Monday, January 28, 2008

Entry for 1/28/06

It seems as the rest of the world got cold feet the Fed got scared. At least everyone wasn't afraid in the FOMC, everyone but one person. In part, whether explicitly said or not, in order to aide the financial markets the Fed cut radically 3/4 of a basis point. And to no avail the markets continue to slide downward. Although today there seems to be a slight pause in the downward fall. It seems the Fed will never be able to satiate the wall street cats. Give them 3/4 quarters of a point cut, and they already are pricing in another half basis point cut. I wouldn't be surprised if the Feds toss in another 25 points to appease the masses. Though, do not be surprised if the Feds hold. The reason why the Feds might hold is due the fact that they would run of ammo to fight real problems. If you keep cutting rates, when a potentially bigger problem arises, how will you fix it? Bring the Feds Fund rate all the way to zero? Even though wall street would like to see a negative fed funds rate, that will never happen. I am just waiting for inflation to rear its ugly head, catching everyone by surprise, which presents a great shorting opportunity when those cpi and ppi numbers come around. Despite the continuing contracting housing market, bearish sentiment around the world from fears of slowed growth, even a technician can tell you that the fundamentals aren't there to support any upward movements. One of the main reasons why in the past I was so bullish also was due to the labor market. With weaker numbers coming in, I wouldn't expect any significant improvement as the rest of the world, just not the United States, is being affected by slowed growth in the US. Furthermore oil is heading up today despite all the bearish news! This does not bode to well for up coming inflation numbers as I expect the headline inflation to be a major component that people have been tending to ignore. In the end the world still has to eat food and drive cars...

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