Fed Cuts, Stocks, the US Dollar, Gold, & Commodity Prices

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"As IR knows if we expected true hyperinflation we should be buying as much RE as possible."

Except that this time we already have hyperinflated real estate, so that asset class is already overcooked. I suppose you could invest in fine art...
 
IR-

Mr. McGuire: I just want to say one word to you - just one word.

Ben: Yes sir.

Mr. McGuire: Are you listening?

Ben: Yes I am.

Mr. McGuire:'Plastics.'
 
Monetary inflation is not the same as price increases. Income increases do not necessarily follow price increases, and spenders would not do well. Neither would savers. RE can become worth less if folks find it necessary to spend more on food and RE can depreciate during an inflationary period, and it can definitely depreciate on a nominal basis. On circular reasoning, some interest rates can be lowered, ie. the fed funds rate, which indirectly cause other interest rates to rise, ie. the 10 yr treasury today. It is not circular because not all interest rates are the same; apples and oranges are both fruit, but they taste different and they grow on different trees.
 
Those of you who think increased liquidity, (borrowed money), will juice the real estate market, you may want to consider this. Created liquidity always flows to where growth is strong. Again, created liquidity always flows to where growth is strong. Strong growth, does that sound like the real estate market right now? If you look at the financial news, where is strong growth? That is where any increased liquidity will flow.
 
Simple explanation about Fed Rate and the value of the dollar.

biz.yahoo.com/ap/070921/dollar.html

"Lower interest rates, while used to jump-start the economy, can alo weaken a currency by giving investors less return on investments denominated in the currency.

The Fed's move put more pressure on the U.S. dollar because it made returns on investment in other countries more valuable. The weak dollar also means that American goods are cheaper for overseas buyers, which can help manufacturing and producers, and it can help companies with big foreign operations turn a larger profit by converting overseas profit into dollars.

On the other hand, a steadily weakening dollar could also discourage foreign investors who buy the country's debt. As investment in U.S. Treasury securities dwindles, the government will have to pay higher rates at weekly auctions to find buyers for its bills, notes and bonds. That eventually could push up borrowing costs for all Americans."
 
"In the past when we lowered our interest rates, most of the rest of the world did the same, so we did not have major inflation worries. This time, we are going it alone, and it will lead to inflation and ultimately higher interest rates."

Actually, the Fed's move will likely pressure other countries to reduce their rates in tandem.
 
"Actually, the Fed's move will likely pressure other countries to reduce their rates in tandem. "

Which other countries? And what other rates? Will this reduction take place immediately? Or will it take awhile? And if so, how long? And why would other countries feel pressured to reduce their rates in tandem?
 
"Actually, the Fed's move will likely pressure other countries to reduce their rates in tandem. "

Well I hope not many follow the Saudi's rout:

Saudi Arabia, who usually mimics every FOMC move, has refused to cut interest rates in lockstep with the US Federal Reserve for the first time., According to a UK Telegraph article (Fears of dollar collapse as Saudis take fright, September 2007),
 
awgee -- For one, the European Central Bank. It sets the rate in 13 European countries. My guess is they will likely cut at their next meeting in October. Why? Because their currency is becoming too strong and the exchange rate is harming European exports.
 
Marty....isn't their exchange rate getting to strong against the dollar? Also, keep in mind that some European countries are having the same mortgage mess we are.
 
"Why? Because their currency is becoming too strong and the exchange rate is harming European exports."

I watch BBC News in the morning. I saw a report on this recently. Apparently the new French prime minister is actively lobbying the EU central bank to lower rates, and several other countries are expressing concern over the loss of exports to the US.

Although, I still think we will go it alone and pay the price for it with inflation and ultimately higher interest rates (increased spreads between the FED and other debt instruments.)
 
IrvineRenter

"I watch BBC News in the morning. I saw a report on this recently. Apparently the new French prime minister is actively lobbying the EU central bank to lower rates, and several other countries are expressing concern over the loss of exports to the US."

Do we really care what the French want? I mean honestly they take about a month off during July / August, work 32 hr work weeks, and have super high unemployment rate.

However, I do agree with you that we are in a "go it alone" manner. I don't think many countries will follow and we are our own worst enemy right now.
 
mino,

Typically I'd bash the French with you but Sarkozy has some very progressive capitalist ideas. They along with Germany are the two largest producers of the EU and I hope for France's sake that Sarkozy is able to kick them in the pants and get them going. That and if he is calling for rate cuts it is probably because someone here with the knowledge whispered in his ear you might want to follow us. Notice it is our current closet ally in the EU who even said any thing?
 
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