will help public sentiment as it will negate the mega recession speculators. After all, public sentiment is conditioned by, often, what they hear.
We are all paying attention to what market does as many are worrying about their 401k performance.
Market falling below the current support will further hype of 1929-like-recession. The bear hype has already damaged public sentiment since 7/19 top as news media keeps on drumming the same subprime crisis drama. It is true that we are having crisis; however, for those who are responsible with the financing are good.
On the positive note for the recent housing bubble and burst, many home owners had the OPPORTUNITY TO OWN HOME, and they are keeping the home. For example, my young nieces were able to buy home a few years ago because interest rate was low.
For those who did take fancy financing are living the consequences as their payment has risen because of the recent rising interest rate; however, many are also able to finance homes with low interest rate.
Higher house price with lower interest rate is working out similar as lower house price with higher interest rate.
Foreigners are also interested is US Housing, i.e. buying US houses/condos, lands and houses, real estates, do not get devalued over longer period.
I think that it is a must that we see stable financial market to help consumer sentiment.
It is not just about housing market, also about the rest of economy. Further deteriorating market will affect our economy as many could lose jobs falling into deep recession.
Therefore, for those who took fancy financing should be helped, if the Fed can, but the economy shouldn't be threatened by those who took fancy financing and paying the price now. It is simple math to figure out that they will be paying more money as interest goes up; but I guess they didn't expect interest will go up?
This is not 1987 when stock market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.
SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.
Breaking out of SPX 1555 in our global economy is reasonable.
In conclusion: Whatever necessary to manage stable market and economy, he will take actions whether it is a rate cut or surgical tactic. One thing for sure at this time is that breaking out of SPX 1555 in our global economy will help our sentiment.
~~~
Federal Reserve Chairman Ben Bernanke is under intense pressure to signal a rate cut when he takes center stage Friday at a gathering of central bankers in Jackson Hole, Wyoming.
~~~
Strengthening Dollar
Advantages
* Consumer sees lower prices on foreign products/services.
* Lower prices on foreign products/services help keep inflation low.
* U.S. consumers benefit when they travel to foreign countries.
* U.S. investors can purchase foreign stocks/bonds at "lower" prices.
Disadvantages
* U.S. firms find it harder to compete in foreign markets.
* U.S. firms must compete with lower priced foreign goods.
* Foreign tourists find it more expensive to visit U.S.
* More difficult for foreign investors to provide capital to U.S. in times of heavy U.S. borrowing.
Weakening Dollar
Advantages
* U.S. firms find it easier to sell goods in foreign markets.
* U.S. firms find less competitive pressure to keep prices low.
* More foreign tourists can afford to visit the U.S.
* U.S. capital markets become more attractive to foreign investors.
Disadvantages
* Consumers face higher prices on foreign products/services.
* Higher prices on foreign products contribute to higher cost-of-living.
* U.S. consumers find traveling abroad more costly.
* Harder for U.S. firms and investors to expand into foreign markets.
~~~
In recent days, CEOs, investors and politicians have been clamoring for the Fed chief to move quickly to ease the current credit crunch and keep the economy from sliding into a recession. Although the Fed helped calm the markets on Aug. 17 with a surprise cut in the discount rate, the call now is for a cut in the more important fed funds rate, which has been stuck at 5.25% for more than a year.
"Clearly, the risk of the economy overall going into a recession is heightened right now," complained Ara Hovnanian, the chief executive of homebuilder Hovnanian Enterprises in an interview on CNBC Thursday. "The credit market disarray is real. Clearly a rate cut would be helpful to the overall economy right now."
It's against the backdrop that Bernanke will deliver one of the most closely watched speeches of his chairmanship on Friday.
World-Wide Attention
Investors around the world are waiting to hear how he will strike a balance between the Fed's two primary mandates -- maintaining the economic health of the nation while keeping inflation in check -- while reassuring the markets that the central bank is prepared to cut rates if needed.
"It’s going to be very interesting to see how he walks that tightrope," Art Cashin of UBS said on CNBC Thursday. "I don’t think he’s going to be specific. He's got to walk the fine line of not hinting of whether he will or won't cut, but he's got to give some broad background, some measuring sticks."
Bernanke gave one clue earlier this week when he sent a letter to New York Sen. Charles Schumer saying that the Fed will "act as needed" to help the economy. The letter, which was made public on Wednesday, helped fuel a rally in stocks that day.
But there have been mixed signals. In the minutes of the Fed's Aug. 7 meeting, policymakers indicated that they were ready to cut rates but hoped that the markets would correct themselves and not force the
Avoiding Greenspan Mold
Fed watchers say Bernanke is leery of rushing down the path of his predecessor, Alan Greenspan, who has been criticized for running to Wall Street's aid with interest-rate cuts.
Many have blamed the so-called "Greenspan put" for fueling a housing boom in the early part of this decade and encouraging reckless risk-taking. Still, the resulting upheaval in the subprime mortgage market has put pressure on Bernanke to at least show he is sensitive to the stresses gripping world financial markets.
"As the evidence accumulates over the next few weeks ... the Fed may come to the conclusion that the risks to the economic outlook have deteriorated so much that it has to lower the fed funds rate," said Sal Guatieri, an economist for BMO Capital Markets in Toronto.
Still, many don't expect Bernanke to use Friday's address to go beyond the published topic of the relationship between housing and monetary policy.
"We expect Bernanke to try avoiding any signals on current monetary policy," Lehman Brothers said in a commentary on Wednesday, barring renewed market disruptions which might force him to do so.
http://www.cnbc.com/id/20511439
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