US FED slashed interest by 0.75%, will it change sentiment?

[tommy]

Okay, so Ben Bernanke at US Fed does pull a bunny out of his hat like he did in August 2007 in an effort to save the US market from plummeting along with markets in the rest of the world.

Now, the question is, will this change investor sentiment in the DOW, and in turn, the rest of the world markets including Australia?

The question here has nothing to do with whether the interest rate cut by 0.75% will actually help decelerate pace of US economic slowdown...
It's just about whether it would change the current mega-negative sentiment in the share market.

What do you think?

[Nita]

Beacuse of the drastic measure and announcing it b4 pre opening, it all sounds like a panic. It would be interesting to see what the average investor makes of the annoucement. I have to say that it is sending the wrong message. Clearly they are spooked by a big drop on the dow in the coming few days.

Bush is also panicing by trying to artifically stimulate the economy.

[tommy]

Yo Nita,

Yup, FED in panic mode too... they might even cut another 0.25% at the scheduled meeting if this one doesn't work.

In any case, they decided to dump the US dollar and inflation targets to save face... let's see what Bush is ready to do now.

[soltrader]

Stocks plunged at the opening bell, with the Dow industrials losing more than 400 points in the first two minutes of trading.

Horse has already bolted?

[Nita]

Stocks plunged at the opening bell, with the Dow industrials losing more than 400 points in the first two minutes of trading.

Horse has already bolted?I rest my case.

The market may well bounce back by the end of close but the physological fear behind the Feds decision is that this situation was likely to happen.

Its worth noting, that some out there are making squillions out of this. Just not the average player

[AMR]

The Dow in fact opened higher than expected. Dow futures have staged a nice rally pre-open, rising from the 11400s.

Is the fear of recession keeping everyone up at 3am?:p

[ratkin]

They are too scared to sleep lol

[George]

Maybe someone here can answer these - what happened to the Nikkei
as Japan's interest rates headed to zero?

Also, if this is the biggest emergency cut since 1984, does
this perhaps indicate a bull run for a few more years before
a 1987 type crash?

[AMR]

It seems to have worked. Dow down 465 points to start with, now down only 70 points.

[winner69]

Maybe someone here can answer these - what happened to the Nikkei
as Japan's interest rates headed to zero?

Also, if this is the biggest emergency cut since 1984, does
this perhaps indicate a bull run for a few more years before
a 1987 type crash?


....... George --- also ask what happened to the US markets the last time the Fed went through a series of rate cuts

[Bilo]

I voted for stabilisation. The worse alternatives are better avoided by those who can make a difference. The Aussie Index has recovered slightly. RBNZ should do as Mark Weldon suggests in this mornings Herald, show some uncommon sense, be business friendly, and slash NZ interest rates with a promise of more to come. Lets face it house mortgages are mainly fixed.

[STRAT]

One bad decision after another. Another bandaid on this festering sore aint gonna do it and I voted D. I do think there will be a bounce of sorts within the next few weeks which may provide a timely exit for a few. Still have my eye on a few stocks ( same ones really ) but am reluctant to part with my cash just yet.

[STRAT]

Its worth noting, that some out there are making squillions out of this. Just not the average playerYup , You can count on that Nita

[STRAT]

I voted for stabilisation. The worse alternatives are better avoided by those who can make a difference. The Aussie Index has recovered slightly. RBNZ should do as Mark Weldon suggests in this mornings Herald, show some uncommon sense, be business friendly, and slash NZ interest rates with a promise of more to come. Lets face it house mortgages are mainly fixed.Hi Bilo. That aint gonna help. In fact I believe it will make matters worse. Bottom line is most of the 1st world lives on credit and it has been way too easy to get. Thats what made this mess in the first place amongst other things. Its become a tragic way of life. Making it easier to afford will backfire sooner or later. If the Helengrad commies in this country want to ease the pressure and create growth they should be stealing less from us in the form of tax not inciting us to borrow.

[POSSUM THE CAT]

BILO & STRAT Another interest rate increase tomorrow would be the best solution so people do not go crazy again on the asumption that they get into trouble they will be bailed out by tax or interest cuts. Also make it illegal to give more than 80% finance on anything unless other security is supplied to at least equal 20%

[STRAT]

BILO & STRAT Another interest rate increase tomorrow would be the best solution so people do not go crazy again on the asumption that they get into trouble they will be bailed out by tax or interest cuts. Also make it illegal to give more than 80% finance on anything unless other security is supplied to at least equal 20%Possum, you are sounding like a fully paid up member of the Communist Nanny State of Helengrad and a man who likes to keep the pesants in their place. Are you talking about the Yanks or here? cause its apples and oranges mate.

There will be no bail outs here in NZ unless its for a Government Dept, a bank or friends of the Party

[Bilo]

Hi Bilo. That aint gonna help. In fact I believe it will make matters worse. Bottom line is most of the 1st world lives on credit and it has been way too easy to get. Thats what made this mess in the first place amongst other things. Its become a tragic way of life. Making it easier to afford will backfire sooner or later. If the Helengrad commies in this country want to ease the pressure and create growth they should be stealing less from us in the form of tax not inciting us to borrow.

Strat
I agree with your sentiment about high cost of money but we live in a global economy and interest rates over double what others pay is unfair to businesses in NZ. It is a bit like Kyoto - we are determined to make a squeek from the bottom of the earth and keep shooting ourselves in the foot. As per your suggestion, interest rates should be at a reasonable level - but NZ interest rates no longer control the NZ money supply or liquidity - so we should not be screwed while the rest of the world prosper - it just forces more Kiwis to explore means of taking cash offshore and keeping it there - do you suggest that we go back to Muldoon fixing everything - Cullen is showing similar control characteristics so I shouldn't be too surprised.

Our measure of inflation including oil and a few other essentials is also correct mathmatics, but others use different measures -to their advantage...

It is not and never has been a level playing field - NZ government has to learn to stop screwing us and to tip it in our favour.

[George]

Re someone making squillions, ANZ yesterday down initially then
up about 80c, down 80c, up 40, down 40, up 20 then total crash
down 80 including about 40 after close. Other stocks probably
similar. One could be excused for thinking there's manipulation
going on, but daytrading could be the way to go for a while.
But imagine buying a few ANZ calls at 2510 15 minutes before close
thinking it was another test of day's support, only to have
price plummet 40c, then another 40 after close if foolish
enough to hold overnight. Dow down 1% now so what's for today?

[jke_brown]

Interesting to see what the RBA will do today with interest rates as the CPI data will be out at 11.30. With the bandage solution put in US overnight to contain the damage will results in dead cat bounce effect on ASX giving RBA a good enough reason put the interest rates up to control the inflation.

What is the interest rate situation in NZ?

[POSSUM THE CAT]

STRAT I am talking about here in NZ most of the problem has been the pussyfooting around raising interest rates a1/4% instead of either hitting them hard or restricting borrowing to sensable limits. If the yanks had done the same thing instead of throwing money at every tom,dick or harry. We would not have this problem. Cheap money leads to stupid investment decisions. The same as the employment contract act driving down wages and conditions led to poor investments thinking this would go on for ever. But did not think these people could not buy as much from their customers thus starting the recession in the late nineties. This is why I asked you in another thread who de we replace Labour with.

[STRAT]

Strat
I agree with your sentiment about high cost of money but we live in a global economy and interest rates over double what others pay is unfair to businesses in NZ. It is a bit like Kyoto - we are determined to make a squeek from the bottom of the earth and keep shooting ourselves in the foot. As per your suggestion, interest rates should be at a reasonable level - but NZ interest rates no longer control the NZ money supply or liquidity - so we should not be screwed while the rest of the world prosper - it just forces more Kiwis to explore means of taking cash offshore and keeping it there - do you suggest that we go back to Muldoon fixing everything - Cullen is showing similar control characteristics so I shouldn't be too surprised.

Our measure of inflation including oil and a few other essentials is also correct mathmatics, but others use different measures -to their advantage...

It is not and never has been a level playing field - NZ government has to learn to stop screwing us and to tip it in our favour.Hi Bilo. Like with possums post there seems to be some confusion here in term of points of view regarding the US and NZ. We cant compare apples with oranges. So just to recap my point of view on the items in the posts

Tax in NZ is too High :mad:

Interest rates in NZ are too High but lowering them will only increase consumer debt for 99% of the population. I would love to see them drop and would make use of the leverage ( not in the stock Market though ) Most people would buy a new car , stero or dishwasher. Thats their right but it would make matters worse. A general change in attitude is needed.

The FED lowering interest rates in the US will make matters worse. I realize now you wrote NZ interest rates but this is a thread about the FED cutting US interest rates

The first world is in debt up to its eyeballs and cannot pay it back.

[The Big Ease]

the rba will do the right thing and raise rates if inflation is too high.
out of control inflation is worse than whats happening now.

[STRAT]

STRAT I am talking about here in NZ most of the problem has been the pussyfooting around raising interest rates a1/4% instead of either hitting them hard or restricting borrowing to sensable limits. If the yanks had done the same thing instead of throwing money at every tom,dick or harry. We would not have this problem. Cheap money leads to stupid investment decisions. The same as the employment contract act driving down wages and conditions led to poor investments thinking this would go on for ever. But did not think these people could not buy as much from their customers thus starting the recession in the late nineties. This is why I asked you in another thread who de we replace Labour with.Possum, Low/fair interest rates arent the problem. The problem is the screening process of the borrowers and their ability to repay. The world is imploding on the back of debt but every night on the TV and every day in your mail box people are throwing money at you me and the dumb**** down the road.

For example GE money
What the........................... :rolleyes:
Every Corp and his dog is / was on the sub prime band wagon

And there is plenty more.

I get posted half a dozen credit cards every year which I never ordered.

AE try and sell me one of theirs a couple of times a year. Once I saw a guy peddling AE credit cards out of the boot of his car

Early last year I went to my bank to borrow some $ to buy a house. I knew what I could afford and thats the amount I requested. They offered me 30% more

These are some of the problems. High interest rates only hog ties productive people and destroys growth but with all things in this PC gone nuts world policy always caters to the lowest common denominator

[STRAT]

the rba will do the right thing and raise rates if inflation is too high.
out of control inflation is worse than whats happening now.Dont get me started on inflation figures. What a crock of lies they are. Real inflation mut be multiples of manipulated published government figures. Gosh Im having a rant today. LOL. I havent got the blues, really I havent :D

[FarmerGeorge]

Inflation figures really are a tough one STRAT, particularly in an economy as big and varied as the US. There's definitely money to be made though (in fact I've already gotten some of it!) just from reading the statements and understanding that Bollard the (old, experienced)economist is most scared of inflation while Bernanke the (new) American is most scared of markets tanking.
Downwards bias in one country vs. upwards bias in another means plenty of currency gains to be made. I'm going to call it 'psychological arbitrage'!

[Kropotkin]

Great thread! Lots of discussion :)

My 2c.

Inflation figs in NZ - absolutely a crock. I will need this qualified by a bigger brain than mine, but I understand housing and therefore mortgage lending is not factored into CPI?


How about these for wacky ideas:

1. Legislate against predatory lending - revoke the aussie banks licenses if they dont play ball.

2. Banks to lend against colatteral as already noted (20/80) - Maybe at the same ratios that banks are required to hold cash to credit?

3. Peg the NZD to the Yuan thereby to the USD $ :D

4. Get rid of GST! Why should a poor family pay $12.5 on $100 bucks work of groceries while I pay $12.5 on a $100 cigar????

5. Bring back a luxury tax on imports. Tariff is a dirty word but it's effective.

6. Reduce top personal tax to 33c to stop me from splitting my income! Less hassle means less avoidance and probably a net tax take increase.

7. Ringfence property type assets to encourage folks away from brick and mortar speculation and enforce the existing cap gains legislation on property sales! More market liquidity rather than money going mouldy in housing.


And finally....

8. Implement a financial transaction tax of .1%. Make the banks pay a bit more for ripping people off

[I.T.Ancient]

I vote D. All we will get is a dead cat bounce. When has letting inflation rip ever had positive consequences?

It seems to me that the only leader who has a clue (surprisingly) is Kevin Rudd. He is talking of reviewing all government spending and slashing all that is wasteful. If he is true to his word, then Australia will be first to quell the inflation beast - they can stop printing money to keep their machine running.

We have the ludicrous situation in many developed nations of folks borrowing to pay taxes for wasteful spending, but then noting that the borrowing is nominally for houses and consumer goods, they forget that without the Robber Barons they wouldn't have to borrow at all.

[Halebop]

Inflation figs in NZ - absolutely a crock. I will need this qualified by a bigger brain than mine, but I understand housing and therefore mortgage lending is not factored into CPI?

An approximate proportion of both House Owning Cost and House Renting costs are included in the CPI Basket, so it does reflect "average" inflation. The problem is it doesn't reflect inflation for the individual. It reflects inflation for the system - of course this is the only way to measure it when any response is going to be systemic.

If you rent then you aren't impacted by interest rates and capital values but by absolute rental yields and rent rises.

If you own with a mortgage you aren't impacted by rent but by your debt to income servicing ratio and changes in interest rates, local body fees, water rates, insurance premiums etc.

...and if you bought and paid for you house 45 years ago the question would be "why are food prices so high?" or maybe "What's wrong with my shagpile?"