Read it here first: Fed Responding to Stocks?

Read it here first: the latest meme making the rounds is whether Tuesday’s emergency Fed action was a "Rogue rate Cut."  In other words, is the Fed too sensitive to falling equity prices?

From today’s WSJ:

"Federal Reserve Chairman Ben Bernanke faces a perception problem: It looks like he is too ready to respond to a falling stock market.

That criticism was sounded after the Fed moved to cut interest rates Tuesday, in part because of fears that an overseas stock-market plunge would spill over to the U.S. The drumbeat grew more intense yesterday as critics and others confronted the possibility that the global selloff was at least partly a false alarm, reflecting French bank Société Générale SA’s unwinding of a trader’s unauthorized bad bets, and due less to economic anxiety.

A Fed official said yesterday that the central bank didn’t know of Société Générale’s actions when the Fed cut rates Tuesday morning. But the central bank remains comfortable with its decision, the official added, saying it was based on cumulative evidence of downside risks to the economy, of which mounting volatility in the markets was a symptom. Fed policy makers don’t have a view on the appropriate level for stock prices, but are focused on the overall economic outlook, the official said."

Indeed.

>

Source:
Criticism of Rate Cut Mounts
Société Générale Issue Prompts Questions of Possible False Alarm
GREG IP
WSJ, January 25, 2008; Page A2
http://online.wsj.com/article/SB120120095796214019.html

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What's been said:

Discussions found on the web:
  1. Justin commented on Jan 25

    wouldn’t a lower economic/market level create a situation where rate cuts would actually have more leverage? Why not hold your powder until you see the “whites of their eyes?”

  2. getting older commented on Jan 25

    Stock prices are and should be one among many pieces of data that the Fed looks at. Why? Because when 50% of the population holds stocks their performance cannot help but affect people’s spending habits and thus the economy. That does not mean that the Fed must step in to halt any market decline. However, the markets were truly in panic on Monday and Tuesday and I don’t see how that serves the interests of the 99.999% of the world that is not short the markets. And even shorts are better served by an orderly decline than a panic.

    The larger issue in BB’s actions is why did he give a speech on Jan 10 promising aggressive action and then—–nothing. It would have made much more sense to have announced a 50 bp cut at that time. Then, there would not have been a panic and they could have calmly considered further cuts at the upcoming meeting. Now they just look like they are running around like headless chickens.

  3. wally commented on Jan 25

    First, there ARE downside risks to the economy. We are headed toward recession, or already there, and everybody knows it. Because of that, The Fed should be cutting rates.
    However, they should not be doing it at 7:00 a.m. before market open and in obvious response to world stock prices. They did the right thing but in the worst possible way.
    There will be bad effects from this. One is that a lot ofs people who should be exiting the market in orderly fashion will stay in longer and eventually get burned. Another is that the Fed has now shouldered the responsibility, whether intentional or not, for stock market prices. If the market falls, the Fed will now be blamed.

  4. Bob Brandt commented on Jan 25

    Do you actually believe that 7.2 bn loss was hidden in the bank with no evidence? This would shatter my belief in our working institutions further.

    Do you actually believe that Hank Paulson knew nothing about the 7.2 bn ‘rogue trader’ mess? A little hard to believe since if anyone is ‘connected’, Paulson is.

    Is the Fed just covering themselves so to speak?

    After a year of 2007 hearing the word ‘contained’ multiple times daily, either they lie to us or the lie to themselves. (I would prefer the latter because if the first is true, our economic system is being run by total fools and that is more scary.

  5. Contrarian commented on Jan 25

    “Do you actually believe that 7.2 bn loss was hidden in the bank with no evidence?”

    Evidence: yes. Oversight: no.

  6. Josh commented on Jan 25

    But the central bank remains comfortable with its decision, the official added, saying it was based on cumulative evidence of downside risks to the economy, of which mounting volatility in the markets was a symptom.

    I agree with wally. It’s debatable how much the Fed should cut (if at all). However, why do so right before market open one week prior to a scheduled meeting? This week’s action will not work through the economy until late 2008/early 2009. A week would have made little difference, if the economy were the main focus.

  7. Jim Haygood commented on Jan 25

    It’s sad that so many accept the statist premise that the Fed should ‘manage the economy.’ Central planning does not and cannot work. No group of wise men can know what the proper short-term interest rate should be. The Fed will ALWAYS be behind the curve, or in front of the curve, or off the curve.

    Central banks evolved to perform a specific, limited task — to act as lender of last resort when a panic renders solvent institutions temporarily illiquid. This may be a ‘value added’ function.

    But letting central banks routinely inflate the money supply, manipulate the cost of borrowing, and pretend that they can day-trade the economy, is nothing but a massive value-subtraction charade. Ask the Soviet Union how that worked out … OOPS, it doesn’t exist anymore!

    Thanks a lot, you statist Fed swine, for flushing our prosperity down the drain with your rogue trading and lending. SHOW ME THE AUDIT!

  8. D.H. commented on Jan 25

    The Fed is the cause of all our ills … LOL. With a little sensationalism, looks like we have ourselves a scapegoat we can all agree upon — and they can do no right whether they cut (inflation), stand pat (market crashes), or raise (market crashes faster).

    Glad I am not BB …

    With all the time spend complaining, people could make a lot of money figuring out where to invest …

  9. Neal commented on Jan 25

    The main reason for the rate cut–Hurricane Katrina.

    The GWB administration and fellow Republicans CANNOT be seen to be standing by on a major crisis again.

    And, a steep fall would shake more of the coconuts out of the tree.

    Why do you think the “stimulus” package was pushed through so fast? Just a week ot two ago, there was “no problem”.

    Remember, their only “legacy” at this point is a “strong and growing economy”.

    “Katrina”, baby, “Katrina”!!

  10. Winston Munn commented on Jan 25

    I wonder who the rogue traders are at the monoliners.

    Timesonline:
    Quote: “America’s biggest mortgage bond insurers collectively need a $200 billion (£101 billion) capital injection if they are to maintain their key AAA credit ratings, a figure that dwarfs a plan by New York regulators to put together a capital infusion of up to $15 billion, a leading ratings expert said yesterday.”

  11. Marcus Aurelius commented on Jan 25

    Centralized governmental management of private capital, assets, and debt is the new Free Market.

    Now, if I could only leverage my credit cards into a $ billion or so of bad debt, I’d be set for life.

  12. Vermont Trader.. commented on Jan 25

    FOMC members have said repeatedly in the last few years that they lowered rates too slowly during the last easing cycle.

    Now that the balance of risks has shifted towards economic weakness I would expect them to be more aggressive than we have been used to in the past.

    What if the Fed cuts 75bps again on Tuesday? I think the market would respond very positively to the new and aggressive Fed.

  13. Helicopter Ben commented on Jan 25

    I can believe you suckers are buying that story…LOL. When they floated it to me, I said no way anyone will believe that. Guess I was wrong.

    There’s nothing to see here…move along…

  14. Doug_S commented on Jan 25

    What if there is no recession? Why are we giving $150b of productive people’s money to the loser’s of the world so that they will spend it at Walmart on Chinese imports ASAP?

  15. 2and20 commented on Jan 25

    so the fed just cut 75bps because they didn’t have all the info…why would they cut next week? no cut, bonds fall, equities fall, commodities fall, should be an easy trade right?

  16. michael schumacher commented on Jan 25

    That one person was responsible is the biggest sack of crap out now.

    No matter what the story is………keep the following in mind:

    That was one bank who did one of two things:
    1. dumped the positions because they know that might be the highest price they will ever get

    2. Total Panic

    Remember it was the assets of bad trades from ONE BANK.

    This will occur again as they now see that it’s actually feasible regardless of whatever communication they do or do not have with the ECB.

    ONE BANK.

    Ciao
    MS

  17. gunthestops commented on Jan 25

    First, in a 50 trillion dollar world economy, 7 billion is a drop in the bucket and would have little effect other then create a confidence issue for that bank and its management team. Second, futures are a zero sum game, if someone loses 7 billion others gained 7 billion.

    The Fed seems to be doing a good job in the face of financial insanity. The leaders in our banking and financial system failed to do their primary duty and manage risk. Many of our banking leaders have turned into fast buck artists, going for big paychecks and leaving the owners (stockholders) in trouble.

    Between the Federal government being 9 trillion in debt and spending more everyday and financial leadership being incompetent and corrupt all the while CNBC cheers them on! I would say the Federal Reserve has a tough job keeping things going in the right direction.

  18. zero529 commented on Jan 25

    Before we knew about SocGen, Barry, you suggested on the tube that we’d see a tradeable bottom and rise in the next couple of weeks/months. Now that we know this wrench in the machinery was responsible for that little hiccup, has your outlook changed? Seems like it throws a whole lot more uncertainty into the data/models.

  19. Stuart commented on Jan 25

    The market is still pricing in a 50 bps cut….meaning…. the market is set up for a perfect short as it’s bound to be disappointed.

  20. Jay Weinstein commented on Jan 25

    “It’s sad that so many accept the statist premise that the Fed should ‘manage the economy.’ Central planning does not and cannot work. No group of wise men can know what the proper short-term interest rate should be. The Fed will ALWAYS be behind the curve, or in front of the curve, or off the curve.

    Central banks evolved to perform a specific, limited task — to act as lender of last resort when a panic renders solvent institutions temporarily illiquid. This may be a ‘value added’ function.

    But letting central banks routinely inflate the money supply, manipulate the cost of borrowing, and pretend that they can day-trade the economy, is nothing but a massive value-subtraction charade. Ask the Soviet Union how that worked out … OOPS, it doesn’t exist anymore!

    Thanks a lot, you statist Fed swine, for flushing our prosperity down the drain with your rogue trading and lending. SHOW ME THE AUDIT!

    Posted by: Jim Haygood | Jan 25, 2008 8:41:09 AM

    I really wish I had written this–well said Jim.

    In a previous post either here or at Calculated Risk, I remarked that Bernanke’s belief in “economic engineering” poses a great danger just as Greenspan’s hubris created much of this crisis.

    Human “analysis” of inherently chaotic and complex “unanalyzable” situations has a terrible way of making things worse, not better. Jim is right–this is statism, and we know how that ends up.

  21. Jeremy commented on Jan 25

    I guess by saying Bernanke faces a “perception problem”, the WSJ
    was politely alluding to issues concerning his credibility, competence and integrity.
    These issues are no doubt currently occupying the minds of policy makers in different parts of the world and their conclusions, and subsequent actions, may prove to be to the detriment of the U.S., the dollar and the economy.

  22. Justin commented on Jan 25

    When does the time come where all the people in power lose credibility? Do they really think the commoner is going to put up with this crap adnauseam?

  23. Loren Steffy commented on Jan 25

    BizLinks | 1.25.08

    Enron’s successor requests millions for payout error United’s Chicago deal would be issue in Continental merger Houston exports rise 28% as city keeps No. 2 rank Bush and House in Accord for $150 Billion Stimulus How Lobbyists Helped Foreign…

  24. FormerlyknownasJS commented on Jan 25

    “Fed policy makers don’t have a view on the appropriate level for stock prices.”

    We’re supposed to believe that? Then why cut conspicuously on a stock rout? This is obviously a lie and the Fed clearly has a target for stock prices. There was no new evidence over the weekend of fundamental economic weakness. None whatsoever and everyone knows it. The Fed is dangerously close to losing all credibility.

  25. TKL commented on Jan 25

    The complete absence of “incoming information” on the economy over the holiday weekend will mark the Fed forever. It obviously and inescapably acted for no other reason than to support equity markets.

    Yet the Fed dissembled in its statement: “The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth.”

    In this age of supposed transparency, the statement should have said: “The Committee took this action in view of equity-market declines. Such declines, if they accelerated and deepened, could create additional strains on the financial system and lead to severe economic distress.”

    Yesterday’s good initial-claims number rubbed salt in the Fed’s credibility wound.

    They cannot cut again next week. Perhaps they knew that, and Poole’s dissent was included as a signal — a tacit, childish admission that they were acting badly and would have to be extra good next time.

  26. The Financial Philosopher commented on Jan 25

    Does anyone here at TBP expect the Fed to act “rationally” by their definition? Does anyone here expect any report from the Federal government to provide a realistic reflection of the true economic picture? If you read Barry’s posts regularly, my guess is that most here would say, “No,” to both of those questions.

    If so, then why the surprise? Why complain over the expected? Why not invest according to the expectation that the Fed will act in a way that matches your expectations — in a way they have acted for the last decade and beyond?

    Personally, TBP has reminded me to look at the “big picture” and doubt everything. Barry does a fine job of tearing apart perception and clarifying reality while setting the expectation that the markets (including the Fed) are not comprised of rational participants.

    Cheers to all…

  27. wunsacon commented on Jan 25

    We have met the enemy. And it is us.

  28. Toro commented on Jan 25

    I don’t blame the Fed for cutting. If the financial system had collapsed, then the Fed would have been blamed for fiddling while Rome burns.

    I think the big question is what happens on Tuesday. If they cut by 50 bps, then the criticism is spot on. But I don’t think they want to be seen as a lap dog to the stock market, so I don’t think they’ll cut 50. Instead, they’ll go 25 or even stand pat. After all, would the Fed cut 125 bps on Tuesday if there hadn’t been a dramatic liquidation? No way.

  29. kk commented on Jan 25

    What is is, the Fed cut, and those are the cards delt to put into the model. I wish Barry would focus on the next Fed meeting, and how it will play out, instead of focusing on conspiracy theories.

    If you are bearish, shouldn’t this rally is a gift to fade at a later time?

  30. kk commented on Jan 25

    What is is, the Fed cut, and those are the cards delt to put into the model. I wish Barry would focus on the next Fed meeting, and how it will play out, instead of focusing on conspiracy theories.

    If you are bearish, shouldn’t this rally is a gift to fade at a later time?

  31. BG commented on Jan 25

    Wow! I have never read some much contention and differing of opinions. I am strickly a spectator; but can’t help but remember how there was talk of a housing bubble 2 or 3 years ago which eventually came to pass. The whole thing kind of reminds me of a rumbling thunderstorm at a far distance but within hearing range.

    I do wonder where we will find ourselves in 2 or 3 years. With the pushing of the financial envelop in every direction along with the changing demographics of this Country, it may get downright scary before it gets better. I just feel there are no longer any bounds what-so-ever. Global electronic trading has morphed into this multi-faceted financial monster with tenacles going everywhere.

  32. Kp commented on Jan 25

    The emergency cut looks most like the Fed is afraid of a BIG panic selloff. It did look like a big panic selloff could have happened. They have been getting hammered, rightly or wrongly so, lately about being asleep at the wheel. So they stepped up.

    They are and have been for some time pushing on a string and they know it. It’s all psychology now, and they are doing their best.

    I really do not believe it will make a difference long term one way or another. Asset prices must fall or incomes must rise. Wage inflation is next to impossible in the global economy of which we are now(and have been since the ~80s) a part of.

  33. Brian A. commented on Jan 25

    So the fed got punk’d?

  34. toady commented on Jan 25

    Helicopter Ben,

    Why, in the past 6 years through tax cuts, have we given more than $150b of productive working people’s money to a wealthy investor class (the winners of the world) who blew the cash on out-of-country 3rd homes, Italian cars, and asset bubbles?

    That there has been a dramatic increase in wealth in the top 1% of earners, in part due to an easing of the tax burdens at the top, has killed me. All that extra money went right into the markets and inflated the bubbles that are currently popping.

  35. catatonia commented on Jan 25

    First time post; discovered this site at the top of the year (what timing, eh?) Outstanding blog with an exemplary comments section. Thx to all.

  36. trolling for dollars commented on Jan 25

    Toady, the money went into yachts called “Positive Carry” instead of laptops for children. Is that what you’re complaining about? Tsk. Tsk.

    ;-)

  37. BG commented on Jan 25

    All of those actions continue to drive all money into those same kinds of risky investments. If you want a safe investment with a reasonable return (~CDs, fixed income securities), you can forget it; as a result, the stability or backstop that those kinds of stable investments give investors and the economy won’t be there either.

    It’s like the safe prudent investments with their implied lower returns are now consistently subsidizing the riskier investments with higher returns. That makes no sense. That is not the way it is supposed to work. Our tax policy and government intervention is giving us exactly what we are asking for. More risk and less financial stability. Will we ever reach the conclusion that safe, stable investments and a stronger dollar are a good thing? It looks to me like our policy is for a deficit that has doubled, we must now drop the value of the dollar by 50% in order to be able to continue to play this game of chicken. Do anything easy or coy in order to preserve the status quo.

  38. brbrown commented on Jan 25

    I think that this discussion shows that the fed has succeeded in misdirecting our attention.

    The bottom line is that our economy is based on consumerism. The drug companies already have people buying drugs they don’t need. The car companies have every family driving 2 (fuel-inefficent) cars. Our drawers are stuffed with clothes we don’t wear. Remodeling our kitchens as a hobby is getting old. And the list goes on…

    So all of these govt “plans” are intended to induce the consumer to spend more and nobody really can know what the consumer will do in response.

  39. dave commented on Jan 25

    So I guess the stock market is now another GSE, with an implied guarantee on all investments. No wonder stocks are soaring. It has been blessed as the next bubble to revive the economy, with serious down-side tumbles blocked before the market even opens! Unbelievable.

  40. Northern Observer commented on Jan 25

    When does the bill come due?
    When does all this deficit spending and massive monetary expansion undermine the value of the US dollar to the point that foreigners no longer want to carry it?

    A million dollar question.

  41. michael schumacher commented on Jan 25

    Our Fed got punk’d yes but the drivel we are supposed to believe is getting more and more unbelievable by the hour. The unit that the SG trader worked in generated about $15 million in revs. PER YEAR.

    Market cap of SG is about $36 b
    Loss of about $7b

    Do the math…

    It’s just not possible to happen in a unit that does $15 m in a year…..in REVENUE.

    At least Nesson’s amounts made some sense. This is just out and out lying.

    Ciao
    MS

  42. Ross commented on Jan 25

    I would echo Daves point about the markets being just another GSE. Remember when we would argue the point that Freddie and Fannie were not guaranteed by the treasury? It is obvious that there is now an explicit guarantee. If this is so, should we not consolidate them on the Government balance sheet? Nah!

  43. Winston Munn commented on Jan 25

    Northern Observer wrote, “When does the bill come due?”

    That is the key question.

    My guess is at the worst possible time, in the worst possible way, and when we least expect it to occur.

    Ask any heavyweight boxer after he has been knocked out about the punch that did him in and all will tell you the same thing: I never saw it coming.

  44. Lola commented on Jan 25

    Maybe the latest cut isn’t so bad. Many bear economists have remarked that the FED was behind the curve, if Tues sell-off was mainly due to SoGen then the FED may have caught-up with the curve…..

    It seems to me the FED will be cutting at the next meeting to prove that the 75bps was not a premature reaction to the stock market. If FED doesn’t cut then people will think its compensating for the aggresive cut…..

  45. BG commented on Jan 25

    I guess I am now wondering if the ECB knew about the SoGen problem early on and chose to not share that information with the Fed? If so, so much for global coordination.

    It’s possible they didn’t know either; but it seems interesting that they didn’t and still haven’t followed the lead of the Fed.

    Did the ECB ever drop rates at all this week?

  46. D.H. commented on Jan 25

    The bill comes due when the rest of the world can create their own rabid consumer base and they will care less about us. However, I have a feeling that there will always be someone interested in the trillions they can make from our tribe of consumption addicts. Thus, we will most likely not get completely dumped so long as we are a significant value add.

    I have read all the good books breaking down the Fed and every imaginable reality and conspiracy. Despite all the issues that I see with central planning, is decentralized planning and genuine free market capitalism a potential reality, or a unicorn in utopia?

    Would a true free market swiftly turn into something that looks a lot like the tribal lord model in Afghanistan? Seriously, are human beings ready to accept a world where no one person is perceived as in charge? I think some of the anti-central planners may be glossing over the deep complexities that would arise in an economy with no backstop and no rules except “what the market does is the best of all possible worlds.”

    I believe the Fed does a ton of things that have created negative issues in the economy. But how can we expect perfect planning of nations or economies when humans are by nature fallible, biased, and political? We have not had a deep depression in almost 100 years and, for the most part, people have had a nice life living in the US since then. If we are talking Big Picture, the real Big Picture, then we have been lucky enough to live in a society that has provided food, shelter, safety, and jobs at a much higher level than many other places in the world. I am not saying we are the best (I think our current government has done some horrible things and US-centric ignorance is very shameful for any intelligent society), but I can think of many places (Africa, Middle East, Russia, rural China, South America) that don’t seem more appealing to me.

    Sometimes I think we are a bit spoiled when we think in an absolute way rather than relative. I am glad we are always pushing to get better, but sometimes it’s nice to stop and enjoy what we have. I also think it’s in our nature to pursue that ever elusive “Freedom” we have heard so much about, and we sometimes forget that absolute Freedom is a fairy tale that only works if a handful of people live on Earth and don’t have a reason to compromise with others. Until then, we have the smartest and savviest attempting to control the less intelligent and less savvy. At least a government and central planning prevents us from spiraling into a purely “survival of the fittest” world.

    Houses have inflated in value, but I’d like to see them revert to the mean rather than fall way below the mean in an outright panic. And if there is not a backstop to at least attempt to prevent a massive crisis, then who would stop the wealthy people from shorting the market all the way down to near zero while hiring PR firms to create mass hysteria? And who would negotiate with China on our behalf if they threatened to dump all their US Treasuries on the market in one day and literally destroy our entire society? My neighbor is not up for the task.

    Bottom line: the Fed is far from perfect, but I would like to hear some extremely detailed visions of a world where central planning ceases to exist.

    IMO, there’s a lot of Monday Morning QB’s in the world of finance, yet none of them seemed to make it to the NFL …

  47. JGFY commented on Jan 25

    Barry – I think we’re being too hard on the former CEO of the Princeton Economic Department. Who among us wouldn’t throw moral hazard to the wind if they could take some action at work that would backstop their 401k retirement account, or ensure a cushy post-FOMC job @ some heggie?

  48. Pat Gorup commented on Jan 25

    I believe the FED does have a “perception” problem. Policy seems to be based on what is happening with stocks and what the markets expect. If they want to dispel this “illusion” they have a perfect opportunity next week. Don’t cut at all.

  49. mw commented on Jan 25

    Imagine a future situation like the current one, a massive rate cut on a “massive stock sell off”. But wait.. one problem.. rates have already “Ben-Slashed” (sorry) to 1/2% (think Japan) The “Gun” is empty or near so. Ben will go from “Go ahead–make my day” to “HELP”

  50. ef commented on Jan 25

    From Grant’s Interest Rate Observer:

    “The meek will inherit the earth, but not on the Fed’s watch. Monetary policy in the United States is an instrument of
    subsidy as well as of macroeconomic management, and the subsidized class seems always to be the feckless one. When risk is
    mismanaged, or speculation fails, or the bottom drops out of the S&P 500, it’s the savers who take a pay cut. . . .”

    Is the Fed too sensitive to falling equity prices? Yes.

    The stock market is not the economy, and it is frightening that in the last 10 or 20 years it has been given that status of be all, end all. The Feds actions are only decreasing confidence. And rating agencies, “ha”. This is the same period of time that traditional pensions started being replaced with defined contributions, along with a lot of other financial inventions/derivatives. WS got it hands on a lot of money. Is WS the only thing that matters in our economy?

    Wasn’t it at one time, that a company could raise money through equity or issue bonds. That’s why companies went public, to raise money. Although today, they don’t have to because of the large growth in private equity and foreign buyers. But in those days (i.e., 2 decades ago maybe), the company actually made something or provided a valuable/needed service. And the investors received a nice dividend, and in the long-term, because the company was successful (and inflation) the stock price appreciated. It treated it workers nicely, as it did the community and customers, had a strong and ethical board, and solid business practices. The focus today seems more on the stock, and less on the company and the economy. And the fed keeps proving that time after time. Are we measuring the right things for a strong, solid, healthy, sustainable economy for the majority.

  51. VJ commented on Jan 25

    In other words, is the Fed too sensitive to falling equity prices?

    It was obvious with the last rate cuts that Bernanke was a whore for Wall Street.
    .

  52. VJ commented on Jan 25

    getting older,

    Stock prices are and should be one among many pieces of data that the Fed looks at. Why? Because when 50% of the population holds stocks their performance cannot help but affect people’s spending habits and thus the economy.

    It’s understandable why one could draw such a conclusion, but that statistic, although true, does not mean what people think it means.

    That “50% of the population” that “holds stocks” has more value in the vehicles parked in their driveway than they do value in their stock portfolio. The vast overwhelming percentage of ownership of stock and bond securities remains with a tiny percentage of the wealthiest people and/or families.

    An argument can be made that the increasing or decreasing value of the homes that 66% of population owns has more of a ramification on “people’s spending habits and thus the economy“, but certainly not stock ownership.
    .

  53. Koba commented on Jan 25

    The S&P500 is off 20%, the Russell 2k is off 25%, and the Fed is allegedly wrong and jumping because of SocGen? Give me a f-ing break. So, in other words, if the market were down 50% and another Nick Leeson lost $5bil while the Fed’s cutting rates, that would be wrong?

    Jesus H. Christ….

  54. JT commented on Jan 25

    I wonder if FOMC & Bernanke realize they are the Wall Street’s bitches or do they really think they are smart?

    I now have a new observation to follow. Never trust a guy who works inside the beltway with armored black Suburban to really know what f*** is going on in the real world. Hell, I could say there was no inflation too, if I lived in the incubator of stupidity called D.C.

    I would love to be a fly on the wall as they sit and praise themselves on jobs well done.

  55. PFT commented on Jan 25

    Since repeal of the Glass Steagall Act banks have much more exposure to speculative trading on stocks and the derivatives markets. If Bernanke looks panicky, odds are he knows something you do not know, and you probably do not want to know it. We could be looking at trillions in losses that are being hidden. The derivative market is 500 trillion with transactions of 1.5 quadrillion yearly. That rogue trader is likely a cover for some global bankers who were trying to expose Bernankes hand. He blinked. The odd timing of the markets free fall with the opening of the World Economic Forum may be a clue.

    Also, while 50% of the people may own stock, they dont own much compared to the top 1%. And over 50% of the stocks being traded each day are not owned but are borrowed, with orders being sent from the Cayman Islands and other tax havens where the equivelant of 1/3 of global GDP is being hidden.

  56. Mich commented on Jan 26

    When everybody is waiting for Fed to raise interest rates by 75 points (%76 expectation, and the remaining 24% expects 50pts), wouldn’t you expect that if they do cut it, the markets go down (already baked into the prices), and if they don’t, DJIA gives back that 600 points in one day, and probably another 400 during the week to close net 1000points?

    I can’t see why, but still, if for some reason, markets do go up on Monday, I will be buying more puts.

    If it goes up again after the Fed cuts rates, I will be buying some more than giving it a week to see how it all goes.

    Next week WILL be very interesting indeed.

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