Poll: Will the fed cut rates and what are you doing about it?

[englishman26]

What do you think the fed will do on tuesday, what do you think the short term and long term effects will be, and how are you preparing for it?

1. They'll tighten
2. They'll keep rates the same
3. They'll cut by 0.25
4. They'll cut by 0.5

[AJLightning]

I think most agree a cut will happen :lol:

will that help the casinos & gaming industry:?:

[cramerica1972]

I think most agree a cut will happen :lol:

will that help the casinos & gaming industry:?:a rate cut will be percieved to be a bailout.....and it is.

[AJLightning]

marks for next week:

TARR, LUM, IMH, LEND, ACF, NLY, RAS

[AJLightning]

a rate cut will be percieved to be a bailout.....and it is.



well sure, it is a bailout...

but does anyone have an opinion on if it will help the casino & gaming industry?

[AJLightning]

marks for next week:

TARR, LUM, IMH, LEND, ACF, NLY, RAS



HCM:?:

[krazykowboy]

no cut on Tuesday, but Bernake will make statements that will leave the probability of rate cuts later in the year.
most likely .50 in october, followed by another .25 or .50 in november
with the markets already priced for a likely cut expect a moderate sell-off if this scenario plays out.
position your assets accordingly

[aiki14]

I think the odds favor a 25bps cut and it's sensible to play it that way, but the no cut would be the most interesting scenario. The Mozilo's of the world and all the pundits who are talking their book while making a case for the big cut will be apoplectic. A 50 bps FED rate cut would be the best for me personally because of the real estate effect, but a 50bps or 100bps cut in the discount rate would be the most economically defensible strategy as it would provide liquidity to the commercial paper market while letting the market deal with their own problems.
I am in a larger than average cash position, have options straddles on GS out through jan 08, am short CFC, long CFC Jan20 calls, and short Jan25 calls.

[madcowdisease]

Based on the jobs report a cut lookslikely. But, given the fact Bernanke claims to look at the data before he moves leaves me to believe he may not move at all based on mimited data showing a slowdown. I am almost entirely cash in my trading account. Ergo, if the Fed doesn't move I won't be hurt as a selloff is likely since the rate cut is already priced in. I do, however, have a few liit buys in place and wouldn't mind seeing them stand pat so that they would be triggered.

[coolio]

No cut. There will be a discount rate cut like last time. Will tease the market with promise of cuts in the future. Sorry, Angelo.

[deerhunter]

Im making a bold prediction for a raise in rates with no reasoning behind it other than to go against the flow..

[englishman26]

This article seems to imply that Bernanke's experience from the studying the great depression will make him cut rates for fear of failing to act the way the fed failed to act back then.

http://observer.guardian.co.uk/business/story/0,,2169919,00.htm

Of course, as people here have pointed out, he could feel lowering the discount rate is acting enough which the stock market won't agree with.

I took a position in BX a week ago which I'm going to get out of tomorrow as the financials could get hit very hard if things don't go right. I'm shorting HOV (bad news on their sale, and very bad housing sales numbers for august to come out soon). I'm 20% cash which is only a bit below average. Other than that, I'm expecting a .25 cut which I think the market will take pretty neutrally.

[optimus25]

I'm leaning towards no cut as energy prices and food prices continue to inch up. A rate cut more than 25 basis point will be too much for what the Fed is looking for. It could also be a combination Fed Funds rate decrease and discount rate decrease. I think 25 is just right but you never know how the Fed is interpreting the data. Either way, I think the market will be disappointed.

[Luc1Grunt]

No opinion or prediction, but the hype will allow some pretty fantastic opportunities intra-day.

I have noticed consumer staples getting thick volume lately. Long term "investment" account remains little changed on the "low days" so not quite ready to sell any (still fundamentally sound/value driven).

Happy trading...er, uh "investing".

:D

[Niketennis1]

What does a rate cut do to the market? I'm not very experienced with the marker so I'd like to know what kind of stocks I could make some money off of if their is a rate cut. Is a stock like IMH a good stock to buy or no?

[englishman26]

Generally a rate cut is considered good for the market. Theoretically lowering the cost of borrowing meaning that companies can more easily invest in their future growth. That's the fundamentals of it anyway even though in reality it's all psychological. And the psychology is that the market believes that with credit rules tightening, that a rate cut must happen and mentally it is already priced in - probably at the 0.25% level. This logic would suggest that 0.5% cut would buoy the market but in fact it will probably make everyone think that the fed sees very bad things ahead. Keeping rates the same will be a sign that we have rising inflation and since the market believes that growth will slow without easing credit, they will believe that the fed has decided to drive us into recession and we'll get a significant down day. Frankly this whole thing has been so over-hyped, and everything is so fear driven at the moment.

Financials will get hit the hardest - as well as homebuilders, if they don't cut at all. There won't be much up - maybe big pharma like JNJ or PG which are often a flight-to-safety stocks.

I actually expect a 0.25 cut and a big fat nothing-much at the end of the day.

[Imperator]

I don't think the market is going to like anything.

I would buy at the money puts on SPY if I had the inclination.

Or buy some of the double-inverse etfs, with tight stops.

btw, what time is the announcement going to be?

[aiki14]

I don't think the market is going to like anything.

I would buy at the money puts on SPY if I had the inclination.

Or buy some of the double-inverse etfs, with tight stops.

btw, what time is the announcement going to be?

Around 2:15

[aiki14]

From Bloomberg this A.M.


Bernanke Weighs Recession Risk Against Investor Cave-In Charge
By Steve Matthews

Sept. 18 (Bloomberg) -- The Federal Reserve will probably cut its benchmark interest rate today for the first time in four years, seeking insurance against a recession. The main question is how big a policy Chairman Ben S. Bernanke is ready to buy.

While a quarter-point reduction in the federal funds rate may not be enough to bolster growth and investor confidence, a half-point cut might fan inflation and be perceived as giving in to pressure from Wall Street firms that made bad bets, especially in the market for securities backed by subprime mortgages.

Bernanke and fellow policy makers ``are really caught,'' said Robert Eisenbeis, a former research director at the Fed's bank in Atlanta who attended meetings of the rate-setting Federal Open Market Committee before retiring early this year. ``The Fed needs to avoid the perception of bailing out the markets, lenders or borrowers.''

The FOMC will opt today for a quarter-point cut to 5 percent in the rate that banks charge each other for overnight loans, according to the median prediction of 134 economists surveyed by Bloomberg News. Twenty-three of the forecasters projected a half-point move, which traders think is coming sooner or later: Interest-rate futures indicate a rate of 4.5 percent by year-end. The decision is scheduled for about 2:15 p.m. in Washington.

Most-Analyzed Statement

Whatever today's decision, the statement accompanying it may be the most-analyzed in years. Reports portray a weakening economy: The Labor Department said Sept. 7 that that the U.S. last month suffered its first job losses since 2003. Investors will look for hints of further cuts -- such as a pledge to act as needed to safeguard the six-year expansion -- or language that plays down the risk of higher inflation.

``The markets will be disappointed by 25 basis points,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. ``If they do more now, they may be more cautiously optimistic in the statement. If they do 25 basis points, they will commit to doing more. You can argue it either way for which is the more powerful.''

The Fed's decision today will come hours after the government report on August wholesale prices; the Consumer Price Index is released tomorrow. As recently as the last FOMC meeting Aug. 7, officials said inflation was the ``predominant'' risk to the U.S. economy.

Just 10 days later, the Fed acknowledged that ``downside risks to growth have increased appreciably'' and pledged to ``act as needed.'' Policy makers will probably use similar language today, economists said.

`A Considerable Amount'

``The statement will point to the growth rate as the predominant policy influence and give the market the flexibility to price in a considerable amount of easing,'' said Brian Sack, vice president at Macroeconomic Advisers LLC in Washington and a former Fed economist.

Bernanke, 53, and his team may take additional steps to increase liquidity, including lowering the discount rate --which the fed charges on loans it makes to banks -- or altering terms for collateral used for loans from the central bank, economists said.

In their public comments, Fed officials have diverged in their assessments of risks to growth, making today's meeting particularly tough for analysts to handicap.

Since the August jobs report, Fed Governor Frederic Mishkin and San Francisco Fed President Janet Yellen have highlighted threats to consumer spending. By contrast, Fed bank Presidents Richard Fisher in Dallas and Charles Plosser in Philadelphia noted signs of resilience in the economy.

No Cave-In

At the same time, all agree the Fed doesn't want to be seen as caving in to funds that piled into the market for securities linked to subprime mortgages, those made to borrowers with poor or limited credit histories.

As defaults on such loans climbed, investors fled, making it tough for some companies to obtain credit; the market for asset-backed commercial paper shrank the most in at least seven years.

``It is not the responsibility of the Federal Reserve --nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions,'' Bernanke said in an Aug. 31 speech in Jackson Hole, Wyoming.

Anything seen as a bailout might increase ``moral hazard'' -- spurring investors to take on even more risk, comfortable in the belief the Fed will make good their losses.

Rivlin Regrets

Former officials including Alice Rivlin, who was a Fed vice chairman under Bernanke's predecessor Alan Greenspan, have expressed regret over cutting rates three times in 1998. The economy continued to expand with little harm from turmoil in financial markets at the time, data later showed.

``The moral hazard argument is a powerful one,'' said Philip Orlando, who helps manage $260 billion as chief equity market strategist at Federated Investors Inc. in New York. As a result, he predicted, ``the market is wont to be disappointed'' by today's decision.

Others say policy makers will focus more on the recent economic data showing signs of a sputtering economy. Besides the decline in August payrolls, retail sales and industrial production rose less than forecast last month, and the Commerce Department may say tomorrow that builders broke ground on the fewest new homes since 1995.

Bernanke and fellow policy makers ``are trying to step away from the Greenspan model,'' said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. ``But at the end of the day, they will act the same.''

To contact the reporter on this story: Steve Matthews at slanman@bloomberg.net .

[englishman26]

There was a good piece in businessweek this week about the risk of stagflation because while the US economy might be slowing, the global economy is still running so we still have inflation risks since so much of what we use comes from abroad, allied with the destruction of the dollar making imports more expensive.

[Risky Trading]

Can Uncle Ben not cut rates...doubt it as he cannot risk throwing the comsumer into recession.
However the market won't be pleased with a 1/4 and he probably won't do a half..so possibly a minor relief rally and then another drift sideways until we get more earnings reports.
I hope for a rally as my glass is half full!

[microhedge]

Read that article, very good piece and I tend to agree.

Albeit, I'm sticking with my quarter percent cut prediction.

[optimus25]

50 basis. unbelievable move after announcement

[Stin]

did not see that coming..

[krazykowboy]

no cut on Tuesday, but Bernake will make statements that will leave the probability of rate cuts later in the year.
most likely .50 in october, followed by another .25 or .50 in november
with the markets already priced for a likely cut expect a moderate sell-off if this scenario plays out.
position your assets accordingly

well i gotta admit i missed that one by a mile and the markets looked great today.

but the scary part is what does the Fed know that is contrary to what it's been telling us. You can bet they've got stats that show were headed for a full blown recession.

[madcowdisease]

Look at the homebuilder stocks. It looks like Wall St. expects a bottom soon.

I, for one, feel the Fed made a mistake today. The dollar doesn't have a leg to stand on at this point as Ben and Co. just killed it. Oil will get more expensive, as will gold, silver, platinum, copper, nickel, and even wood. The whole commodity sector will cost Americans more and that will have a ripple effect on the consumer as we try to absorb higher prices. The weak dollar is making americans relatively poorer compared to the rest of the world. I don't know how much our consumer driven economy can handle as the dolar continues to fall relative to world currencies. Speculators will try and tell you it's suply-demand equations. That may be part of it but as the dollar falls it buys less so it's a two component scenario. At least all those irresponsible borrowers who took "teaser" rates will be happy. Thanks Ben.

[TonyM]

Yup, looks like I'll need to postpone that European vacation, Euro hit $1.39 today, ouch. On a positive note we can compete in trade exports, now let's see what do we have to export?...Oh yeah, ridiculously cheap money:lol:

[cramerica1972]

Yup, looks like I'll need to postpone that European vacation, Euro hit $1.39 today, ouch. On a positive note we can compete in trade exports, now let's see what do we have to export?...Oh yeah, ridiculously cheap money:lol:GOOD job uncle ben.....allowing wallstreet to manipulate the fed..........dummy.