Monday, Jan 28, 2008
Another Rate Cut? What Does the Fed Really Know?
Market Oracle: Fed Duped by Rogue Trader and the Destruction of Bond Insurers
Article by John Mauldin (www.frontlinethoughts.com) who thinks the Rogue Trader explanation is not right. The Fed was not worried about the stock market itself. The stock market was responding to a monoline downgrade. Instead the Fed knows how serious the credit crunch is, a $45 trillion Credit Default Swap market is at stake. If more monolines and other bond insurers get downgraded things go over a cliff. Dropping IR 1.25% on Wednesday would have been too much, so they are doing it in two steps. Expect another big rate cut on Wednesday.
Posted by happyrenterz @ 08:27 AM (708 views) Add Comment
6 Comments
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1. happyrenterz said...
Safe as houses
2. Stevie Dee said...
When it is a one way street. No amount of engineered uncertainty, confusion (a la evil kenieval), will make it change!!!
FED will cut again 50 points next meeting!!!
To the banks, etc. Thanks for the Bubbles!!! And I ain't talking Fizz!!!
3. hpwatcher said...
They can cut all they like....the trend is DOWN
4. cornishman said...
Uncle Tom - I seem to remember you said late last year that you had concerns about the UK banks and have taken your savings out of them whilst you wait to see what happens. Any further thoughts about the seriousness of what is going on?
I can't see how the £35,000 cash deposit guarantee can possibly be met if we have a domino effect collapse with more banks. Northern Rock by itself has caused enough of a problem.
5. Icarus said...
I've read in several places that the total CDS market is $450 trillion, not $45 trillion. The former figure includes a lot of duplication, however, and total exposure has been estimated at between $30 and $90 trillion (i.e. slightly less than, or rather more than, world GDP).
6. planning4acrash said...
Buy gold on Tuesday, sell Friday, or wait until oil stops going up in response to repricing of it in response to a weaker dollar. I think I'll put my money where my mouth is this time!