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Strategies & Market Trends : The coming US dollar crisis
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To: stan_hughes who wrote (1011)9/17/2007 5:46:52 AM
From: Real Man  Read Replies (1) of 71442
 
We'll see shortly. I still think a 25 bips cut will be
in the works. Market expectations (near-term futures) are
based on private communications of the money center banks and
the Fed. Bernanke has worked on "greater transparency", i.e.,
telegraphing rate moves well in advance. The reason was not
to upset the pyramid of derivatives that all have risk-free
rate as a pricing basis. Thus, while expectations are managed
and 1/2-year out futures can be dead wrong, as you have pointed
out, the Fed never did what the current month Fed funds
futures did not expect them to do. This argues strongly for a
cut.

One market observation, though - during the last year of
Greenspan the market always staged a record up day exactly
one day before the Fed announced a coupon pass. Once Bernanke
was at the Fed, the big rallies came on the day of the
announcement. Maybe the Ben Fed indeed lacks
some "connections" -g-
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