oc-conservative_IHB
New member
<p>With the Fed decision coming this Tuesday at 11:30am, I thought I would summarize very succinctly my thoughts on why I believe the Fed will cut the Fed Funds Rate by 25 or 50 basis points.</p>
<p>First I don't believe the Fed acts on conspiracy theories or overly complex theories. And I don't believe the Fed doesn't act because they don't want something to happen (ie. not cutting because they don't want a falling dollar). I tend to believe in simple explanations, sort of like Occam's Razor if you will.</p>
<p>So, my primary and I think most obvious points of why the Fed will cut:</p>
<p>1) The Fed has effectively already lowered the FFR, and banks have already been borrowing at up to 50 bp below the target rate through open market operations.</p>
<p><img alt="" src="http://i225.photobucket.com/albums/dd17/oc-conservative/FFR.gif" /></p>
<p>2) Bernanke has been setting up for a rate cut given certain conditions (ie. "contained" inflation, weak employment data, worsening housing market...). I believe enough of the conditions will give reason for the Fed to cut.</p>
<p>3) Bernanke cut the Discount Rate in order to restore confidence in the credit markets. It's obvious the housing market needs the same psychological boost in confidence via the FFR . If demand doesn't pick up, pretty soon mosquitos will take over the inland valleys.</p>
<p>I think this is what the Fed will do, not what I would like them to do. I would love for the Fed to stand pat or even raise rates because I don't believe in the bullshit headline or core inflation of 2%. What I see with my own eyes is more like 5-10% annual inflation given energy, health care, rent costs. </p>
<p>And most of all I believe they should let the housing market correct fully on its own without interference, which may or may not even help. But, then again, the Fed orchestrated this housing bubble. Why wouldn't they also try everything in their power to have their cake and eat it, too.</p>
<p>I haven't yet contributed to the IHB fund, so let's make this fun. If I'm right and the Fed cuts, I will donate $100 to the IHB fund. If I'm wrong, and the Fed does not cut, then I will donate $250.</p>
<p>First I don't believe the Fed acts on conspiracy theories or overly complex theories. And I don't believe the Fed doesn't act because they don't want something to happen (ie. not cutting because they don't want a falling dollar). I tend to believe in simple explanations, sort of like Occam's Razor if you will.</p>
<p>So, my primary and I think most obvious points of why the Fed will cut:</p>
<p>1) The Fed has effectively already lowered the FFR, and banks have already been borrowing at up to 50 bp below the target rate through open market operations.</p>
<p><img alt="" src="http://i225.photobucket.com/albums/dd17/oc-conservative/FFR.gif" /></p>
<p>2) Bernanke has been setting up for a rate cut given certain conditions (ie. "contained" inflation, weak employment data, worsening housing market...). I believe enough of the conditions will give reason for the Fed to cut.</p>
<p>3) Bernanke cut the Discount Rate in order to restore confidence in the credit markets. It's obvious the housing market needs the same psychological boost in confidence via the FFR . If demand doesn't pick up, pretty soon mosquitos will take over the inland valleys.</p>
<p>I think this is what the Fed will do, not what I would like them to do. I would love for the Fed to stand pat or even raise rates because I don't believe in the bullshit headline or core inflation of 2%. What I see with my own eyes is more like 5-10% annual inflation given energy, health care, rent costs. </p>
<p>And most of all I believe they should let the housing market correct fully on its own without interference, which may or may not even help. But, then again, the Fed orchestrated this housing bubble. Why wouldn't they also try everything in their power to have their cake and eat it, too.</p>
<p>I haven't yet contributed to the IHB fund, so let's make this fun. If I'm right and the Fed cuts, I will donate $100 to the IHB fund. If I'm wrong, and the Fed does not cut, then I will donate $250.</p>