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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (113111)	3/27/2008 2:27:01 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 306849

>>The last chance Bernanke had was simply to hold the Fed funds rate at about 5% and let the chips fall where they might.<< Free markets are a b*tch....

To: Tommaso who wrote (113111)	3/27/2008 2:35:04 PM
From: XoFruitCake	Read Replies (1) \| Respond to of 306849

"What I really meant is that there appear to be no good choices left for the Fed. The last chance Bernanke had was simply to hold the Fed funds rate at about 5% and let the chips fall where they might" I respectfully disagree with the 5% statement. If it is simply an issue of US getting into recession, I would agree with you 100%. The trouble is that we have so many bank/brokerage institution around the world that is overleveraged with our crappy mortgage paper. Making the Fed rate stayed at 5% is going to bring down a lot of these marginal institutions because they have no way of repairing their balance sheet. It goes back to why Fed try to force the BSC merger (and I think the hearing will be entertaining to say the least). I don't know if you remember the big run on ETFC brokerage business because of ET bank problem of owning too much crappy papers until the capital injection. And the big run on LEH stock the day after the BSC deal was announced. That is going to be daily occurance if Fed did what you advocate. The general economy (small companies especially) and a lot of innocent bystanders like us will get hit and loss everything we have just because we have our money in the wrong financial institutions at the wrong time. And I don't think the inflation picture is as bad as we think. The oil/grain/metal market are driven by global demand and we have very little control on the pricing other than our currency. But our inflation is somewhat sheltered by China. If you notice, China inflation rate is going through the roof now. And a big part of the problem is that they peg their currency to ours and when they export stuff to us, they essentially absorb inflation for us. And who is to say the ECU does not need to cut rate in the near future? Their banks own a lot of our crappy paper as well.. So their banks need to recapitalize and the fastest way is to engineer a very steep yield curve like our Fed is doing. As the last few Fed meeting minutes indicated, inflation is going to be secondary issue until we get a handle for our credit problem (Fed uses the word growth problem). And personally I agree with them. Reality is that whether we agree with them or not, they are going to do it. So the issue is more on how to invest following their tailwind.