Well, there is definitely a lack of confidence in our Feds throughout the market, so a flight to quality is on again.
Time will tell, but the move seems to defy logic, focusing more on investor emotions. Float 'em while the move is on.
Robert D. Ashby
· 1 year ago
Of course, reality hits the market, or rather the disclosure of the BofA/Countrywide merger is now sending the bonds lower so the rally is over as quickly as it started.
For more information on the merger, go over to my blog and scroll down slightly.
Brian LeBars
· 1 year ago
The FED has to cut at a minimum once more. The markets are already pricing in a half point. If the FED does a quater, watch out. Lock your loans today. The half will charge the market.
Richard
· 1 year ago
You know, cutting the fed fund rate is having a diminishing return. Over time, the market is going to price in the effects of a 1% FOMC rate and then what??!? Can't keep cutting forever, Ben!
We have to drop some debt and increase productivity/output in order to turn this mess around.
Robert D. Ashby
· 1 year ago
Brian - If the Fed fails to cut a half and that is what the market expects, stocks will tumble and bonds will win as we saw last time the Feds met and only moved a quarter. That would be good for mortgage bonds, at least short term.
The problem then lies in the fact that the more the Fed cuts, the greater inflation we begin to see, something I have been warning about since back in September wiht the "Pandora's Box" analogy.
The market is finicky, so anything can happen these days and emotions are overruling fundamentals so basically all bets are off.
Richard - You're right, Ben can't cut forever, but he is sure doing a good job of devaluing the dollar and trying to hide the fact inflation risks are growing.
Rememebr that the low Fed Funds Rate and their lack of attacking the issue harder (slow steady increases) is what helped bring us the current crisis and their actions now aren't helping much, if at all.
Brian LeBars
· 1 year ago
Well advising clients, since I do mortgages everyday the past 3 FED cuts in the past consumer rates continue to rise up to the cut. So I advise my clients to lock loans now while the market is "Satisfied" and money will start a shift into stocks.
I’m not an economist, just a Mortgage Broker. My clients Mortgages is what I’m concerned with.
Robert D. Ashby
· 1 year ago
Brian - I am not an economist either, but I do follow the economy and how things play out. And as you can see, they don't always play out as expected.
The point I was trying to clarify was simply that of your statement regarding the markets and the Fed cut. Sure, the Fed will cut rates (though they don't have to and with inflation climbing, probably shouldn't), but if you remember back at the last meeting, the stock markets tanked when they only cut 1/4 while the markets planned on 1/2. You mentioned that if they only cut a 1/4 then watch out. Well if they only cut a quarter, bonds will likely rally and floating would be best.
That being said, I agree that protecting your clients money is #1 and right now is a great time to be locking in loans based on technicals and fundamentals. Next week, as the CPI and PPI come rolling in we will see how bad inflation is looking. If bad, bonds will tumble.
(FYI - Don't let the picture fool you, I have been doing mortgages and have been in the financial arena for about 10 years)
Franklin
· 1 year ago
The effects of the rate cuts do have deminishing returns. I think the markets have realised by now that rate cuts aren't going to solve anything. My 2 cents says that Bernanke's rate cuts are virtually useless by now, in terms of market sentiment, so he might be well advised to keep his powder dry.
All Comments
Time will tell, but the move seems to defy logic, focusing more on investor emotions. Float 'em while the move is on.
For more information on the merger, go over to my blog and scroll down slightly.
We have to drop some debt and increase productivity/output in order to turn this mess around.
The problem then lies in the fact that the more the Fed cuts, the greater inflation we begin to see, something I have been warning about since back in September wiht the "Pandora's Box" analogy.
The market is finicky, so anything can happen these days and emotions are overruling fundamentals so basically all bets are off.
Richard - You're right, Ben can't cut forever, but he is sure doing a good job of devaluing the dollar and trying to hide the fact inflation risks are growing.
Rememebr that the low Fed Funds Rate and their lack of attacking the issue harder (slow steady increases) is what helped bring us the current crisis and their actions now aren't helping much, if at all.
I’m not an economist, just a Mortgage Broker. My clients Mortgages is what I’m concerned with.
The point I was trying to clarify was simply that of your statement regarding the markets and the Fed cut. Sure, the Fed will cut rates (though they don't have to and with inflation climbing, probably shouldn't), but if you remember back at the last meeting, the stock markets tanked when they only cut 1/4 while the markets planned on 1/2. You mentioned that if they only cut a 1/4 then watch out. Well if they only cut a quarter, bonds will likely rally and floating would be best.
That being said, I agree that protecting your clients money is #1 and right now is a great time to be locking in loans based on technicals and fundamentals. Next week, as the CPI and PPI come rolling in we will see how bad inflation is looking. If bad, bonds will tumble.
(FYI - Don't let the picture fool you, I have been doing mortgages and have been in the financial arena for about 10 years)