Rate Cut Priced In??

[TheBurg]

I think the markets have priced in a rate cut -- 25 or 50 basis points, I'm not sure. If the Fed cuts next week and its only 25 basis points, do we sell off? I have actually been selling into the strength this week in anticipation of a 'sell on the news' pullback. I'm also concerned that the fed is actually on the fence and there is still a chance they do nothing. If that happened, it would get ugly in a hurry. I'm approximately 30% cash right now, but may be closer to 50% by Monday. I've got some big gainers I'm sitting on (RIMM) for which I may lock in at least partial profits.

You think a fed cut is a sure thing?

50 bp? 25 bp?

Thoughts?

[sesh]

I think it's priced for a rate cut of somewhere between 25 and 50 basis points. If it's 25 it will go down slightly, if it's 50 it will go up. And if there's no change, look out.

[The Little Giants]

Why guess? Wait and react!

[TheBurg]

Originally Posted by The Little Giants

Why guess? Wait and react!

Since I'm generally long equities, I'm not willing to just 'react'. With several of my holdings being quite volatile (5% dips or rises in a day occur frequently), I'm not willing to take a 10% haircut. Honestly, if no cut took place, I believe we'd see the beginning of a bear market that could last upwards of a year or more, with significant pullbacks occuring upfront. Maybe I'm being too cautious, but I've had an excellent 2007 and perhaps I'm being too protective of my profits.

[The Little Giants]

Well, those are your only two choices, so if you are not willing to wait, then you should sell and not take the risk. I will tell you one thing for certain. Not cutting rates by 25 basis points in one meeting is not going to send the market into a 1 year bear market. If we go into a bear market it would be due to the fact that there are other problems already in place that a rate cut simply cannot fix. Also, if a non rate cut sent us into a downward spiral then the fed would simply step in with an intra-meeting cut.

It's a huge catch 22 tho. We have obvious inflation problems in every aspect of the economy except for anything relating to the housing bubble. Plus, the dollar is at one of it's weakest points in several decades. Not to mention the fact that one of the reasons we have such a credit problem is because of the fact that the fed left rates far too low for far too long. When you are dealing with many aspects of a false economy (extremely low rates causing hyperinflation in housing, a silly war that is throwing a ton of borrowed government money into the economy which is creating a national debt that we'll never recover from, the list goes on and on) you are going to have mixed bag of weakness in many areas of the economy and a lot strength in others. So, there is a legitimate argument for and against a rate cut. The reality tho is that a rate cut would only benefit big business this time around and will not affect the consumer. Big business wants these cuts so that they can borrow cheaper and make more off the consumer in what could be a tough economy. You wont see a significant drop in long term interest rates.

[Romanowski]

Originally Posted by The Little Giants

....You wont see a significant drop in long term interest rates.

but real estate will prices will drop no matter what

[The Little Giants]

???