I am not pulling your leg von. I am asking you this to stimulate your thought. Is easy for anyone to say this or that will go up or down. It becomes an entirely different matter when you are betting your money on it. You need to be confident in what you are saying, through proper understanding of the markets without blindly believing what the Fed and the financial press are telling you. If you want to go long, you want to do it when it is cheap. If you want to go short, you want to do it when it is expensive. Either case, you want to be able to sleep at night -- that's very, very important. If you can't see yourself having such level of confidence, why risking your hard-earned cash? Only do it when you knew you can win. Don't speculate. Speculators always loose in the long run.
The Fed is going to cut, because it has no other choice. The credit derivative market is a multi, multi-trillion dollar business. Is bigger than the combine of the US, the UK, the German, the French, and the Japanese economies. The Fed knew this, and it will cut to save the banks. That's the only thing they care about. The Fed has only one tool, and it cannot fight insolvency without more inflation. Is impossible. You must understand that the Fed is, afterall, a private institution -- one that is established to make money with the monopoly of money creation. Cutting the Fed Funds rate is essentially money printing. New money will need to be printed through its electronic printing press in order to lower rate. And that new money is created out of thin air. I have written about this numerous times. Inflation is the by-product, which will be reflected in the prices of precious metals and commodities. They have been changing the definition of inflation on dictionaries and web sites such as wikipedia to make the public think that inflation is measured by the CPI published by the US government. That measure is manipulated, is a total joke. Inflation is here, and is serious. Is no accident that Oil is breaking the $100 mark amid these talks of recession and global stock market turmoil.
- The Fed said the subprime problem was nothing compared to the size of the US economy. Wrong -- it is big, and is causing a global financial meltdown.
- The Fed said the subprime problem was contained. Wrong -- it is now spreading to Alt-A, prime, auto loans, CDS, etc and other sectors and other countries.
- The Fed promised both "no recession" and "price stability." Wrong and wrong again -- policies employed to fulfil this misguided political mandate are now resulting in both recession and inflation.
Yesterday Bernanke pledged, once again, to "act in a timely manner as needed to support growth and to provide adequate insurance against downside risks." This is about the 4 or 5th time he has said so since initially making the pledge as the Fed started cutting rate on September 18. The Fed has cut the Fed Funds rate 5 times and the stock markets are still below the levels at which the Fed started and credit spreads continue to deteriorate. The Fed chairman's "timely" pledge appears to be running out of time.
Stop listening to the Fed and the media which is trying to put a very good spin on things.