Monday, September 10, 2007

Effect of projected Fed Cut - will it do the Job

Will rate cuts serve as a panacea to the price action? We've discussed how the past, while not an absolute prologue to the future, often offers valuable reminders, such as how the market reacted after the first rate cute in January 2001 (Chart below) I believe that's an important context to keep in mind after the initial, requisite rally.

The other important elements, and again, these are dynamics that we've discussed, is the elasticity of debt and the velocity of money. While the former storm is coming to bear, the latter matter is seemingly scarce. The Fed can pump money into the system but if they can't churn it around—which is why they're engaging Fannie Mae and Freddie Mac—it'll be all for naught. -


Anonymous said...

I always enjoy all your posts over at the Fly zone.

You are a funny and interesting fella.

la grande poussée said...