It was a long awaited FOMC, Federal Open Market Committee meeting today----and most pundits had expected a 1/4 point lowering of the interest rate. Many had hoped for a half point lowering.
More disappointing that the numbers was apparently the writing that went along with the lowering. Here is the situation as I see it. Mr. Bernanke wrote his PhD thesis on the flaws in the first Crash of 1929, and in his thesis he argued strongly for BOLD action to prevent a meltdown in the midst of a credit crisis. Mr. Paulson of the Treasury department, has been not as bold in his moves to rescue the housing market, and went to great lengths at his press conference last week, to descibe how the Treasury plan was voluntary.
My OpEd view is that the traders do not see the action today as BOLD and rather see it as TIMID and bound to FAIL. That was bad news to them and they sold.
The good news. Bond prices went up as folks fled to Treasury securities. Lower interest rates on the mortgage sector may be on the way---just what those home buyers in their 20/s have been waiting for.....oh yes and lower prices....which may be coming also.
Click on the post for an article on this subject from Minyanville.
Stay tuned.
Tuesday, December 11, 2007
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