ajtj99's Market Pulse

[Not_Bill_Oneil]

It would help in many ways...

if the Fed gets rates lower.

Study the WFC quarter, look at the net interest margin numbers. That's where it will help further strengthen Wells and all the banks.

Look at total consumer debt, much of which (ex mortgages) is based on the prime rate (which is based on the fed funds rate). Yes, a lot of debt including sub-prime, interest only, and ARM's are based on Libor which is causing problems (because it is high). Look at a chart of U.S. Prime rate versus Libor and you will see the recent break in the historic spread.

But, do a quick calc of 50 bp cut on the interest on that debt based on prime and you are still talking real money and real savings for consumer's debt payments. In this coming economy during the next year, a cut now will help later and have other positive ripple effects (the average consumer credit rate is dropping from last year but needs to come down more). This morning's poor economic numbers support this need - retail sales and PPI. http://www.federalreserve.gov/releases/g19/Current/

The Fed used to watch things like the household debt service ratio and should want to keep it as low as possible so consumers have more money to spend on goods and services especially during a recession. If it stays high it also means more households are likely going into default. But, who knows what Bernanke is focusing on. http://www.federalreserve.gov/releases/housedebt/

GM (and F) problems are a huge issue for this country right now that many people are not realizing. A cut would help on the consumer end as well as the smaller suppliers.

IMHO, inflation is not an issue regardless of what the Fed is pumping in now. It's coming deflation.

All these actions will have effects. They (the Fed) can correct later based on how the plethora of stimulus operations by the U.S. govt and other countries take effect in the coming quarters.

Even NASCAR needs help now per this article! "NASCAR Hits Wall as Financial Crisis Dents Sponsorships Demand".
http://www.bloomberg.com/apps/news?pid=20601109&sid=aAivN03d0_mk&refer=home

Even though the effects of another 50bp move would take time, a cut would help in many ways. We don't want anything close to anything resembling Iceland next year.