Sunday, October 26, 2008

The Fed to cut this week (yawn)

The Fed is going to cut again on Wednesday.

1) How much?: I think 50 is likely but the market is hoping for 75. If we crash between now and Wednesday, clearly the Fed will cut more than 50.

2) Is there a joint cut this time? I don't think so. I talked about it a lot last time, but I don't think so since it didn't seem to have a big impact and since it would seem a little overdone doing it twice in a month. If we crash between now and Wednesday, then I would expect a joint cut.

3) Does anyone still believe that after going from 5.25% to 1.50%, that a 0.75% or 1.00% Fed funds is going to really make a difference? Sadly, there are probably some uberbulls out there who do, but I think the "Fed will save us thing" is so March 2008...

Risk remains very, very high, especially if we decisively break S&P 839....

Addendum (Oct 29th): Answers 1) 50 was right. 2) No joint cut was right 3) Still too early but market rallied then sold off post 2:15 rate cut announcement.

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