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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: gregor_us who wrote (7333)2/9/2004 6:46:47 PM
From: CalculatedRisk  Read Replies (1) of 110194
 
Lambeth, Your prediction: "Perhaps it's Time To Get Bold Here...
...and predict a Rate Cut by the Fed in 2004, from 1.00% to .75%"

I made this same prediction in a "2004 Prediction contest" back in December! But I've changed my mind a little bit. I think the psychological damage of lowering 25 basis points will far out weight any stimulus.

So what will the Fed do? I think they will intervene in the 10 year treasury (I think the last time they did this was over 50 years ago ... and that was for different reasons). If they bid up the 10 year (and drop the rate to 3.0%) that will introduce more liquidity AND spark another round of home financing. This would prolong the bubble.

Also, I liked your post on Capitalism and Deflation!

Best, Bill

P.S. My entries in the 2004 Prediction contest (entered in December, 2003):

1) Entertainment: Kevin Costner has a hit movie!

2) Politics: Cheney will NOT run for V.P. due to "health concerns".

3) Economics: After the FED holds the FED funds rate (currently 1.0%) for several months, they will shock the World by lowering rates to 0.75%!

4) Sports: NFL ... DET makes the playoffs as a wildcard team.

5) Disaster: A major 7.5+ earthquake rocks California.
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