FOMC: 75 BPs
Quick hits:
FOMC Statement
http://federalreserve.gov/newsevents/press/monetary/20080318a.htm
Very different statement than previous ones; the Money quotes are underlined:
Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.
Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.
Dissenting: Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.
My quote: "If this doesn't bring down mortgage rates, I cannot fathom what else will."
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Tuesday, March 18, 2008 | 02:14 PM | Permalink
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Comments
Rather grim statement from the Fed, too.
Interesting that Plosser and Fischer were not on board and wanted something less. Guess killing the dollar ain't all its cracked up to be.
Posted by: Mr. Obvious | Mar 18, 2008 2:23:09 PM
Ben's got billionaires to bail out, didn't you get the memo? Why save the middle class's dollar - there's traders with Maseratis who need a new condo in Vail!
Posted by: Unsympathetic | Mar 18, 2008 2:29:12 PM
memo to maserati driving traders: there are no condo's to rent in Vail...or Tuscany.
Posted by: craig | Mar 18, 2008 2:31:56 PM
Stagflation, stagflation, stagflation
Posted by: Steelduck | Mar 18, 2008 2:36:59 PM
March 31st - Last Call - For anyone who wants to get out before 1300 on SPX.
Posted by: Nihilism | Mar 18, 2008 2:39:02 PM
It's a shame these Fed meetings aren't deemed suitable material for satire. "The Simpsons" & "South Park" both have stables full of boobish characters to draw from ...
Posted by: Chief Tomahawk | Mar 18, 2008 2:41:37 PM
This isn't going to bring down l.t. rates or mortgage rates. The problem is the inverse of the previous conundrum. Then it was worldwide liquidity keeping the long-end of the yield curve down. Now it is structural breakage in all the various credit markets keeping it up as the previous liquidity is "sponged" away by de-leveraging. No matter what the Fed does with traditional monetary policy we are experiencing inadvertent contractionary monetary policy because of tightening credit. A good thing to look at is Kasriel's inflation-adjusted monetary base which I did along with various rate spreads in this post: http://tinyurl.com/2tzbe5
YOY% growth in the real monetary based was DOWN -3.5%. DOWN - ye gods.
Everything they can do to break up this logjam and get the machinery working again before we get a real credit collapse is, IMHO, entirely justified. For a 2nd more notable opinion check out Mohamed el-Arrian's CNBC appearance and think about what he's saying in terms of deep structural breakage.
Posted by: dblwyo | Mar 18, 2008 2:43:59 PM
Wonder what it's like when Ben comes out of his meeting and sees Bear bid up to 6.30-ish on shareholder dissent over the terms of the deal?
Posted by: zackattack | Mar 18, 2008 2:46:06 PM
By the way, isn't there something about concerning Japanese banks have to attest to the value of the paper on their books by March 31st? How much bad paper are they sitting on and how do they value it?
Posted by: Chief Tomahawk | Mar 18, 2008 2:46:57 PM
I am still amazed at how many people are bottom fishing. No doubt this is one of the worst financial crisis in history. And they expect only 10-20% down in the market?
Every rally is your chance to exit for survival now.
Posted by: erdong | Mar 18, 2008 2:49:17 PM
Yeah Barry, your underlined excerpts seem like the kiss of death to me. Who woulda thunk they would have been so honest.
Well I guess honest would have been to not change the rate and admit that they are having no control over the real problems. But you know.
Posted by: mikkel | Mar 18, 2008 2:49:40 PM
Who writes the statement? I presume all of them get input?
I notice that they mention inflation five times in the 2d paragraph....almost like they are trying to tell us something....
Posted by: Mr. Obvious | Mar 18, 2008 2:51:16 PM
"If this doesn't bring down mortgage rates, I cannot fathom what else will."
There’s no reason why an easing of monetary policy, at this point in the cycle, SHOULD lower mortgage rates, given the inflation threat. Moreover, the other issue, of course, is the AVAILABILITY of mortgage loans, even apart from the price of them.
Posted by: David | Mar 18, 2008 2:54:30 PM
Here's an article that makes you think. Money quotes (bold mine):
"With the euro now trading around 1.56 against the dollar, the size of its annual output (at market value) has exceeded that of the United States," US investment bank Goldman Sachs estimated last week.
"Brief as the development may prove to be, European policy makers will no doubt derive some pride" from the event, it said.
Heckuva' job.
Posted by: LFC | Mar 18, 2008 2:54:55 PM
Mr. Obvious:
You think? While they'll never admit it, I think it has finally dawned on the Fed that inflation is rising and only going to get worse.
Posted by: Joe Klein's conscience | Mar 18, 2008 2:55:24 PM
Mortgage Rates will go down. - It's part of the deal. Everything is being orchestrated right now and has been since Friday. The next step is a round of capital raising starting with the VISA IPO for the banks.
Posted by: Vermont Trader | Mar 18, 2008 2:57:25 PM
WTF? Where the f*ck is this market going?
Posted by: Bingo | Mar 18, 2008 3:03:45 PM
Barry, We are f...ed! I should have covered!
Phuck!
Posted by: Phucked Bear | Mar 18, 2008 3:05:42 PM
Barry, you have misled us the bears. Biggs was right and you were wrong -- admit it Barry.
Posted by: Phucked Bear | Mar 18, 2008 3:11:20 PM
Wonder what it's like when Ben comes out of his meeting and sees Bear bid up to 6.30-ish on shareholder dissent over the terms of the deal?
Posted by: eh | Mar 18, 2008 3:12:15 PM
Maybe some currency intervention today as well?
Posted by: Vermont Trader | Mar 18, 2008 3:13:14 PM
This market reminds me of the Beavis and Butthead candy sale. I think someone here mentioned it first but it's a perfect analogy for this clusterfuck. Only difference is the one holding the bag will be the taxpayer, or so they hope. The problem is the taxpayer is broke. Check out Paulson and GW sell candy bars.
http://www.youtube.com/watch?v=P_UvMKhJF8U
Posted by: ken h | Mar 18, 2008 3:22:06 PM
Bingo & Phucked Bear,
When LEH & GS reported earnings today and there were no surprises to the downside, that should have been your cue that short term (a few days to a few weeks) everything was ok.
Note how much LEH is up today. In other words, the worst news on the street had passed - for the time being. That only meant that FED should/would provide good news to their banker friends to squeeze the shorts in the afternoon - so far that is what is happening.
It also helps if you know how to read charts.
It's a hard game to figure out, but that is what is happening.
Posted by: blin | Mar 18, 2008 3:27:10 PM
Doesn't any one here look at longer (like multi-month) trends? It looks like it's going for a test of the double bottom. If it has one more good day to make a clean break of 1325 I will reassess and might go long, but until then my outlook for the next 2 months hasn't changed.
Posted by: mikkel | Mar 18, 2008 3:28:25 PM
My quote: "If this doesn't bring down mortgage rates, I cannot fathom what else will."
Well, Senor Barry, mortage rates are not going down per ops model: Privatize the Gain, and Socialize (er, offload) the risk!
Rule of thumb (priorities) for the Fed:
1)By business
2)For businesss...and most importantly,
3)Taking care of business
The purpose of the Fed is to make whole, especially the 'gang of 22' though with Bear liquidated now down to 21 money centers, those banks who are not! Period!
As viewed from the flightdeck (and overheard from those he transports, ie the principles, to their multiple residences in the US, Cayman's & Europe).
They operate on a different set of physics which and not applicable to you or I.
Your mileage may vary....
Posted by: SR | Mar 18, 2008 3:29:22 PM
If the dollar has been going down due to rate cuts, why is it up just after this cut?
Posted by: n00b | Mar 18, 2008 3:38:31 PM
Blin
I'm a trend follower and normally make such insane amounts of money that it would make you cry. But this market is just taking a toll on my patience and my portfolio. I can't stand these 500 pt swings between two days. I'm in a drawdown so I don't want to miss out on a massive move by staying out. But I'm afraid to keep trading my system because I've never seen a market like this on any charts in the history of the stock market.
Posted by: Blin | Mar 18, 2008 3:39:15 PM
It only has to work through November. That's all they really care about.
Posted by: donna | Mar 18, 2008 3:43:15 PM
I feel Like I'm being mmolested by the Fed.
I feel so used like a cheap wwhore.
Posted by: Phucked Bear | Mar 18, 2008 3:58:28 PM
This is priceless. It's a web page called
Posted by: LFC | Mar 18, 2008 3:59:53 PM
A further thought...
17/03/08 "Counterpunch" -- - Americans learned two new truths last week from the Bush Administration's version of Life's Little Instruction Book: if you're a Wall Street miscreant you're thrown a lifeline; if you're a Wall Street crime fighter you're thrown a land mine....
Meredith Whitney (Oppenheimer & Co. analyst)...watch your back against these vipers.
Posted by: SR | Mar 18, 2008 4:02:19 PM
Blin, I'm not going to pretend that I know what will happen next. Tough market to crack.
fyi
Yesterday i met up with a friend who trades the markets late in the day for a St. Patrick's day beer. He was a bit stressed and told me that he picked up 1000 of LEH @ $25. The crazy thing is that the market wasn't closed yet.
Since i know his trading style, i figured that he didn't even have a stop in place. He didn't realize that his 25k could be virtually wiped out by morning.
Lucky for him LEH closed @ about $32 yesterday. But I warned him that earnings were due out before market open today. Good thing they did not disappoint, so naturally the short squeeze was on, it was pushed past $40 and he eventually got out @ $43.
I still thought it was a stupid trade...very ballsy.
Although, today's earnings for LEH & GS tipped off the market that all should be well for a rally today. BTW, the bottom was tested on SPY yesterday...although it could test it again very soon if more fear hits the street.
There should be follow through buying tomorrow...(that's what the charts tell me)...but then who the hell knows
Posted by: blin | Mar 18, 2008 4:03:19 PM
Why is Bear trading at 6.50?
Rumor Mill, let's here it. Who is bidding on Bear Stearns?
Posted by: RPB | Mar 18, 2008 4:07:21 PM
Ouch! My comment was cut off at the knees.
The site is called Ask the Ben Bernanke 8-ball, and it magically answers all your financial questions.
Posted by: LFC | Mar 18, 2008 4:10:36 PM
Change one word and this works again:
"You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of paper."
Posted by: zackattack | Mar 18, 2008 4:11:29 PM
Any idea where a small, individual investor can stick his meager dollars? I've been going with very boring dividend stocks, like GE, so far, because they beat out CD's, but if the market really crashes big time, this strategy loses. Foreign CD's-- is there an easy way to do that from the States?
Posted by: tom B | Mar 18, 2008 4:18:39 PM
I'd still vote for Bryan today, even though he did go off the deep end on the evolution issue.
Posted by: Sufferin' Succotash | Mar 18, 2008 4:21:03 PM
Hey nothing boring about ge today. I was wrong as well, Barton Biggs is gonna have his day, but I still think Jeremy Grantham is gonna have his year, or two. In addition this site should be developing an additional following as a short term market indicator! Pat yourself on the wallet y'all.
Posted by: cathompson | Mar 18, 2008 4:31:07 PM
Thats two for two on Tuesdays
400+ points on the Dow today and last week
Kinda neat(sic) how They can make all the major indexes end at the EXACT HIGH OF THE DAY.
its as if the news from Sunday/Monday did not exist.....
Posted by: MarkTX | Mar 18, 2008 4:32:10 PM
Just who will be the investors in the mortgage markets? at what price? What lending standards will be required to attract capital to these now high risk market?
Doubt that this is an environment for lower mortgage rates going forward, rather a good time for many to exit the system and look for other avenue's of investment. Shelia Blair on Bloomberg today keeps telling us that we need a large scale system to reduce existing mortgage principle for millions of mortgage holders they just can't figure out how to do it on a large scale without significant moral hazard. Now would you put your hard earned investment dollars in American mortgage market waiting for this to happen?
Posted by: ron | Mar 18, 2008 4:40:12 PM
tom b@4:18
You can buy CD's denominated in foreign currencies at Everbank.
Posted by: Bruce F | Mar 18, 2008 4:54:01 PM
I'm going out on a limb and saying this is THE BOTTOM for mortgage rates. Refi now, if you can. The curve steepened today, with the 10 year yield jumping 4%, with a successful retest of the 3.29% bottom of a few days ago. The Fed is igniting fears down the road of higher inflation.
Posted by: SteveC. | Mar 18, 2008 5:02:05 PM
"I notice that they mention inflation five times in the 2d paragraph....almost like they are trying to tell us something...."
Like, inflation = expect moderate uncertainty?
Posted by: Pat G. | Mar 18, 2008 5:08:31 PM
"Why is Bear trading at 6.50?
Rumor Mill, let's here it. Who is bidding on Bear Stearns?"
============================================
Short covering and bond holders wanting to buy the common so they have a vote on any possible deal??? Knowing they get paid first, they could threaten to vote down a deal and desire something better.
Posted by: Chief Tomahawk | Mar 18, 2008 5:49:21 PM
Bruce F @ 4:54:01:
From Everbank's web page:
the Community Banking division of EverBank serves banking customers in the Northeast Florida retail market....EverHome Mortgage Company manages servicing partnerships for Wachovia, The Bank of New York, Bear Stearns, ...
Am I being paranoid?
What's a rube to do?
Posted by: Taylor | Mar 18, 2008 5:55:15 PM
Rally arrived in time and commodities topping in time? Would have loved to have a little more downside but I guess it's enough already.Time to get bullish for rest of the year a may be?
Posted by: Jagmohan Swain | Mar 18, 2008 6:37:51 PM
How long does it normally take for a federal funds rate change to be reflected in the mortgage market?
Posted by: odograph | Mar 18, 2008 6:46:22 PM
I don't think Everbank is FDIC insured..be careful
On another note, it was a interesting day, I am wondering who was buying Bears, Countrywide, JPM, etc... I wouldn't be able to sleep if I own any of them, or many others for that matter.
Posted by: Mich(^IXIC1881) | Mar 18, 2008 7:15:32 PM
Some back and forth on Everbank.
Posted by: Taylor | Mar 18, 2008 7:21:49 PM
Barry,
I feel sorry for retired people and many/or most lower-income WW2 widows, who have most of their life saving in bank CD'S. They trusted the Fed to keep a floor under their SSN/CD's and the Fed threw them under the bus.
I have nothing but Pity For You Bernanke and Board of Governors of the Federal Reserve, you have so much contemptuous disregard for the elderly bank CD holders.
May G-d have mercy on the Fed's soul.
“Whip him, fellows, Till, like a boy, you see him cringe his face, And whine aloud for mercy: take him hence.”
William Shakespeare
Posted by: David | Mar 18, 2008 8:18:53 PM
Interesting market.. I wonder when I can pick up my double shorts again.
Posted by: DalmatianCoast | Mar 18, 2008 9:34:58 PM
To be clear:
The Fed said:
1. Inflation is a problem and will probably become a bigger problem
2. Growth sucks
The Market said:
"Thanks for the bad news, but we are sure you guys can handle it since you have done such a terrific job so far."
Market up, gold down. Anybody but me see a problem with this? Where is the consumer in all of this? You know, the 70% of the economy that depends on the consumer, did house prices hit a bottom today too? Did gas go to $1.50 per gallon. We seem to be forgetting about Joe Six....
Posted by: Rich Shinnick | Mar 18, 2008 10:37:37 PM
The customer.. Joe six pack is out of gas/cash and flat busted on his ass. Retail sucks!!!! China is exporting inflation, wait till fall goods hit and people see the prices...INFLATION!!!
Posted by: john | Mar 18, 2008 11:43:03 PM
