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Investors everywhere have been eagerly awaiting the Fed's next interest rate cut, and the wait ended with a bang thanks to a bigger-than-expected half-point cut. The markets soared on the news, and we want to know how it affected your portfolio and your trading strategy. What stocks are you buying and selling? And how does this change your outlook?
Unfortunately I don't think this action has done much other than improve liquidity, therefore extending the current rally. My reaction is to hang tight and enjoy the upward progress of the market, but I don't think the Orchestra has been fully paid yet.
A lot of folks have been harmed severely already, and with market opinion the way it is, when the truth outs, the investor will grow wary and cautious and we'll start heading south. The degree of damage will determine the rate, and if a dozen or so companies of stature report dreadful news and dismal earnings, this single cut will be forgotten.
I'm not altogether sure this isn't needed. Didn't the preponderance of cheap money get us into trouble the first time? Sure, lessons have been learned by all parties, but I remain unconvinced that the Fed's attempt at a soft landing won't stir the same issues again.
I don't mean to imply government regulation is warranted, but if there is ample money to borrow their is little to convince me that some new debt instrument will be "baked" by the Green Eyeshade Wall Street Wunderkinder - and we eat the Big One sometime in the future because of it.
Repackaged debt to feed the hedge funds...they're still around and my guess is their appetites are unchanged.
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