View Poll Results: Who suffered from recent meltdown?

Voters
12. You may not vote on this poll
  • Got shares, stuck on my portfiolio and am stuck with a lot of paper value loss

    9 75.00%
  • Cut loss and now waiting to stay invested

    2 16.67%
  • Sold everything on the high and out

    1 8.33%
Page 5 of 20 FirstFirst ... 345671015 ... LastLast
Results 81 to 100 of 394

Thread: Subprime issue in the financial markets and your shares

  1. #81
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    U.S. Economy: Employment Unexpectedly Drops in August

    Sept. 7 (Bloomberg) -- The U.S. economy unexpectedly lost jobs in August for the first time in four years, sending stocks lower from Warsaw to Wall Street and increasing speculation that the Federal Reserve will be forced to reduce interest rates to counter an economic slowdown.

    The drop in employment, following a month-long increase in the cost of credit prompted by losses in the mortgage market, is the clearest sign yet that the U.S. expansion is in jeopardy. Payrolls are one of the main indicators, along with sales, wages and production, which help determine the start of economic contractions.

    Employers cut 4,000 workers, compared with a revised gain of 68,000 in July that was smaller than previously reported, the Labor Department said today in Washington. The unemployment rate held at 4.6 percent as almost 600,000 people left the workforce.

    ``The recession risk has certainly increased,'' said Zach Pandl, an economist at Lehman Brothers Holdings Inc. in New York. ``It definitely cements the case for a rate cut at the next Fed meeting.''

    The benchmark 10-year Treasury note's yield fell 14 basis points to 4.37 percent, the lowest since January 2006, at 4:17 p.m. in New York. The Standard & Poor's 500 Index fell 1.7 percent to 1,453.55.

    `Some Surprises'

    ``It's not the kind of number I'd like to see,'' Treasury Secretary Henry Paulson said in an interview in Washington. ``Data does not always move in a straight line, so occasionally you will find some surprises. The economy will continue to grow in the second half of the year.''

    Paulson said he had breakfast with Fed Chairman Ben S. Bernanke today, as he does once a week. The former Goldman Sachs Group Inc. chief executive officer said he agreed with former Fed chairman Alan Greenspan that there are some similarities between the current market turmoil and that of 1987 and 1998.

    Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, called on the central bank to reduce rates when policy makers next meet.

    Companies that thrive when consumers spend the most led the stock-market retreat. Harley-Davidson Inc., the biggest U.S. motorcycle maker, lost $5, or 9.3 percent, to $49.09 for the steepest decline in the S&P 500 Index. General Motors Corp., the largest automaker, and Intel Corp., the biggest maker of computer chips, helped pace a drop in the Dow Jones Industrial Average.

    Goldman's New Call

    None of the economists in the Bloomberg survey predicted payrolls would shrink. Later in the day, Countrywide Financial Corp., the nation's biggest mortgage company, said it may fire 10,000 to 12,000 workers in the next three months. The company had about 55,000 employees at the beginning of the year.

    Economists at Goldman changed their forecast for the next Fed meeting on Sept. 18, projecting the central bank will reduce its target rate by a half percentage point. Goldman had previously predicted a quarter-point cut.

    ``There is no doubt now that financial turbulence is having real effects,'' said Peter Kretzmer, a senior economist at Bank of America Corp. in New York. ``This Fed is going to cut; this makes it easier for them.''

    Economists surveyed by Bloomberg News had forecast that payrolls rose 100,000 during the month, according to the median of 88 estimates, compared with an originally reported 92,000 gain in July. None of the analysts foresaw a decline.

    Factories, Builders

    Manufacturers, builders and the government led the drop in payrolls. Factory payrolls slid by 46,000, the most since July 2003, after slipping 1,000 a month earlier. Economists had forecast a drop of 10,000 in manufacturing employment.

    Payrolls at builders dropped by 22,000 after falling 14,000 a month earlier. Government payrolls decreased by 28,000.

    ``It is a whole different ball game,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ``The decline in manufacturing employment was much bigger than anyone expected. The probability of recession has increased pretty dramatically.''

    Service industries, which include banks, insurance companies, restaurants and retailers, added 60,000 workers last month after boosting payrolls by 78,000 in July, the report showed. Retailers added 12,500 jobs after hiring 5,000 in July.

    Average weekly hours worked by production workers held at 33.8. Average weekly earnings gained to $591.50 last month from $589.81 the prior month.

    Bernanke Pledge

    Bernanke last week said the central bank would do what's needed to prevent the credit-market turmoil from undoing the six-year economic expansion.

    The Fed ``continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets,'' he said at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming.

    Bernanke said the Fed would ``pay particularly close attention to the timeliest indicators'' since data prior to August didn't capture the credit crisis. Futures contracts are pricing a certain cut in the benchmark federal funds rate on Sept. 18.

    The Labor Department's employment survey of businesses covers the week of Aug. 12, at the height of the decline in global stock markets, suggesting the figures won't reflect the full extent of the damage done by the subprime tumult.

    Consumer Impact

    Job and wage growth are needed to help sustain consumer spending, which accounts for more than two-thirds of the economy, as home values fall and loans become more difficult to get. Spending slowed to a 1.4 percent annual pace in the second quarter, down from 3.7 percent the previous three months.

    First American Corp., the largest U.S. title insurer, said this week it would cut 1,300 jobs, or about 3 percent of its workforce, to reduce costs as home sales slow.

    LandAmerica Financial Group Inc., a Richmond, Virginia- based title insurer, said Aug. 28 it will eliminate 1,100 jobs in the second half of 2007 to reduce costs as mortgage originations decline.

    Lehman Brothers Holdings Inc. and Accredited Home Lenders Holding Co., both in the U.S., and HSBC Holdings Plc in London said last month they would cut a total of 3,400 jobs as tremors from the collapse of the subprime-loan market spread through the economy. At least 15 mortgage companies have filed for bankruptcy and about 50 have stopped lending or shut down entirely.

    Declines in residential construction have detracted from overall growth for the last six quarters, and the housing slump is prompting economists to warn of rising risks of recession.

    Harvard University economist Martin Feldstein, who heads the group that dates U.S. contractions, said Aug. 31 there is a ``significant risk'' of a recession.

    ``Downturns in housing construction have almost always been followed by a downturn in the economy, by a recession,'' Feldstein said in an interview from Jackson Hole. ``My judgment is there is enough of a risk that the Federal Reserve should be responding to that risk'' by cutting interest rates.
    Last edited by raincool2005; 8th September 2007 at 10:40 AM.

  2. #82

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by Deceased View Post
    Both i'm not familiar.
    Not vested.

    Only play within your means.
    Don't contra, don't short if one ain't expert.

    never contra. quite dangerous especially if i cant constantly monitor the market.
    anyone of you here made alot on paper? but cannot buy cause relatives in exchange?

  3. #83

    Default Re: Subprime issue in the financial markets and your shares

    Another media news to paint the picture gloomy. Let see who panic sell again.

    Nevertheless, Singapore Market will continue to choing because of the next 2 years, our economy will be still be robust. Those elites in Temasek, MAS and GIC will know what to do to sustain economic growth in Singapore.

  4. #84

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by USM View Post
    Another media news to paint the picture gloomy. Let see who panic sell again.

    Contra will rush to cover back on monday morning for small gains.
    and shortists will take this opportunity to short it down for profits.

    but

    problem is..everyone expecting or rather pinning on the hopes that stocks will nosedive and who knows, BBs might push the prices up.

    Interesting playing field on monday.


  5. #85

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by seanlim View Post
    never contra. quite dangerous especially if i cant constantly monitor the market.
    If you know what you are doing and has an exit strategy...then shorting and contra won't be dangerous.

    Most of the time, traders dunno what they are doing.
    Seeing a stock rise or fall a little, will make impulsive decision.

    I would say contra & shorting is extremely stressful during the intraday trading.
    I'd enough stress liao.

    Rather focus on mid and long term investments.
    Can sleep better at night.


  6. #86
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    today bloodbath !

    our SG market has no backbone, always follow foreign markets.


  7. #87

    Default Re: Subprime issue in the financial markets and your shares

    The STI is very resilent today despite the fall. Dropped > 90 pts at opening bell, but recovered to 50 pts at mid-day. This shows that there are a lot of buyers sitting on the sideline to pick up cheap stocks.

    Panic sell, and you will fall into the trap of these big fishes.

    All the blue chips have almost recovered their losses since the subprime problems surfaced. This means what? There are buyers on the fence waiting for suckers to dump their shares at lelong prices. For example, OCBC dropped to $7.65 at one point due panic selling, then recovered back to $8.80 within 1-2 weeks. My friend bought OCBC and made a killing out of it.

    Therefore, the moral of the story is - do your own search. Is OCBC that bad to deserve such treatment? If not, buy when people panic sell.

    Happy Trading.

  8. #88
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    marine, oil and gas counters are moving as oil is reaching $80 USD per barrel.

    when oil is 80, do expect an increase in petrol price, airfare and electricity bill.


  9. #89

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by raincool2005 View Post
    marine, oil and gas counters are moving as oil is reaching $80 USD per barrel.

    when oil is 80, do expect an increase in petrol price, airfare and electricity bill.

    This is a temp supply shock. It will not last long.

    As expected, STI continue to power up. Singapore.

  10. #90

    Default Re: Subprime issue in the financial markets and your shares

    Check out Federal.
    From the charts, looks like trending up.
    Not affected by monday selldown.

    Golden Agri looks promising.


  11. #91

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by raincool2005 View Post
    when oil is 80, do expect an increase in petrol price, airfare and electricity bill.
    Buy Comfort & SBS?


  12. #92

    Default Re: Subprime issue in the financial markets and your shares

    Fed Policy Makers Signal Division on Risks, Size of Rate Cut

    Sept. 11 (Bloomberg) -- Federal Reserve Governor Frederic Mishkin joined San Francisco Fed President Janet Yellen in flagging an increasing threat to consumer spending, differing with officials who still see signs of economic strength.

    Mishkin said late yesterday in New York that ``heightened uncertainty'' in markets could hurt consumers, after Yellen said demand is under ``downward pressure.'' By contrast, Dallas Fed President Richard Fisher was ``generally encouraged'' about the economy, and Charles Plosser of the Philadelphia Fed said Sept. 8 there are ``a lot of conflicting data.''

    The scope of remarks may reflect debate inside the central bank over whether to lower the benchmark interest rate on Sept. 18 by a quarter-percentage point, or a half-point as some investors expect, Fed watchers said.

    ``They might be legitimately still debating, even with the market way out in front of them,'' said Chris Rupkey, a senior financial economist at Bank of Tokyo Mitsubishi UFJ Ltd., who was present at Mishkin's address to the Money Marketeers of New York University. ``The Fed is a very deliberative body.''

    Rupkey said there's no ambiguity in the Treasury market, with the two-year note yield at 3.84 percent, indicating traders anticipate a series of rate cuts. The yield is more than 1.25 percentage points below the Fed's 5.25 percent target rate for overnight loans between banks.

    Policy makers are trying to gauge the economy's state after the first loss of jobs in four years in August. Atlanta Fed President Dennis Lockhart said the data now show that job growth started slowing in June. In an Atlanta speech yesterday, he backed away from remarks he made four days before that the housing slump was having a limited impact.

    `Question of Magnitude'

    ``It sounds like everyone's marked down their growth outlook, and everyone realizes the credit-market events are something that require a Fed response,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed. ``It's just a question of magnitude.''

    Treasuries rallied yesterday as traders interpreted the officials as confirming a reduction in borrowing costs to preserve the six-year expansion. Economists and investors expect the Federal Open Market Committee to lower its main rate at least a quarter-percentage point from 5.25 percent next week.

    Employers cut 4,000 workers in August, the Labor Department said Sept. 7. Revised figures showed job gains diminished from a 188,000 pace in May to 69,000 in June and 68,000 in July. Mishkin said private payrolls growth has slowed to 70,000 on average in the past three months, from 165,000 in the second half of 2006.

    Main Indicator

    Payrolls are one of the main indicators, along with sales, wages and production, which help determine the start of economic contractions.

    Lockhart and Yellen both vote on rates in 2009, and Fisher and Plosser vote next year, though they all participate in the FOMC discussions. Officials gather in Washington on Sept. 18. Mishkin and other Fed governors have permanent votes.

    Mishkin and Yellen acknowledged some areas are doing better than others. Consumer and business spending appear to be holding up ``reasonably well'' based on some recent indicators. They indicated that the risks to the outlook would sway their decision on rates.

    ``It is critical to take a forward-looking approach -- gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook,'' Yellen said in a speech to a conference in San Francisco. Yellen, 61, is a former Fed governor and head of the White House Council of Economic Advisers in the Clinton administration.

    `Severely' Affected

    Mishkin said that outside of housing, growth ``could be affected more severely in other sectors should heightened uncertainty lead to a broader pullback in household and business spending.''

    ``That scenario cannot, in my view, be ruled out, and I believe it poses an important downside risk to economic activity,'' said Mishkin, 56, who joined the Fed Board a year ago.

    Others played down the surprise loss of jobs, which economists said indicated that the sell-off in credit markets and deepening recession in housing is having a broader impact.

    ``Our economy appears to be weathering the storm thus far,'' Fisher said yesterday in a speech in Laredo, Texas. ``As yet, tighter credit conditions do not appear to have had a major impact on overall economic activity outside of real estate.''

    `Be Careful'

    Plosser said in an interview after a speech in Waikoloa, Hawaii, that ``we want to be careful not to overweight one piece of information'' referring to the job loss. He said he had not ``made up my mind at all'' on whether a rate cut is needed.

    Interest-rate futures show traders expect about 0.75 percentage point of cuts in the Fed's target by year-end. The yield on the December contract closed at 4.435 percent yesterday.

    ``Investors' perceptions of increased downside risks have resulted in a notable decline in the rates on federal funds futures contracts,'' Yellen said yesterday. Both she and Mishkin refrained from attempting to counter market expectations.



  13. #93
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by Deceased View Post
    Fed Policy Makers Signal Division on Risks, Size of Rate Cut

    Sept. 11 (Bloomberg) -- Federal Reserve Governor Frederic Mishkin joined San Francisco Fed President Janet Yellen in flagging an increasing threat to consumer spending, differing with officials who still see signs of economic strength.

    Mishkin said late yesterday in New York that ``heightened uncertainty'' in markets could hurt consumers, after Yellen said demand is under ``downward pressure.'' By contrast, Dallas Fed President Richard Fisher was ``generally encouraged'' about the economy, and Charles Plosser of the Philadelphia Fed said Sept. 8 there are ``a lot of conflicting data.''

    The scope of remarks may reflect debate inside the central bank over whether to lower the benchmark interest rate on Sept. 18 by a quarter-percentage point, or a half-point as some investors expect, Fed watchers said.

    ``They might be legitimately still debating, even with the market way out in front of them,'' said Chris Rupkey, a senior financial economist at Bank of Tokyo Mitsubishi UFJ Ltd., who was present at Mishkin's address to the Money Marketeers of New York University. ``The Fed is a very deliberative body.''

    Rupkey said there's no ambiguity in the Treasury market, with the two-year note yield at 3.84 percent, indicating traders anticipate a series of rate cuts. The yield is more than 1.25 percentage points below the Fed's 5.25 percent target rate for overnight loans between banks.

    Policy makers are trying to gauge the economy's state after the first loss of jobs in four years in August. Atlanta Fed President Dennis Lockhart said the data now show that job growth started slowing in June. In an Atlanta speech yesterday, he backed away from remarks he made four days before that the housing slump was having a limited impact.

    `Question of Magnitude'

    ``It sounds like everyone's marked down their growth outlook, and everyone realizes the credit-market events are something that require a Fed response,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who used to work at the Fed. ``It's just a question of magnitude.''

    Treasuries rallied yesterday as traders interpreted the officials as confirming a reduction in borrowing costs to preserve the six-year expansion. Economists and investors expect the Federal Open Market Committee to lower its main rate at least a quarter-percentage point from 5.25 percent next week.

    Employers cut 4,000 workers in August, the Labor Department said Sept. 7. Revised figures showed job gains diminished from a 188,000 pace in May to 69,000 in June and 68,000 in July. Mishkin said private payrolls growth has slowed to 70,000 on average in the past three months, from 165,000 in the second half of 2006.

    Main Indicator

    Payrolls are one of the main indicators, along with sales, wages and production, which help determine the start of economic contractions.

    Lockhart and Yellen both vote on rates in 2009, and Fisher and Plosser vote next year, though they all participate in the FOMC discussions. Officials gather in Washington on Sept. 18. Mishkin and other Fed governors have permanent votes.

    Mishkin and Yellen acknowledged some areas are doing better than others. Consumer and business spending appear to be holding up ``reasonably well'' based on some recent indicators. They indicated that the risks to the outlook would sway their decision on rates.

    ``It is critical to take a forward-looking approach -- gauging the effects of recent developments on the outlook, and, importantly, the risks to that outlook,'' Yellen said in a speech to a conference in San Francisco. Yellen, 61, is a former Fed governor and head of the White House Council of Economic Advisers in the Clinton administration.

    `Severely' Affected

    Mishkin said that outside of housing, growth ``could be affected more severely in other sectors should heightened uncertainty lead to a broader pullback in household and business spending.''

    ``That scenario cannot, in my view, be ruled out, and I believe it poses an important downside risk to economic activity,'' said Mishkin, 56, who joined the Fed Board a year ago.

    Others played down the surprise loss of jobs, which economists said indicated that the sell-off in credit markets and deepening recession in housing is having a broader impact.

    ``Our economy appears to be weathering the storm thus far,'' Fisher said yesterday in a speech in Laredo, Texas. ``As yet, tighter credit conditions do not appear to have had a major impact on overall economic activity outside of real estate.''

    `Be Careful'

    Plosser said in an interview after a speech in Waikoloa, Hawaii, that ``we want to be careful not to overweight one piece of information'' referring to the job loss. He said he had not ``made up my mind at all'' on whether a rate cut is needed.

    Interest-rate futures show traders expect about 0.75 percentage point of cuts in the Fed's target by year-end. The yield on the December contract closed at 4.435 percent yesterday.

    ``Investors' perceptions of increased downside risks have resulted in a notable decline in the rates on federal funds futures contracts,'' Yellen said yesterday. Both she and Mishkin refrained from attempting to counter market expectations.


    if they dun cut, do expect a bloodbath in the markets.. !

  14. #94
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by Deceased View Post
    Check out Federal.
    From the charts, looks like trending up.
    Not affected by monday selldown.

    Golden Agri looks promising.

    i found a better one - Cosco Corp, it is going back to its historical high of 5.80

  15. #95

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by raincool2005 View Post
    if they dun cut, do expect a bloodbath in the markets.. !
    Most probably a quarter.
    And year end another cut.

    If don't cut, can expect sharp selldown. (cash out 90% of my folio)
    If cut, might go up a little and slowdown again.

    Tough decision to make.


  16. #96

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by raincool2005 View Post
    i found a better one - Cosco Corp, it is going back to its historical high of 5.80

    Hmmm...this one not enough bullets to load.
    Did you see C20 Holdings?? from 32 cents -----> 77cents within 1 week.

    Very much like jade.

    After checking SGX announcement, notice alot of directors selling out their shares
    and their earnings so so...yet the stock price push until so high up.

    100% increment


    Invest $100,000,
    you get back 200k in return.

    Better than strike 4D.



  17. #97
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by Deceased View Post
    Most probably a quarter.
    And year end another cut.

    If don't cut, can expect sharp selldown. (cash out 90% of my folio)
    If cut, might go up a little and slowdown again.

    Tough decision to make.

    pal, faced it. 10 years cycle has come and arrived finally. This bubble has been expected and has to go to start a new begining...


  18. #98

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by raincool2005 View Post
    pal, faced it. 10 years cycle has come and arrived finally. This bubble has been expected and has to go to start a new begining...

    I believe too...
    Look at the Gold price.

    http://goldprice.org/gold-price-hist...day_gold_price



  19. #99
    Senior Member
    Join Date
    Sep 2005
    Location
    Raffles Place
    Posts
    1,808

    Default Re: Subprime issue in the financial markets and your shares

    Quote Originally Posted by Deceased View Post
    I believe too...
    Look at the Gold price.

    http://goldprice.org/gold-price-hist...day_gold_price


    u see.. the pattern 1987, 1997 and maybe 2007 ? all are recession and crisis years.

    nothing goes in a straight line loh...

  20. #100

    Default Re: Subprime issue in the financial markets and your shares

    The Fed's unkindest cut?

    Wall Street is certain the Fed will cut rates to ease the pain of the credit crunch. But how will investors react if Bernanke & Co. cut by just a quarter of a point?
    By Paul R. La Monica, CNNMoney.com editor at large
    September 14 2007: 10:03 AM EDT



    NEW YORK (CNNMoney.com) -- The Federal Reserve is going to cut the target on a key short-term interest rate on September 18. There is no mystery about that.

    According to futures on the Chicago Board of Trade, the market is pricing in a 100 percent chance of a cut to the federal funds rate, an overnight bank lending rate that heavily impacts how much interest consumers pay on their credit card debt, home equity lines of credit and car loans.


    The fact that the Fed already cut its discount rate, which is what banks pay to borrow money from the central bank, in a surprise move on August 17, coupled with remarks from Fed members in the past few weeks about how closely they are monitoring the mortgage meltdown that is roiling the markets, makes it a virtual lock that Ben Bernanke and Co. will lower the fed funds rate on Tuesday.

    Fed can't stop recession
    Still, there is a fair amount of intrigue surrounding the September 18 meeting. Specifically, investors are unsure about how much the Fed will lower interest rates.

    The Fed cut the discount rate by a half of a percentage point, from 6.25 percent to 5.75 percent, on August 17, leading many market observers to speculate that the Fed would also lower the fed funds rate by a half of a percentage point on September 18.


    To that end, as of September 14, investors were factoring in a 58 percent chance that the Fed will cut the fed funds rate by 50 basis points, or half of a percentage point, to 4.75 percent, on Tuesday.

    But hopes appear to be diminishing somewhat for a big rate cut. Investors had been pricing in a 74 percent chance of a 50 basis point rate cut on September 12.

    Still, what will happen if the central bank only lowers interest rates by a quarter of a percentage point? Fed watchers said it all depends on what the Fed says in its statement.

    John Norris, director of wealth management at Oakworth Capital Bank, a private bank in Birmingham, Ala., said the market would probably not be too happy with just a 25 basis point cut at first. But he thinks that in some ways, a smaller rate cut might be more reassuring.

    "Obviously everyone wants a 50 basis point cut. If it's only a quarter of a point the market will be upset," Norris said. "But if the Fed cuts by 25 basis points and the language in the statement is strong enough to indicate that this is the first of many cuts to come, cooler heads will prevail. Investors would like that as much, if not more, than a half-point cut with language that indicates this is just a one-off thing to placate the markets."

    Why the credit crunch may deepen
    Scott Martin, managing director with Astor Asset Management, a Chicago-based investment firm with $200 million in assets under management, agreed that a half of a point cut might soothe the market at first...but not for long.

    "If the Fed cuts by 50 basis points, you have to worry about the health of the economy. If the Fed can just say that they are going to keep an eye on the subprime market and signal that they may cut two more times by the end of the year, that might be the best case scenario," Martin said.

    Vincent Boberski, portfolio strategist with FTN Financial in Memphis, also said that a half-point cut might get some cheers at first but it could wind up spooking the markets once investors realize the reason behind it.

    "If the Fed were to cut rates by a half point, it might backfire since it could potentially give the market the impression that the economy is much weaker than investors thought," Boberski said.

    Despite fears that the subprime mortgage market implosion could send the economy into a recession, fears stoked by the surprise decline in jobs during the month of August and a smaller-than-expected increase in retail sales, Norris points to other economic evidence that might prevent the Fed from cutting rates aggressively.

    For one, oil prices hit $80 a barrel for the first time ever on Wednesday. That, as well as rising prices for other commodities, could keep the Fed from lowering rates by too much since it wants to keep inflation in check.

    Tales of the crash of 2007
    Norris added that the most recent figures from the Institute of Supply Management regarding manufacturing growth and services industry growth indicate that the economy is still expanding.

    "Bernanke is in an awkward situation. Right now, the data is still mixed. And he doesn't want his reputation to be that financial markets are dictating monetary policy. He doesn't want to be known as the Fed chairman that was bullied around by Wall Street," Norris said.

    David Joy, chief market strategist with RiverSource Investments, a Minneapolis-based asset management firm agreed, adding that the economy still does not appear to be in dire enough shape to justify a half-point cut.

    "If the Fed cuts rates by a quarter of a point, you will hear howls from those who think the Fed is behind the curve," Joy said. "But in my mind, a quarter of a point cut is appropriate. I'm not sure the economy needs a half-point cut. Plus, the Fed could always lower rates further in the coming months."

    Compounding matters though is that Bernanke's widely respected predecessor, Alan Greenspan, is currently making comments about the economy as he promotes his new memoir, which will be published on Monday.

    That has led some on Wall Street to unfavorably compare how Bernanke is handling the subprime woes with how Greenspan dealt with numerous crises during his tenure, such as the 1987 Black Monday crash, the collapse of the hedge fund Long-Term Capital Management in 1998 and the September 11 terrorist attacks.

    But according to excerpts released Thursday from an interview that will air on the CBS news show "60 Minutes" Sunday, Greenspan said that he felt criticism of Bernanke was unfair and added that his successor was doing "an excellent job."

    Still, Greenspan's legacy has come into question lately as well. According to the excerpt from the "60 Minutes" interview, Greenspan admitted that the Fed did not fully grasp how much of a danger the explosion in demand for subprime mortgages would have on the economy.

    Martin of Astor Asset Management pointed out that Bernanke might want to avoid cutting interest rates too drastically, since it can be argued that the historically low rates from earlier this decade helped bring about the subprime mess in the first place.

    "The market is begging for a rate cut but we're trying to fix a liquidity problem with more liquidity. It's kind of funny," Martin said.

    So while a half-point rate cut might be considered a quick cure for what's ailing Wall Street, some think it might be more pragmatic for the Fed to lower rates gradually.

    "It would be a bold move to cut rates by a half of a point," Boberski said. "There is some justification for it since the labor markets are a lot weaker than people thought. But it seems like the Fed would prefer to take an incremental approach since Bernanke does not want to be seen as bailing out the financial system."

    Joy added that it's amusing to see people criticize the Fed for not cutting rates since many Fed skeptics thought the central bank kept rates too low for too long.

    "It's somewhat disingenuous to say the Fed needs to cut rates to bail out housing while at the same time many of these people were saying a year ago that the Fed needed to raise interest rates because the housing market was a bubble," he said.

    To that end, Boberski thinks the Fed would rather cut rates two or three times by a quarter of a point before the end of the year and perhaps once or twice more in 2008.


    Exciting market movement next week!


Page 5 of 20 FirstFirst ... 345671015 ... LastLast

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •