Fed Cuts Rate 3/4 of a Point
- Thread starter washparkhorn
- Start date
washparkhorn
2,500+ Posts
Times of London says the rate cut was issued on fears of bond insurance collapse:
ousuxndallas
500+ Posts
Yes, Jim Cramer mentioned this morning that everything could be eased if the gov't bailed out the bond insurers and purchased them.
Similar to the S&L crisis, huh?
Similar to the S&L crisis, huh?
I think the word to use here is "relax". Look at the history of the stock market. There is always something. A "new" reason why our economy is going to collapse.... the real estate tax breaks that caused the S&L crisis, the oil embargo coupled with extremely high interest rates, the dot com craze, the sub-prime problem, etc., etc. etc.
Part of the problem is that the economy has done relatively well for so long that many people have no idea what "hard times" are.
As one poster mentioned, there will always be some other area of the market that money will flow. Likewise, there will be more periods in the future where the market will fall as much, if not more, than what we have currently witnessed.
Most people who left their money in the market throughout history have done better than those that have panicked and became "reactive" investors.
Part of the problem is that the economy has done relatively well for so long that many people have no idea what "hard times" are.
As one poster mentioned, there will always be some other area of the market that money will flow. Likewise, there will be more periods in the future where the market will fall as much, if not more, than what we have currently witnessed.
Most people who left their money in the market throughout history have done better than those that have panicked and became "reactive" investors.
Ag with kids
2,500+ Posts
Where did the data for the GDP w/o MEW come from?
triplehorn
2,500+ Posts
The GDP/MEW graph with the formulation came from here:The Link . If someone can effectively shoot it down, go for it. Variability in estimates is acknowledged.
The overriding point remains that Mortgage Equity Withdrawal has been a very large buttress to GDP growth since the historic Bush/Greenspan interest rate slashes began in 2001 in the run-up to Bush's plan for a Home Ownership Society.
Interest rates were in the double-digits in the '80s. A decade ago they hovered around 8%. Even with interest rates on the rise during the last couple of years, we're still a sizeable step down from the 'high' interest rates of the late '90s.
washpark, you say:
The overriding point remains that Mortgage Equity Withdrawal has been a very large buttress to GDP growth since the historic Bush/Greenspan interest rate slashes began in 2001 in the run-up to Bush's plan for a Home Ownership Society.
Interest rates were in the double-digits in the '80s. A decade ago they hovered around 8%. Even with interest rates on the rise during the last couple of years, we're still a sizeable step down from the 'high' interest rates of the late '90s.
washpark, you say:
washparkhorn
2,500+ Posts
triplehorn
2,500+ Posts
washpark- did you even read the article you linked? I'm not sure you even clearly read the quote you blocked.It says:
"The national home price boom since the late 1990s appears unprecedented in US history, although the “baby boom” in housing of the late 1940s and early 1950s comes close, and there have been some very large local booms."
"Since", as in "after". The paper discusses some psychological phenomena like "uniqueness bias" that have been repeated over and over that led to booms and busts, but it does not tie the dotcom boom of the 1990's directly to the real estate boom of the 2000's even though they are quite proximate in occurrence.
Moreover, in going through various historic examples, he addresses this current housing bubble burst with its own heading: The Real Estate Boom of the 2000s
In it he states:
"The national home price boom since the late 1990s appears unprecedented in US history, although the “baby boom” in housing of the late 1940s and early 1950s comes close, and there have been some very large local booms."
"Since", as in "after". The paper discusses some psychological phenomena like "uniqueness bias" that have been repeated over and over that led to booms and busts, but it does not tie the dotcom boom of the 1990's directly to the real estate boom of the 2000's even though they are quite proximate in occurrence.
Moreover, in going through various historic examples, he addresses this current housing bubble burst with its own heading: The Real Estate Boom of the 2000s
In it he states:
triplehorn
2,500+ Posts
washparkhorn
2,500+ Posts
Are you really arguing the housing boom didn't start until Bush took office? Absolutely wrong.
As the housing market boom ramped up, so did consumer spending :
Move to housing market (and beginning of boom) coincides with drop in equity market investment (the dot com crash - Nasdaq losing 80% of value):
That hate for Bush is going to eat you up inside.
As the housing market boom ramped up, so did consumer spending :
Move to housing market (and beginning of boom) coincides with drop in equity market investment (the dot com crash - Nasdaq losing 80% of value):
That hate for Bush is going to eat you up inside.
triplehorn
2,500+ Posts
washpark, when you provide the evidence against your own points, it makes it easy 'hate bush'.
Look at your tables, especially the first. There was a huge crash in home prise indices in late 2000/early '01 in the wake of the dotcom bust in 3/2000.
A distinct and separate bubble rapidly grew beginning in 2002. The bottom line is that this would not have happened without Bush/Greenspan intentionally slashing interest rates to historic lows and holding them there while the consumer fantasy index exploded.
btw, have you bothered reading the Yale article you linked to yet ? I enjoyed it.
.
Look at your tables, especially the first. There was a huge crash in home prise indices in late 2000/early '01 in the wake of the dotcom bust in 3/2000.
A distinct and separate bubble rapidly grew beginning in 2002. The bottom line is that this would not have happened without Bush/Greenspan intentionally slashing interest rates to historic lows and holding them there while the consumer fantasy index exploded.
btw, have you bothered reading the Yale article you linked to yet ? I enjoyed it.
.
washparkhorn
2,500+ Posts
I am glad you enjoyed the Yale article by Shiller. I thought of you when I read it.
I guess we agree to disagree. I believe the housing boom began with the dot com crash, leading Americans to believe and defend a faulty assumption that housing was safe (while ignoring the risks of oversupply, interest rate hikes, . . .).
You believe Greenspan and Bush started the housing market boom.
Just as home investors could not be persuaded that there was risk in speculating in the housing market, I cannot convince you that your assumption is wrong based on the data presented to you showing the housing market beginning its boom with the collapse of the dot com bubble.
But then I suppose you would disagree with me if I said the "sky is blue" - countering that statement with a diatribe against Bush for polluting the air and causing the sky to be vanilla, not blue.
I guess we agree to disagree. I believe the housing boom began with the dot com crash, leading Americans to believe and defend a faulty assumption that housing was safe (while ignoring the risks of oversupply, interest rate hikes, . . .).
You believe Greenspan and Bush started the housing market boom.
Just as home investors could not be persuaded that there was risk in speculating in the housing market, I cannot convince you that your assumption is wrong based on the data presented to you showing the housing market beginning its boom with the collapse of the dot com bubble.
But then I suppose you would disagree with me if I said the "sky is blue" - countering that statement with a diatribe against Bush for polluting the air and causing the sky to be vanilla, not blue.
froghorn717
100+ Posts
triplehorn
2,500+ Posts
froghorn717
100+ Posts
granted and if you have read any of my posts you will notice that I agree this is bad....and probably gonna get worse.
I have been against this market and believe Greenspan is a large part of the equation.
However as I have said this mess is 20 years in the making...it’s just that recent events have brought it to the surface.
Trust me there is enough blame to go around for everybody...my point is you will miss so much if you keep your target so small.
I am in this everyday, I actually don’t care who is to blame, and pointing fingers doesn’t improve my firms P&L or mine…
However I just can’t read some of those comments and not at least try and educate that the fault is larger than any two people.
Believe me the current administrations ability to hide their heads in the sand is astounding, but you get the same type of head in the sand from all the supposed “pundits” on TV…..
And behind closed doors these heads of corporations are frightened….
I have been against this market and believe Greenspan is a large part of the equation.
However as I have said this mess is 20 years in the making...it’s just that recent events have brought it to the surface.
Trust me there is enough blame to go around for everybody...my point is you will miss so much if you keep your target so small.
I am in this everyday, I actually don’t care who is to blame, and pointing fingers doesn’t improve my firms P&L or mine…
However I just can’t read some of those comments and not at least try and educate that the fault is larger than any two people.
Believe me the current administrations ability to hide their heads in the sand is astounding, but you get the same type of head in the sand from all the supposed “pundits” on TV…..
And behind closed doors these heads of corporations are frightened….
triplehorn
2,500+ Posts
Thank you. I also read what what you posted in 8/07.
.
.
froghorn717
100+ Posts
missed this...
triplehorn
2,500+ Posts
froghorn - I appreciate the time you've taken to explain some things. I'm not an economist so some of it is too much of an abstraction for me, but I understand the complex and multifaceted nature of this over time that you acknowledge.
That said, I have questions about two of your quotes that stand out to me. They are:
That said, I have questions about two of your quotes that stand out to me. They are:
G
gobears92
Guest
Hayden_Horn
1,000+ Posts
honestly, i blame mortgage brokers and yield spread premiums for a lot of the bad loans. good god there is a lot of questionable **** going on out there.
froghorn717
100+ Posts
Triple:
Dude...look I realize you are trying to learn and I have no problem helping. As I said above I am in it everyday. I do very vigorous DD in order to devise a plan for our trades for the IB I work for. They range from any where to a day trade to a trade we may put on for a 12 month or longer period and trade around it.
That being said it seems you are hell bent on blaming this on Bush. I don't know if you waved to him and he walked over and kicked you in the nuts or stole your puppy but if I was you I wouldn't play the market you are way too stubborn. When looking at the economy, the market and really the global economy, you need to be flexible, you need to see the whole picture. I don't think they should be cutting rates but that doesnt mean I don't have trades on that will make money in the short term b/c of those rates cuts as well as trades out a little longer that will benefit when/if the rate cuts don't work. If I am wrong I will quickly cut my losses and reassess. You are missing World trying to squish ants.
Too low too long: 1.25% was actually a negative real interest rate when inflation adjusted which was basically free money...you would've been crazy not to borrow and buy anything you could....Trust me I did this, as well as borrowing YEN to buy everything under the sun denominated in USD. I used the YEN as a financing currency this is called the carry trade. I took that trade off around in ’05 or so and went the other way.
Secondly home ownership is not bad, those who own get richer those who don’t, don’t….I know seems easy right? This is one of the few things that Bush got right. I voted for Bush twice and trust me I wish I hadn’t. I am soooo pissed he has continued to treat the American people like children and insult our intelligence by not just telling the truth. People who own are helped by inflation people who don’t own are not helped by inflation (credit expansion); nobody is helped by deflation (credit contraction). This is what Bernanke is most afraid of right now. The problems now are problems created by financial engineering and people taking on too much debt (being too greedy)…which is fine if you have the income to pay back that debt. This once again was not bush’s fault...this is the American consumers fault.
I am gonna say this but you probably will not believe it but the Fed is independent and charged with setting Monetary Policy. The Fed meaning neither Greenspan nor Bernanke had policies handed to them from the Whitehouse. Let me reiterate that, they are not handed policy from the Whitehouse. They receive no money from Congress. They are independent and the Board of Governors can span the terms of multiple Presidents. Its part Public and part Private.
Let me be clear when rates were that low taking down debt is not a bad thing it can be a very useful tool to growth when not overused, it’s bad when you over load and all of the sudden the asset side falls while your liability side stays the same. When you take out debt you are basically arbitraging one future dollar of income against the present value of that dollar today. Trying to make that future dollar worth two now, then you can pay back that future dollar. For instance back in the 80s it took $1 of debt to produce $1 GDP that is more like 7:1 now. These figures are just off the top of my head so they maybe off just a hair, but the point is the same.
You ask were the demand for housing came from LOW/NEGATIVE REAL INTEREST RATES…and let me say this buying a house when rates were that low was a great idea, buying too much house, buying 5 houses when you could afford 1, or getting ARM or option ARM loans to buy those houses and not understanding rates were gonna go up and you should actually be using those types of loans when rates are high and going lower bad bad idea. That was not Bush’s fault….Greenspan was not persuaded by Bush, or Clinton or the First Bush on his Interest Rate policy. He felt as though for the economy’s sake rates should stay low. Greenspan can be blamed for telling people to take out these ARMs though.
Bush and his Fiscal policy are not outside the blame, but as I have continually said….there is enough blame to go around.
Dude...look I realize you are trying to learn and I have no problem helping. As I said above I am in it everyday. I do very vigorous DD in order to devise a plan for our trades for the IB I work for. They range from any where to a day trade to a trade we may put on for a 12 month or longer period and trade around it.
That being said it seems you are hell bent on blaming this on Bush. I don't know if you waved to him and he walked over and kicked you in the nuts or stole your puppy but if I was you I wouldn't play the market you are way too stubborn. When looking at the economy, the market and really the global economy, you need to be flexible, you need to see the whole picture. I don't think they should be cutting rates but that doesnt mean I don't have trades on that will make money in the short term b/c of those rates cuts as well as trades out a little longer that will benefit when/if the rate cuts don't work. If I am wrong I will quickly cut my losses and reassess. You are missing World trying to squish ants.
Too low too long: 1.25% was actually a negative real interest rate when inflation adjusted which was basically free money...you would've been crazy not to borrow and buy anything you could....Trust me I did this, as well as borrowing YEN to buy everything under the sun denominated in USD. I used the YEN as a financing currency this is called the carry trade. I took that trade off around in ’05 or so and went the other way.
Secondly home ownership is not bad, those who own get richer those who don’t, don’t….I know seems easy right? This is one of the few things that Bush got right. I voted for Bush twice and trust me I wish I hadn’t. I am soooo pissed he has continued to treat the American people like children and insult our intelligence by not just telling the truth. People who own are helped by inflation people who don’t own are not helped by inflation (credit expansion); nobody is helped by deflation (credit contraction). This is what Bernanke is most afraid of right now. The problems now are problems created by financial engineering and people taking on too much debt (being too greedy)…which is fine if you have the income to pay back that debt. This once again was not bush’s fault...this is the American consumers fault.
I am gonna say this but you probably will not believe it but the Fed is independent and charged with setting Monetary Policy. The Fed meaning neither Greenspan nor Bernanke had policies handed to them from the Whitehouse. Let me reiterate that, they are not handed policy from the Whitehouse. They receive no money from Congress. They are independent and the Board of Governors can span the terms of multiple Presidents. Its part Public and part Private.
Let me be clear when rates were that low taking down debt is not a bad thing it can be a very useful tool to growth when not overused, it’s bad when you over load and all of the sudden the asset side falls while your liability side stays the same. When you take out debt you are basically arbitraging one future dollar of income against the present value of that dollar today. Trying to make that future dollar worth two now, then you can pay back that future dollar. For instance back in the 80s it took $1 of debt to produce $1 GDP that is more like 7:1 now. These figures are just off the top of my head so they maybe off just a hair, but the point is the same.
You ask were the demand for housing came from LOW/NEGATIVE REAL INTEREST RATES…and let me say this buying a house when rates were that low was a great idea, buying too much house, buying 5 houses when you could afford 1, or getting ARM or option ARM loans to buy those houses and not understanding rates were gonna go up and you should actually be using those types of loans when rates are high and going lower bad bad idea. That was not Bush’s fault….Greenspan was not persuaded by Bush, or Clinton or the First Bush on his Interest Rate policy. He felt as though for the economy’s sake rates should stay low. Greenspan can be blamed for telling people to take out these ARMs though.
Bush and his Fiscal policy are not outside the blame, but as I have continually said….there is enough blame to go around.
triplehorn
2,500+ Posts
froghorn - thanks again. You offered your best to the questions I asked.
Regarding Bush, and whether he kicked me in the nuts or not? The answer to that question is revealed by your own shared sentiment:
Regarding Bush, and whether he kicked me in the nuts or not? The answer to that question is revealed by your own shared sentiment:
froghorn717
100+ Posts
No Problem.... and keep in mind i made that point to show I am not being a Bush apologist, but you gotta be able to see the whole picture..
Yes I am upset with the way Bush has handled our nation, but that doesn't mean that I can't see that the problems we are facing are much bigger than any one person, even a President.
Peace...
Yes I am upset with the way Bush has handled our nation, but that doesn't mean that I can't see that the problems we are facing are much bigger than any one person, even a President.
Peace...
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