Tuesday, Jan 22, 2008
Shock as FED jump to cut rates with immediate effect.
40 Comments
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1. theboltonfury said...
I am converted. This is surely evidence that no matter what happens to IR, it cannot stop what is already in motion. If recession, HPC etc was that simple to stop by a %age point here and there then we'd have monkeys in charge - oh hang on - wait a minute......
2. japanese uncle said...
This St Bernard of a man, hasn't got the nerve to steer the global economy, must resign immediately.
3. hpwatcher said...
I fully expect Boe to follow suit.
4. tyrellcorporation said...
This doesn't look good - a crazy panicky move IMHO. Heck, why not go down to 1% IRs?
5. Randomkevlar said...
Gulp!! Not sure if this is good or bad for HPC'ers.
Whilst we all want house prices to become more affordable, thats not much use if most of us no longer have jobs??
Is this panic or prudent?
6. paul said...
CUT RATES QUIIIICK! EVERYONE PANIC!
(it'll somehow do us all some good ... !)
7. techieman said...
with immediate effect? Never known them to do it without immediate effect.
8. inbreda said...
Fantastic news.
Too late to stop house prices from falling, but just in time to add an extra few grand to my currency hedging.
Fingers crossed they carry on like this.
9. happyrenterz said...
83% of this FT poll "should Fed have cut rates so much" say no. I vote yes provided they crank them back up again after the credit crisis eases. No point in going back to year zero just because some banks scr*wed the financial system up. Whatever the IR do this credit bubble is going to deflate.
10. uncle tom said...
It'll make virtually no difference to the rates US consumer borrowers actually pay - more a statement that says 'we have noticed there is a problem'
Actual interest rates are set by lenders - not by central banks.
11. submedia said...
Futures are still pricing a fall today on wall st. Surely the fed move was a little too reactive? I am going on holiday until it all settles down and losses are fully revealed and we know where we are. Hope the BoE hold their stare a little longer.
12. drewster said...
@techieman: After 9/11, they also issued a cut with immediate effect.
@hpwatcher: I expect the BoE to follow with a 0.5% cut at the next meeting. As we know now, it won't save the housing market. Buying a house is buying a stake in the future, it says you think the path ahead looks rosy. With the R-word making front page news and panic-actions by the government, people have lost all confidence in the future of the economy.
13. rocket robbie said...
Techieman,
Is now the time to buy gold or are you still holding out??
14. hpwatcher said...
@drewster, well there will definitely be a cut. But I can see BoE becoming contaminated with US panic.....
15. techieman said...
@rocket Robbie - i posted on this yesterday. Basically sidelined although i favour the downside. If you want i can re post what i said, but its under a gold question.
@drewster - i meant ive never known them to announce a cut without it being for immediate effect!
16. jack c said...
No need for panic in the UK -
"the latest financial turbulence had been "a wake-up call for every economy in every part of the world", impacting on states including Britain and mainland Europe. But the UK is well placed to withstand global economic uncertainty, with its inflation levels at 2%, compared with 3% in the rest of the EU and 4% in America -
Gordon Brown 14/01/2008
17. bystander said...
Love it Jack c. What a joke - he will take this line to his grave -inflation what inflation - my wife does the shopping and the tax payer pays for my petrol, but that holiday looks a little expensive.
18. techieman said...
on second thoughts....
3. techieman said...
A close below 872 (Spot) breaks the 20DMA. That creates a bit more momentum to the downside. If that happens more selling as stops get run then a recovery would "look" right although i wouldnt be betting on Gold - long or short at the moment. I do favour the downside to about 820 in the relatively short term.
Monday, January 21, 2008 01:30PM
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[today went to 849 on the downside and then up to 880s now.It wasnt going up in reaction to the plunge in the stock market but is prob going up on the dollar sell off and the opportunity cost of holding interest bearing assets reducing]
4. happyrenterz said...
Thanks Techieman that is interesting because we are below 872 at the moment. Bit of chart analysis here, essentially bullish conclusion.
Monday, January 21, 2008 03:40PM
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5. techieman said...
no probs @hr . He sort of sees it going either way, and then a march up to new highs. The intersting part of the chart is that (and ive been scratching my head here) there are 2 triangle "4th" waves of different degree. So I say that we might well be in or have had the 5th. This is a problem because there was no spike - which is what i would have expected. I know this doesnt tie in with the bullish sentiment and i know this opposes S2R1 - and I have trouble too because i also have a Core holding. It would make sense to have a fall though to the neckline. Im actually disappointed because i find myself standing on the fench a bit. However the move down does go against what people were previously saying that its an escape from Stock Market woes. If thats the case (i.e. the falls in the markets are not a support), then its basically just being perceived as an inverse play on the dollar. hmmm
19. paul said...
The rate cut has not made a jot of difference to the stock market slide.
That's a serious vote of no confidence.
20. techieman said...
Paul - something wrong with my computer then! its up quite a bit since the news, but lets wait for the next few days before judgement.
21. hpwatcher said...
I expect them to go up, on hearing the news, but then slide..as the trend is downwards.
22. Russ said...
Down in the US:
http://news.bbc.co.uk/1/hi/business/7201658.stm
23. planning4acrash said...
Guys, the time to buy Gold passed, it is a short term hedge. If you bought in the minute after the fed cut, you would have got a 4% rise. Then, when that burst has topped out, you sell and put into a stable currency like Euro. Hold out in fiat currency, wait till an oil price surge, buy, then sell (you can do that in bullionvault in a way that does not seem available elsewhere so easily). Whenever it languishes at a stable level, sell to avoid the downturns, buy when obvious events like interest rate cuts, a breach of 100 dollar oil, etc. The price of Gold doesn't matter, its the magnitude of falls and rises in % against the currency you want to hedge against.
That is my view. The more sophisticated you get to triggers of rises and falls, the more you can get involved. Gold has doubled a few times in the past few years, but, if you sold at all the up points, without suffering the falls, you can see that the rise has been phenomenal. The real strength of Gold is being able to benefit from the volatility, which is actually not the volatility of Gold, but an inverse response to the volatility of the global market.
24. fahrenheit451 said...
It's the roller-coaster effect, before the storm hits.
I just hope that this does not create another "dead-cat bounce" with a fresh round of morgages to those "not quite at the moment" Sub-Prime Investors. Meanwhile its "good news" to the BTL brigade who are now hoping for lower CGT in April for the short-termers to jump ship. But I'm betting that these properties will be picked up by the "in it for the long term" mob. Time to start checking out the local auction house "and smell the coffee".
It's the last trip on the merry-go-round, "everything must go".
25. bystander said...
Planning for a crash - "a stable currency like the Euro" - I would be interested as to why you think it is a stable currency - when there seems to be just the beginning of banks in euroland admitting losses caused by the American contagion? I was in the process of transfering GBP to Euro, when the pound rose against the euro, I stopped the transaction, as I would have lost quite a bit of money. The ECB is being pushed in the same manner as the BoE, slowing growth and growing inflation - rock and Hard place. Your thoughts would be very helpful.
26. techieman said...
p4c - sell all the tops when they hit the tops and buy all the bottoms as soon as they hit the bottom. Nice advice :-). So thats what i've been doing wrong!!! Must do that from now on! p4c - if you can do that you will "have more money than god!"
27. techieman said...
bystander - to be fair he did say "like [the] Euro" . Go for the swissy. in terms of the Euro - it looked like a pull back. You boys!! - the other day someone posted the COT charts on here which said "Bullish" for the pound. Everyone derided that and the blogger!! You have to appreciate trends and overbought and oversold conditions. IF you want to buy and hold do that IF you want to trade do that, but dont mix em up. And IF you want to get in after a big move up then expect some turbulence!!
28. cornishman said...
bystander - there is talk of some countries leaving the euro - maybe it will break up? maybe Germany will rescue it? If you plan to buy a house eventually, why take the risk of changing money when house prices likely will tumble 50% in sterling anyway?
29. jack c said...
@fahrenheit451 - from your earlier post "good news" to the BTL brigade who are now hoping for lower CGT in April for the short-termers to jump ship"
Sorry to pour cold water on this but I have it on very good authority that the CGT proposals are about to be pulled - announcement due in next working week.
30. paul said...
"Paul - something wrong with my computer then! its up quite a bit since the news, but lets wait for the next few days before judgement."
Not according to Bob Peston - who's always right
31. techieman said...
well I'll just have to give my money back to IG then if thats the case!
32. happyrenterz said...
Lots to like about gold this past week. It fell no where near as much as oil and shares indicating it was holding as safe haven. Then when rates got dropped and dollar dropped gold shot up. It seems to go up with oil or dropping dollar but not retracing its steps. But then those more knowledgeable than me say that we are due a big correction to the $800 range. Since some are already talking about another 0.5% Feb drop in January things are looking good.
33. techieman said...
Paul send this on to Mr Preston http://uk.finance.yahoo.com/q/bc?s=%5eFTSE&t=1d&c=
Now im not saying we are now out of the woods - and i might still be bearish but......when you're wrong you're wrong. I would agree its not a huge move.. Now for Wall street, the issue was that the market was closed yesterday, and the grey market was quoting down between three and five hundred (IG still trades), so a move down of only 128 (as i write this) http://finance.yahoo.com/q/bc?s=%5eDJI&t=1d&c= IS a move!!!
Wouldnt be surprised if the PPC were involved ;-).
34. techieman said...
@hr - it (spot) was down to 849 today, before the rate cut.(so i dont know if that qualifies for the safe haven status) A key reversal day (well im using artistic licence) if it holds above 884 http://spectrumcommodities.com/education/tech/c.html. Im still unconvinced. and just dont want to be involved. Resistance 897 and above. Good luck you boys!
Sorry about these posts - always like this after an adrenaline day!
35. Debtfree said...
the only reason gold was 849 is due to the amount of shorting, not the natural progression of gold, which is up.
as jim sinclair explained, the volume shorting was so large it was a threat to the exchange itself.
gold is going to $1650 :o)
36. It_is_going_with_a_bang said...
A typically US way to try and fix a problem.
Which history has shown usually doesn't work.
37. bystander said...
Thanks for the advice Techieman ( p4c did say 'like the Euro', my mistake) and Cornishman.
38. techieman said...
Debtfree - I hope you are right! I'm confused though - didnt he say that the shorts would have to push the price up as they unwound? If so then isnt that (a) reason for the rise rather than the fall? I just think that was plain wrong analysis - although i' wouldnt argue with a long term price of $1650 or $200 (i mean $200 not $2,000). I did say yesterday "A close below 872 (Spot) breaks the 20DMA. That creates a bit more momentum to the downside. If that happens more selling as stops get run then a recovery would "look" right although i wouldnt be betting on Gold - long or short at the moment. I do favour the downside to about 820 in the relatively short term."
Closed below 872, did create more momentum (to 849) then we have had a recovery (although i admit is quicker than i thought - well that might have SOMETHING to do with the rate cut!!) . Lets see what happens next!!
39. planning4acrash said...
Guys, when I refer to the Euro I mean in short term value. Actually currencies like the Aussie Dollar and ?Canadian? are performing better. I'm talking about short term transactions. The Euro is strong until the ECB get Bearish or until sentiment slips from the Euro. That moment has not yet come to pass but is definitely on the horizon and in my radar, things could change in a day.
Anyway, what I would have done, if I'd had a bullionvault account set up is, sell at 900 dollars because oil prices were falling, then been at my computer at the US interest rate decision time, waited for the decision (with a view about where I would go depending on the cut volume), all of my cash with 50bp cut or more. Then, as it goes back to 900, short gold and sell into Euro's, not dollars obviously, and not Sterling because markets are pricing in IR cuts. Bullionvault gives no other options. If I had my way it would be into Chinese or Australian money.
The next massive buying opportunity will be when oil breaches 95-98 dollars again and then when it breaches 100 dollars. When oil breaches 105 dollars gold will go ballistic. That moment could be very soon, but oil will peak and languish for a short while, as will gold. Sell at the plateau, wait to see where interest rates and oil go. Like I said, the main reason for selling at 910 dollars was because oil began falling, but you always have to position yourself for IR changes.
Last time that UK interest rates fell, gold fell against sterling by a few percentage, somewhere above 3%. But the shift took a few minutes after mid-day to materialise because it takes time to shift cash. So with a quick fire method like bullionvault you can pre-empt it and, in the space of a minute, make the gain that would be made on a year of interest from a standard current account. Do that 10 times a year and you have 30% rise. So, its about the quick buy/sales with gold rather than the long term investments. Of course you cannot be informed about all events, but following oil and IR's is a no-brainer and you can become more sophisticated over time. Shift out of this type of hedging when yields return to other investments, simple. And there will be many more buying opportunities over time. In my opinion, this will be the case from now into the future, because, with peak oil, we will keep seeing oil prices breaching records and being volatile, so gold will follow that trend.
40. planning4acrash said...
Many Americans will put cash into Gold, hedge against IR changes, that will be priced into the currency, then Gold has done its safe haven job and they can transfer straight back into higher yielding dollar investments. If oil keeps going down, gold will continue to correct, because people don't see gold as a long term investment, because it doesn't yield. The next buying opportunity will be the next BOE cut. but the rise will be about a minute or two after the cut, look at the history graphs, then hold gold for half a day, see it rise, then sell. When oil breaches 100 dollars again it will rise for longer, so hold for a couple of days or even weeks until gold plateaus and oil stops rising, sell as soon as oil prices start falling, or hold out a bit longer for if you are a fan of risk.
(This is not financial advice, its my thinking out loud!)