Yes, but the Fed may not be able to cut much.
When they do, they
will cause the dollar rout and the carry trade blow-up. The
10-year and 30-year rates could go UP then, NOT down.
That's exactly why they are not cutting yet.
I don't know what WS is celebrating. I would not bet on BK
thanks to their bear routs, but stocks are
very risky right now, so I'm just out. I like the safety of
treasuries and gold.
The next Fed move will be a cut, and soon. I would expect
dire consequences down that road, which include
1) Much lower US dollar (I'm in gold for that reason)
2) HIGHER LT rates (I'm in short-term, not LT T-bills for that
reason)
3) HIGHER mortgage rates, higher 10-year rates, and all
bond rates, except very short term. Defaults will spread to
all of mortgage market, and corporate bonds
4) Stocks down, Re down.
That's the Risk, thanks to huge trade and budget deficit,
and the Fed's policies to prolong and postpone the inevitable
by actually promoting the carry trade! The more they promote
it, the more dire the consequences of actual foreign outflows
will be for the dollar. 1-4 are pretty much guaranteed some
time down the road. That's the banquette of consequences. |
