More Fed Increases Likely

[MoMoney4Me]

Market Update

09:40 am : Stocks struggle out of the gate as last-week's impressive rally prompts some early profit-taking. Heading into what is expected to be a busy week of economic data, especially with the next FOMC meeting only eight days away, the sluggish start has not been helped by early commentary from Fed President Poole, who sees a 50% chance of another rate hike on August 8. Since that's more hawkish than the 35% chance being priced in by fed funds futures, coupled with commentary from voting Fed President Yellen hitting the wires around 11:45 ET today and the core PCE out tomorrow, investors are using such uncertainty as an excuse to consolidate recent gains. DJ30 -30.02 NASDAQ -7.76 SP500 -2.54 NASDAQ Vol 74 mln NYSE Vol 76 mln

[Lou]

its just tough talk from them.

[madcowdisease]

My money is on another Fed hike the next time the FOMC meets. I don't think Bernanke is as dovish as Wall St. previously thought. His paramount goal is combating inflation. Sustainable growth is a bonus but with oil as high as it is prices will begin to escalate if they haven't already. I heard on 700WLW earlier today that Kellogg and Anhueser-Busch both have said, publicly, they will pass on higher costs to consumers. Anyoen that has been to the grocery knows this to be the case already, but here these co.s are making it public.

The Fed has got to ease demand somehow and their only tool is hiking rates. Part of the reason oil is increasing in price, apart from the obvious speculation, is that it's traded in US Dollars. The dollar is weakening due to myriad concerns about our budget deficit, inflation, and currency traders find more security in other currencies (Euro and even the Canadian Loon). Bernanke wants a strong dollar and I applaude another rate hike in a week.

[NATHAN LLOYD]

I agree another hike. I'm looking to short anything with a high P/E a day after the hike. I wouldn't be surprised if Bernanke talks about a pause after the hike, which will cause another fake rally.

[oldboldpilot]

You cannot honestly believe another rate hike will cure anything. The economy is heading toward an '07 recession as it is. Chasing the price of oil by raising the prime is another indication of the inept handling of the economy. No one could understand Greenspan and that was bad....everyone understands Bernanke and that's worse.
There's nothing like ever increasing Fed rates to cut the legs out from under the markets. The housing market is floundering and think what THAT ALONE does to the economy !

[BuyOnDips]

I wouldn't buy any home builders, even if they appear "cheap". If fact, many are probably still good shorts. I think the pain in the housing market is going to be pretty bad for at least next 12 months.

The stocks I'd avoid are radio stocks, newspaper stocks and housing stocks. And avoid companies that have huge debts.

[Bman409]

You cannot honestly believe another rate hike will cure anything. The economy is heading toward an '07 recession as it is. Chasing the price of oil by raising the prime is another indication of the inept handling of the economy. No one could understand Greenspan and that was bad....everyone understands Bernanke and that's worse.
There's nothing like ever increasing Fed rates to cut the legs out from under the markets. The housing market is floundering and think what THAT ALONE does to the economy !


The Housing market's run up was purely a result of Fed easy money...

This is just the reversion back to the mean

[Svenwulf]

bonds and gold are telling me they are done. maybe a qtr hike, but strong language that they are done. jmo, and prolly contrarian.

[Bman409]

bonds and gold are telling me they are done. maybe a qtr hike, but strong language that they are done. jmo, and prolly contrarian.


I agree with you on gold, especially..

Gold looks real bullish here from a technical point of view

[madcowdisease]

My money is on another Fed hike the next time the FOMC meets. I don't think Bernanke is as dovish as Wall St. previously thought. His paramount goal is combating inflation. Sustainable growth is a bonus but with oil as high as it is prices will begin to escalate if they haven't already. I heard on 700WLW earlier today that Kellogg and Anhueser-Busch both have said, publicly, they will pass on higher costs to consumers. Anyoen that has been to the grocery knows this to be the case already, but here these co.s are making it public.

The Fed has got to ease demand somehow and their only tool is hiking rates. Part of the reason oil is increasing in price, apart from the obvious speculation, is that it's traded in US Dollars. The dollar is weakening due to myriad concerns about our budget deficit, inflation, and currency traders find more security in other currencies (Euro and even the Canadian Loon). Bernanke wants a strong dollar and I applaude another rate hike in a week.

Prescience?

http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=OBR&Date=20060801&ID=5909643

[madcowdisease]

The Housing market's run up was purely a result of Fed easy money...

This is just the reversion back to the mean

Thank you my brother for stating what I've been saying all along. This couldn't be more true and I, for one, am tired of all this rumpus regarding the housing market. Your home isn't supposed to increase 25%/yr. Look at a historical chat of Fed Fund Rates and you will see that the goldilocks' economy of the mid to late nineties occured while the FOMC had us between 4 and 6%. You should also know that cheap money, particularly trading on margin, is what caused the dotcom crash (will we ever learn :roll:).

The housing boom, and rampant speculation, were created, as you stated, by the Fed giving us 1% interest on borrowed money. The housing ATM that ensued is part of the reason the Fed had to tighten to begin with. Too much cheap money. For all those whining about the housing market I ask that you do some research and realize this won't be the end of the world. Another sector will emerge and lead us forward. The FOMC are doing exactly what they ought to and that is guiding us toward sustainable growth. I hope we go to 6% before the end of the year.

[Svenwulf]

Prescience?

http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=OBR&Date=20060801&ID=5909643

Prescience is the ability to predict the future through vision.

really you think? although Paulson and Bernanke may be interchangeable for your purposes, sounds like Paulson is saying the economy is slowing, doing the fed's job for it. but dont take my word for it.. the 10 yr has been trading under 5 for 2 days now. gold is up. silver up huge. again, jmo. i have been in the 6%/recession camp for awhile, but the market changes from day to day. today seems to say one and done.

[madcowdisease]

I was attempting to reaffirm my comment of the FOMC wanting a strong dollar. The link simply supports what I posted yesterday on this topic.

[oldboldpilot]

Too much cheap money. For all those whining about the housing market I ask that you do some research and realize this won't be the end of the world. Another sector will emerge and lead us forward. The FOMC are doing exactly what they ought to and that is guiding us toward sustainable growth. I hope we go to 6% before the end of the year.[/QUOTE]

Well my brother, you just may get your wish. As to "whining" about the housing market, just what sector in particular do you feel will "emerge" and deliver us from the impending recession??
It never ceases to amaze me that "economists" feel they are masters of a science. For every economist's opinion, there are economists who opine just the opposite. Opinions are like belly buttons....everyone has one !!!!

[madcowdisease]

Well my brother, you just may get your wish. As to "whining" about the housing market, just what sector in particular do you feel will "emerge" and deliver us from the impending recession??
It never ceases to amaze me that "economists" feel they are masters of a science. For every economist's opinion, there are economists who opine just the opposite. Opinions are like belly buttons....everyone has one !!!!

Recession is part of the business cycle. I say the sooner we welcome and usher one in the sooner we can prepare for the next growth, or Mark-Up, phase. One must keep in mind that historically expansion in the economic cycle lasts ~44 months while contractions last a meager 11 months. I suppose the difference between I and those that feel recession is anathema is that I accept it as part of life, as part of the game we're all here playing.

As for your question to me regarding what may be the next sector to emerge, I did not say anything would rescue us from recession. I did say that another sector would emerge and lead us forward. I don't have all the answers but given the demographic change in this country, and the extreme govt. spending on this issue, perhaps healthcare is the golden child of the next bull market. With energy being as salient as it is, we may even see alternative energies/technologies as a focal point as well. We shall see in another 11 months of the pattern remains constant ;).

[oldboldpilot]

Well bro, we disagree regarding a recession being a part and parcel of economic life. I WOULD agree other than the fact that most recessions in this country are caused by the micromanaging by the Feds who can't seem to do anything right. Invariably, they overshoot the mark and either loosen the money supply way beyond what is called for or tighten it to a point beyond which the economy can sustain growth.
I hope you are correct that alternative energy may lead the way out of the morass in which we find ourselves. Hopefully, it will be "green" because we can no longer afford the "damn the torpedoes, full speed ahead" program that we have had to this point. Global warming is a myth according to our current administration which is SOOOOO on top of events.
I see great challenges for the economic policies of this country whereas you seem to place a great amount of faith in the hands of "academics" who thrive in a "text book" environment.
My knowledge of economics is limited........I have no degree in the subject. The difference bewtween me and those who claim credentials is that I admit my lack of knowledge. Those who hold an advanced degree in the subject do not !

[Svenwulf]

people bash Cramer over individual stock picks. granted, he like anyone who plays this game, gets a few wrong. i feel he is very correct regarding general market trends. but i post not to preach, but to put fact to record:

Cramer from realmoney 8/03

You can't anticipate a [Fed] number, Cramer said. Tomorrow's employment report is the one that that Fed watches the most closely. When there are a lot of jobs created, the Fed tightens rates. If tomorrow's number is weak -- and the consensus is that it's going to be weak -- then it will stop tightening, he said.
This market is such that every time it's up, the next morning it goes down, Cramer said, adding that although it doesn't necessarily stay down, there always seems to be some event that causes it to go down.


from CNNmoney 8/04


Bond prices surged and the dollar sank to its lowest level in two months against the euro Friday after a weaker-than-expected jobs report led traders to bet that the Federal Reserve may pause after two years of rate hikes.

jmo, and do your own DD.

[oldboldpilot]

My bet is they can't keep their pudgy little fingers out of the pudding and they top off their efforts with yet another rate increase to insure we venture into a full blown recession next year. Not written in stone.....I just think they can't resist the urge to tweak things. jmo of course !

[grassferret]

rate hike not probable next week. the pause, however is temporary. it will continue for a bit

[zyzzyva57]

FED will hold (no change)

Keep Page 115 of Master Cramer's book handy

[Svenwulf]

bonds and gold are telling me they are done. maybe a qtr hike, but strong language that they are done. jmo, and prolly contrarian.
i think a quarter point hike is baked in, and i think people are finally realizing the fed will stop before years end. i was in the 6% camp for a long time; i still think that is what is necessary for a healthy economy. but for other concerns, i think the fed is done. so, again, i say one and done tuesday, and thats where my money is. as a student of history, this looks less like the 70s now, and more like the 20s. that is very bad news! these are all my opinions, and prolly contrarian. good luck to all!

[NATHAN LLOYD]

I think this is fed rally week despite what Bernanke does. That is just my opinion. I guess we'll have to wait and see.

[optimus25]

Tomorrow will be a day of activity.

[Svenwulf]

bonds and gold are telling me they are done. maybe a qtr hike, but strong language that they are done. jmo, and prolly contrarian.
blind squirrel finds acorn! originally posted 8/01.

[Lou]

its just tough talk from them.

tough talk...