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Fed Cuts Rates Boldly; Wall Street Wary
Wednesday January 30, 5:33 pm ET
By Jeannine Aversa, AP Economics Writer
Fed Cuts Interest Rates Bold Half-Point to Boost Ailing Economy; Wall Street Still Wary
WASHINGTON (AP) -- The Federal Reserve delivered powerful new relief to people and businesses squeezed by the ailing economy Wednesday, cutting interest rates ever deeper in an effort to avert or at least soften the blow of a recession.
The bold, half-point reduction approved by Fed Chairman Ben Bernanke and all but one of his colleagues came as President Bush and Congress raced to enact a separate rescue package -- including tax rebates for individuals and tax breaks for companies -- to help energize an economy in danger of stalling.
Heartened by the Fed's newfound aggressiveness, Wall Street rallied but then pulled back, still wary. The Dow Jones industrials jumped more than 200 points after the announcement but ended up down 37.47.
Commercial banks followed the Fed action by lowering their prime lending rate by the same half percentage point -- to 6 percent, the lowest in nearly three years. That prime rate applies to certain credit cards, home equity lines of credit and other loans.
Hours before the Fed's action, the government reported that the nation's economic growth had stumbled to a virtual halt. The economy grew at just a 0.6 percent pace from October through December, and for all of 2007 it logged its weakest performance in five years.
The collapse of the housing market, sour mortgage investments and much harder-to-get credit are weighing on people and businesses alike. Foreclosures have hit record highs, and banks have racked up multibillion-dollar losses. The fallout has shaken Wall Street, catapulted the economy to Topic A among worried families and galvanized political figures, including those vying to be the next president.
"The economy is hanging by a thread," said Stuart Hoffman, chief economist at PNC Financial Services Group.
While Wednesday's interest rate cut was welcome, the Fed's blunt new assessment of the economy was sobering for everyone from business owners to people worried about debts to anyone without a job -- or fearful of losing one.
"Credit has tightened further for some businesses and households," the Fed said. "Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets."
In its 9-1 decision, the Federal Reserve dropped its key rate to 3 percent at the end of a two-day meeting. Richard Fisher, president of the Federal Reserve Bank of Dallas was the sole dissenter. He preferred no change.
It was the second Fed rate cut in just over a week, and the policymakers signaled they were prepared to keep going lower if needed.
There had been a rare, three-quarter point reduction last Tuesday. Bernanke had convened an emergency session after stocks worldwide plummeted, intensifying recession fears. The cuts have helped to restore some confidence among skittish investors, but financial markets remain fragile.
In the gravest challenge to his leadership since becoming Fed chief nearly two years ago, Bernanke must help stem the fallout from both the housing bust and a credit crunch. Wall Street critics and others have taken Bernanke to task for waiting until September of last year to embark on a rate-cutting campaign, accusing the Fed chief of being behind the curve in dealing with the economy's problems.
Bernanke also must be mindful of not letting inflation get out of hand -- a delicate and tricky maneuver. Oil prices have receded from $100 a barrel but still remain high. The Fed said it expects inflation to ease in coming quarters but added that it is imperative to monitor developments carefully.
Still, more rate cuts are expected at the Fed's next scheduled meeting in March and beyond. Some economists predict the key rate could drop as low as 2 percent this year, which would be the lowest in four years.
"The Fed needs to throw out a life raft to the economy pending the fiscal stimulus measures," said Brian Bethune, economist at Global Insight.
Even further action might not avert a recession but rather limit the damage. The interest rate cuts will take months to affect the economy, as will any stimulus package approved by the government. Neither effort will quickly cure the root cause of the economy's troubles: a severely depressed housing market and bad mortgage investments.
The economy may actually be declining now. Under one rough rule, it would have to contract for six months in a row for the country to be considered in a recession. The likelihood of a recession has risen sharply over the past year, and analysts increasingly believe the U.S. will be in one during the first half of 2008. The worry is that people and businesses -- which turned more cautious at the end of the year -- will hunker down, sending the economy into a tailspin.
Bernanke is not expected to cut rates as deeply as did his predecessor, Alan Greenspan, when Greenspan took on the 2001 recession, the economic fallout of the Sept. 11 attacks, a series of accounting scandals that rocked Wall Street and the uncertainty that gripped the country leading up to the U.S.-led invasion of Iraq in March 2003.
By the summer of 2003, Greenspan had slashed rates to 1 percent, a 45-year low. He held rates there for a year before the Fed began pushing them back up.
Critics contend those low rates helped feed a housing frenzy, in which home values zoomed and investors gobbled up risky loans, known as subprime mortgages, to borrowers with poor credit histories. When the housing market collapsed, the greatest damage was in subprime loans. Banks and other financial institutions have taken big hits on these soured mortgage investments.
http://biz.yahoo.com/ap/080130/fed_interest_rates.html
S&P Mulls $500B in Mortgage Downgrades
Wednesday January 30, 5:48 pm ET
S&P Considers Downgrading More Than $500 Billion in Downgrades of Mortgage Debt
NEW YORK (AP) -- Standard & Poor's Ratings Services is considering slashing its rating on more than $500 billion of investments tied to bad mortgage loans, the ratings agency said Wednesday.
The massive downgrade would threaten a broad swath of the world's finance industry, S&P said, ranging from Wall Street's trading desks to regional banks to local credit unions.
Ratings from agencies like S&P play a vital role in how much investments are worth. Many funds can only buy investments carrying strong ratings, and some people blame the agencies for granting top-notch credit scores to risky investments during the housing boom.
S&P has downgraded or is considering downgrading $270.1 billion in "mortgage-backed securities," or bonds deriving their payments from home loans. Assuming more people, strapped by the struggling housing market, will not be able to repay their debts, S&P is reviewing 6,389 classes of bonds backed by home loans issued in 2006 and the first half of 2007.
The 238-page list of bonds considered for downgrade includes transactions involving virtually all the major investment banks, including Citigroup Inc., Lehman Brothers Holdings Inc., Bear Stearns Cos., and Merrill Lynch & Co.
The bonds considered for downgrade represent nearly half the bonds of that kind sold between January 2006 and June 2007, S&P said.
The ratings agency has also downgraded or is considering a downgrade of $263.9 billion of collateralized-debt obligations, which are complicated securities splicing payments from a number of different sources, including mortgage-backed bonds.
S&P acknowledged the potential for these downgrades to ripple throughout the world of banking and finance. Banks have already posted $90 billion in losses on these types of mortgage investments, and S&P expects losses to reach $265 billion.
http://biz.yahoo.com/ap/080130/mortgage_downgrades.html
Fed Cuts Interest Rates by 1/2 Point
WASHINGTON (AP) -- The Federal Reserve on Wednesday cut a key interest rate for the second time in just over a week, reducing the federal funds rate by a half point. It signaled that further rate cuts were possible.
The Fed action pushed the funds rate to 3 percent. It followed a three-fourths of a percentage point cut on Jan. 22, a day after financial markets around the world had plummeted on fears that the U.S. economy was heading into a recession. That decrease had been the biggest one-day move in more than two decades.
The half-point cut Wednesday followed news that the economy had slowed significantly in the final three months of last year with the gross domestic product expanding at a barely discernible pace of 0.6 percent, less than half what had been expected. The report came amid increased concern from several quarters about a possible recession.
In a brief statement explaining their decision, Federal Reserve Chairman Ben Bernanke and his colleagues said that "financial markets remain under considerable stress."
The Fed move was approved on a 9 to 1 vote. Richard Fisher, president of the Fed's Dallas regional bank, dissented, preferring no change in rates.
The rate cut marked the fifth time that the Fed has cut the funds rate since it started with a half-point cut on Sept. 18 in response to the severe credit crisis which hit global markets in August.
The latest Fed action was expected to be quickly followed by cuts in banks' prime lending rate, the benchmark rate for millions of consumer and business loans. The Fed's hope is that by making credit cheaper, it will encourage more borrowing, giving the economy a needed boost.
The Fed's half-point move met expectations of financial markets and was a bolder move than the smaller quarter-point cut that many economists had been expecting.
In its statement, the Fed said that "downside risks to growth remain" and pledged to "act in a timely manner as needed to address those risks." That was seen as a pledge to cut rates further if the economy continues to weaken.
On inflation, the Fed officials said that they expected inflationary pressures to moderate in coming quarters but they also pledged to monitor price developments closely.
The GDP report showed that a key gauge of core inflation, which excludes energy and food, jumped at an annual rate of 2.7 percent in the final three months of last year, the fastest increase in a year and up sharply from a 2 percent increase in the July-September quarter.
The economy has been dealt a series of blows from a two-year slump in housing to a severe credit squeeze as banks faced with billions of dollars in losses from mortgage defaults have cut back on their lending and tightened standards.
The GDP report showed that the housing collapse had depressed economic growth last year by the largest amount in a quarter-century. Policymakers are worried that the slump could intensify this year as millions of subprime mortgages rest at higher rates.
To combat the threat of a recession in an election year, the Bush administration has been negotiating with congressional leaders for an economic stimulus package of around $150 billion, focused on tax rebates for households and business tax breaks to spur investment. The House passed its version of the proposal on Tuesday but Senate action could be delayed by efforts to expand the relief to senior citizens and the unemployed.
The Fed move Wednesday occurred at the first regularly scheduled meeting of 2008 for the Federal Open Market Committee, the group of Fed governors in Washington and regional Fed bank presidents who set interest rates.
The Fed's three-quarter-point cut on Jan. 22 was taken after an emergency video conference held by Bernanke and other members of the FOMC.
That rate cut, the biggest reduction in the funds rate in more than two decades, was seen as an effort to boldly demonstrate that the central bank was prepared to do whatever necessary to keep the country from slipping into a recession -- or at least make the downturn milder than it would have been otherwise.
Financial markets had complained that once the credit crisis hit in August, the Bernanke-led Fed had been too tentative in its responses until last week's move.
Many private economists believe the central bank will keep cutting rates through the spring, especially if the unemployment rate keeps rising. The jobless rate jumped from 4.7 percent to 5 percent in December, the biggest one-month increase in five years.
http://biz.yahoo.com/ap/080130/fed_interest_rates.html
I called OANADA and he can't figure out the problem, he's gonna turn it over to the tech team to find a solution.
Currently I'm not able to allocate the funds to your account so that you can accept them.
May take another day to wake up the IT India Team.
Yes, that the correct email address
This is the only I received
This is a Cat Like auto responder ....Do not respond to this E-mail......I will see what you have to say and get back to you as soon as I can...,
Truely Cat Like ,
I was waiting for your email message with the link before trying again...
Time for Bernanke to take a stand << and grow some balls >>
Monday January 28, 3:54 pm ET
By Paul R. La Monica, CNNMoney.com editor at large
"This was a sad day for Bernanke," a bond fund manager told me the day after the Federal Reserve cut interest rates by an aggressive half-point back in September.
The manager's argument at that time was that the Fed chairman was showing that it could be bullied by Wall Street.
Since then, the Fed has gotten even easier to push around. The central bank's dramatic three-quarter of a percentage point rate cut last Tuesday was the equivalent of shoving a pacifier in a crying baby's mouth.
And that only stopped the whining for a little bit. The market is set for another ugly day Monday and Wall Street is moaning for another rate cut - according to futures, investors are pricing in a 82 percent chance of another half-point cut this Wednesday.
Enough is enough. It's time for Ben Bernanke and the rest of the Fed to pull a page from Tony Danza's book and show investors who's the boss.
Yes, the economy is teetering on the edge of a recession, if it isn't already in one. But the Fed has already cut the fed funds rate by 175 basis points since September.
If the Fed lowers rates much further, it risks going too far.
Historically low rates set the stage for this mortgage mess in the first place.
Plus, the central bank has already loaned $70 billion to needy banks through a series of three auctions since December and it is conducting a fourth auction for $30 billion today. The Fed has said that the credit markets are already benefiting from these auctions.
And the Fed still has to be worried about inflation. That certainly shouldn't be the Fed's biggest concern right now but it is silly to suggest that inflation is dead considering the high prices of oil, gold, wheat and other commodities. Inflation is dead only if you have the luxury of not needing to drive anywhere, heat your house or eat.
I'm not optimistic that the Fed will stand up to Wall Street. Market conditions are too fragile right now.
Still, I hope that some members of the Fed are paying close attention to what one of their colleagues had to say recently about the risk of cutting rates too drastically.
Dallas Federal Reserve president Richard Fisher, speaking in Philadelphia on the same day that Bernanke was giving his blessing to an economic stimulus package during testimony on Capitol Hill, made some interesting remarks that the market pretty much ignored. Read his full speech.
Fisher, as an alternate member of the Fed's policy-making Open Market Committee last year, did not vote on the 2007 rate cuts. But he will be a committee member this year. So his opinions are worth paying attention to.
He warned that the Fed still has only two mandates, fostering price stability and supporting economic growth. Keeping the markets happy is not a new third mandate.
"Our job is not to bail out imprudent decisionmakers or errant bankers, nor is it to directly support the stock market or to somehow make whole those money managers, financial engineers and real estate speculators who got it wrong. And it most definitely is not to err on the side of Wall Street at the expense of Main Street," he said.
He reminded everyone that rate cuts don't work instantly, which is why the Fed needs to proceed cautiously.
"The act of changing or not changing the fed funds target rate, in and of itself, has no immediate effect on the economy. Like a good single malt whiskey, the ameliorating or stimulating influence kicks in only with a lag."
And most importantly, he stressed how crucial it is for the Fed to not go overboard in response to current doom and gloom headlines.
"We must be mindful that short-term fixes often lead to long-term problems," Fisher said.
One can only hope that other Fed members are listening more closely to Fisher's words of wisdom than the market's panic-stricken calls for another huge rate cut.
What do you think? Is the market pushing the Fed around?
http://biz.yahoo.com/cnnm/080128/012808_morningbuzz.html?.v=13
You have mail
I push the allocate button but nothing happen, I don't think the account is linked to the glance management account side.
I did all that, I don't see funds being allocated to Glance Management. How does it know to allocate the funds to Glance Management?
I logged in using the link, is the link I'm using the correct one?
Thanks
You got money....
sign in the client login..then allocate money into the account.
https://fx2.oanda.com/ma/malogin.shtml
I'm wait'n for Oanda to send me my password so I can log-in.
Try closing out your account and restarting to see if the new MA accounts are linked. TIA
I added 20K, if you try to sell me life insurance, I'm pulling the plug!!!
I'm not sure it created a subaccount called (MA Unalloc USD 2818249) under my game account, I'm not sure what cAt is seeing under his game account.
All you have to do is click on the link and the next time you open your game account an extra tab is created with the link MA tab.
Sign me up
OT - Waving Goodbye to Hegemony
"Turn on the TV today, and you could be forgiven for thinking it’s 1999. Democrats and Republicans are bickering about where and how to intervene, whether to do it alone or with allies and what kind of world America should lead. Democrats believe they can hit a reset button, and Republicans believe muscular moralism is the way to go. It’s as if the first decade of the 21st century didn’t happen — and almost as if history itself doesn’t happen. But the distribution of power in the world has fundamentally altered over the two presidential terms of George W. Bush, both because of his policies and, more significant, despite them. Maybe the best way to understand how quickly history happens is to look just a bit ahead...."
Rest of the story - http://www.nytimes.com/2008/01/27/magazine/27world-t.html?pagewanted=1&_r=1&ref=todayspaper
It's the red pill tracking system, you should have taken the blue pill...
You may not get the rebate check today, but you sure will get the tax bill later...Bush is going for the fiscal spending record of $10 Trillion dollars.
To quote J. Wellington Wimpy, if you buy me a burger today I will gladly pay you back on Tuesday...the best way to capture the tax relief rebate, is to change your withholding so that LESS TAXES are taken out of your paycheck and treat the rebate as a future tax credit.
I'm hold'n AUD/JPY down 486 pips and USD/JPY down 316 pips...I guess your a carry-trade (bag) holder when your down more than 100 pips.
The problem is d'bear short'd d'market on a 3-day weekend...twenty percent down and twenty percent up somebody's making forty percent and I'm net zero.
UPDATE 1-NYSE short interest hits record high in January
Tue Jan 22, 2008 6:18pm EST
(Adds analyst comment, background, byline, recasts)
By Emily Chasan
NEW YORK, Jan 22 (Reuters) - Short interest jumped 8.7 percent on the New York Stock Exchange in mid-January, rising to an all-time high, the exchange said on Tuesday, as short sellers sought to take advantage of a global sell-off in stocks.
As of Jan. 15, short interest was at a record 13.85 billion shares, up from 12.74 billion shares as of Dec. 31.
The 8.7 percent increase from late December to mid-January was the largest increase in short selling in recorded history, according to Dylan Wetherill, president of short interest tracking Web site ShortSqueeze.com.
"Short sellers on the NYSE have been dumping huge volumes of shorted shares on to the market and gaining from every tick down in stock prices," Wetherill said. "The profits have been fast and huge for the short sellers."
Short interest as of Jan. 15 was equal to 3.7 percent of the total shares outstanding on the NYSE, the exchange said.
The previous short interest record of 12.95 billion shares was hit on July 13, 2007, just before the stock market tumbled in August.
Investors who sell securities "short" profit from betting stocks will fall. Short-sellers borrow shares and then sell them, waiting for the stock to fall so they can buy the shares back at the lower price, return them to the lender and pocket the difference.
U.S. stocks have dropped below August lows this month, and the benchmark Standard & Poor's 500 index .SPX is on track to record its worst January ever, as investors fear the U.S. will slip into recession and drag other economies around the world down with it.
Short interest has been rising fairly steadily on the New York Stock Exchange since late October as short sellers sought to take advantage of the housing meltdown and resulting credit crisis.
The American Stock Exchange also reported a rise in mid-January short interest on Tuesday to about 1.13 billion shares, just below its November record of 1.14 billion shares. (Reporting by Emily Chasan; Editing by Tim Dobbyn and Carol Bishopric)
Link - http://www.reuters.com/article/marketsNews/idUKN2255953720080122?rpc=44
I agree, I've moved the majority of my investment overseas, the main problem I'm having is trying to decoupled from the US recession fear...no place to hide short-term.
Only problem is that some of these dreams turn into nightmare when the FX-trades goes against you...
Down 750 pips on AUD/JPY and 350 pips on USD/JPY
Could have been worst, if the Fed had not lower the interest rate today...
I'm down over $24K in my retirement accounts over the last two months, and I was projecting another $12K in losses today.
Hopefully this is the bottom.
Its not easy being green
Link
Hmmm.....My favorite President
As long as I get my $1600 tax rebate, I promise to spend the money on Happy Ho's to keep this country from falling into recession...
Ben has to grow some balls and cut the Fed rate....he's currently all cannon and no balls.
Must be d'dingo that ate your message.
USD/JPY down 320 pips
AUD/JPY - down 490 pips
I only have 200 FX-days of carry-trade left till breakeven.
I agree.
You have to look like Charles Milles Manson to bring in the BIG BUCKS...
Israel to get "smarter" US-made bombs than Saudis
Sun Jan 13, 2008 9:03am EST
JERUSALEM, Jan 13 (Reuters) - The United States has agreed in principle to provide Israel with better "smart bombs" than those it plans to sell Saudi Arabia under a regional defence package, senior Israeli security sources said on Sunday.
Keen to bolster Middle East allies against an ascendant Iran, the Bush administration last year proposed supplying Gulf Arab states with some $20 billion in new weapons, including Joint Direct Attack Munition (JDAM) bomb kits for the Saudis.
The plan has angered Israel's backers in Washington, who say the JDAMs, which give satellite guidance for bombs, may one day be used against the Jewish state or at least blunt its power to deter potential foes. Israel has had JDAMs since 1990 and has used them extensively in a 2006 offensive in Lebanon.
Israeli Prime Minister Ehud Olmert's government dropped its objections to the proposed Saudi deal in July after securing U.S. military aid grants worth $30 billion over the next decade.
Two Israeli security sources said the United States further mollified the Olmert government with an "understanding in principle" that future JDAM sales to Israel would include advanced technologies not on offer to Saudi Arabia.
"We are checking which of the top-of-the-line JDAMs will become available to us. The agreement is that Israel's qualitative edge will be preserved," one source said.
The spokesman for the U.S. embassy in Tel Aviv could not immediately be reached for comment.
Shlomo Dror, spokesman for Israel's Defence Ministry, declined to give details on any specific defence deals, saying only: "The Americans are certainly taking steps to help us preserve our technological superiority, as is Israel."
JAMMING
Robert Hewson, editor of Jane's Air-launched Weapons, suggested Israel might be interested in American innovations aimed at making JDAMs immune to jamming attempts.
"The great unspoken fear is that you can come up against an enemy who knows what he is doing when it comes to countermeasures," Hewson said. He added that Israel is currently the only country in the Middle East believed to have JDAMs.
U.S. President George W. Bush was due to visit Saudi Arabia on Monday as part of a Middle East tour he hopes will shore up Washington's efforts to isolate Iran over its nuclear projects.
In Israel and the Palestinian territories last week, Bush worked to foster bilateral peacemaking but also discussed Iran, which denies seeking nuclear weapons but whose president has stirred war fears by urging that Israel be "wiped off the map".
Israel used JDAMs extensively in its 2006 offensive against Iranian-backed Hezbollah guerrillas in Lebanon, requiring urgent U.S. resupplies. Surprise setbacks in the 34-day war prompted Israel's top brass to order an overhaul of the armed forces.
Believed to have the Middle East's only atomic arsenal, Israel has vowed to deny Iran nuclear weapons and hinted at the possibility of a strike like its air force's 1981 bombing of Iraq's nuclear reactor.
According to the Internet site of JDAM manufacturer Boeing Co (BA.N: Quote, Profile, Research), recent enhancements to the kits include laser navigators and glide wings that allow jets to drop the munitions from a distance of more than 40 miles (64 km) from the target.
Saudi Arabia does not recognise Israel but signalled a softening of this stance by attending a U.S.-hosted conference on Palestinian statehood in November. (Editing by Sami Aboudi)
http://www.reuters.com/article/latestCrisis/idUSL13501614
Not me I'm cutting up all my Citibank credit cards, and calling customer service....talked to customer service in India, and I'm receiving a $20 dollar credit on my credit card and a FREE no INTEREST Check with no payment till August 2008....
How about this one, three weeks ago the News is reporting that the U.S economy 3Q is growing the fastest in four years, and two week later we our in the middle of a recession.
I've been reading the "The House of the Rothschild" - Money's Prophets 1798 - 1848 by Niall Ferguson - Some of the greatest FX players of all time, I should be finish tonight with the book.
Third quarter growth fastest in four years
Thu Dec 20, 2007 9:01am EST
WASHINGTON (Reuters) - The U.S. economy expanded at its fastest rate in four years during the third quarter, the government confirmed on Thursday, though it has slowed sharply since and is expected to keep doing so in 2008.
The Commerce department said gross domestic product, which measures total goods and services output within U.S. borders, expanded at a 4.9 percent annual rate in the third quarter - a final reading on performance that was unrevised from the estimate it made a month ago.
Third-quarter growth was the strongest since GDP expanded at a 7.5 percent rate in the third quarter of 2003.
Faster exports and increased inventory-building accounted for the pickup in third-quarter growth from the second quarter's 3.8 percent pace, but many economists say the ongoing drag from a weak housing sector and credit market turmoil will slow fourth-quarter expansion to 1 percent or less.
Spending on new-home building contracted at a 20.5 percent rate during the third quarter, the steepest fall in more than 16 years, since a 21.7 plunge at the start of 1991 when the economy was headed toward a recession.
The GDP report showed a price gauge closely watched by the Fed -- personal consumption spending excluding food and energy -- rising at a revised 2 percent annual rate in the third quarter instead of the 1.8 percent it estimated a month ago. Prices rose at a more modest 1.4 percent pace in the second quarter.
News Link -
http://www.reuters.com/article/topNews/idUSN2063555520071220
Guess who has the largest Gold reserve?
Gold Reserve Link - http://www.cnbc.com/id/22111908
It's gonna be J. Wellington Wimpy tax relief, which the government will gladly pay you a 2009 tax refund for each taxpaper who will spend their hard earn cash today...