Fed cuts rate by 50 basis point. Now what next?

[Venkat123]

alpesh,
Lacker just said US could end up in a recession. That's a big concession coming from a fed. He also talked about Fed losing credibility if inflation persists. Today's ISM showed high inflation.

 

[uasish]

You guys always keep us updated,thks.

 

[Venkat123]

You are welcome. The most bearish news for exporters to US is that US savings rate has turned positive. People have slowed down spending and instead are saving. I don't know how much those low interest rates are going to matter if you are not ready to spend. Not much direct effect on India but this could leave China and Japan in a spot.

 

[alpesh14]

alpesh,
Lacker just said US could end up in a recession. That's a big concession coming from a fed. He also talked about Fed losing credibility if inflation persists. Today's ISM showed high inflation.

Fed was really never concerned about inflation. They kept on saying that its under control . its under control. However it really sucks to pay 3$ for gallon of milk and 3$ for gas/petrol. Prices have gone up for each and everything. But FED has other means of calculating inflation. they don't consider hike OIL & energy price as inflation as its tied to market. But fed doesn't know that price of oil is going higher & higher because they keep on cutting rates. Obvious a normal US citizen would belive them but I do not.

Now factory reports started showing real weakness and now we are in recession. Everyone talked that this recession will be a lighter one as compared to all previous one and will last merely for 6 months. I doubt it though.

Walstreet already expects Ben to cut rate by 50 basisi point when they meet Mar 18th. I am sure BEN will cut rates and will take us into more deep trouble. Greenspane created this bubble now Ben is just putting some more air in bubble.

Venkat, I don't think we can be decoupled from world. When china/japan slows down with US recession. I m sure india will also slow down. I expect sensex to be around 15K then I can do some shopping. I hope to get house/apt if everything goes down. May be my last hope. else keep on renting.

Ashish, I am a long term investor. could you please suggest few stocks for long term? I got RPL, ISPAT, Suzlon, UNITECH, EIH hotels & SBI. All are in small quantity. If market goes down i m planning to buy some more. what do yuo think about all these stocks and please let me know if i can invest in some other.

Thanks

 

[Venkat123]

alpesh,
I agree. On India, i said there will not be any direct effect but the effects on China and Japan will have an indirect effect on India. China will do anything to keep its economy alive and well until the olympics are over.

 

[alpesh14]

I hope China don't dump their $ reserve and convert them into euro or gold after olympics. If recession starts then china will be exporting less and less goods to USA. Finally they might just dump $ which will be disaster for USA. Value of $ will be equivalent to just piece oof paper. And whoever has foreign reserve in US $ will also get screwed.

British ruled the world because they used devide and rule. Noone can fight against USA with military and weapons USA have, The only way to defeat them is to distroy their economy and US will fall.

 

[judemit]

The only way to defeat them is to distroy their economy and US will fall.

The US will distroy its economy, if they keep doing the same things for the next few years. Bush is again out with a $3.1 Trillion budget and soon US will have a record deficit. The tax rebate checks will reach the tax-payers soon and boost CHINA's economy for sure. The stock markets are strugging to stay put on news that someone would bail-out the Bond Markets. Hope this happens soon(even though i think this is unlikely), If not one can see lower levels soon. The rating agencies are planning to comeup with a new rating system instead of the treditional (Alphabet based) rating system. Lets see what happens to the bond market.

 

[Venkat123]

Bailout could be limited to munis.

 

[suba_stocks]

you will not see any further rate cuts here after .....for obvious reasons

regards
suba

 

[judemit]

There will be more rate cuts this year, i expect a rate cut in March and again in June this year.

FYI: From Bloomberg News

"Ackermann Says Bond Insurers Threaten Debt `Tsunami'

Feb. 7 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said rating downgrades for bond insurers pose risks that could match the U.S. subprime market collapse.

``It could be a tsunami-like event comparable to subprime,'' Ackermann said in a Bloomberg Television interview in Frankfurt today. Deutsche Bank, Germany's biggest bank, is ``well positioned'' on its risk from bond insurers, he said.

Bond investors stand to lose $200 billion should MBIA Inc., Ambac Financial Group Inc. and Financial Guaranty Insurance Co. forfeit their AAA grades because of declines in mortgage-backed securities they insure, according to data compiled by Bloomberg. Ratings on $2.4 trillion of debt that the industry guarantees would be thrown into doubt.

Complete story: http://www.bloomberg.com/apps/news?pid=20601087&sid=aNakA5B47ql4&refer=home