Came across this, what do you think
http://www.businessweek.com/perm/content/07_38/b4050099.htm?chan=search
DB
I’ll take a crack at this…
Here’s what I worry about and why.
This 50 basis point rate cut we just got has sent the market surging.
The fed actually lowered both the discount window and the fed funds rate, this in my mind means the data the Fed is seeing is worse than Wall St. predicted.
As of right now we’re 340 points off the all time high in the DOW. So much for that correction? Or is it???
Markets get into trouble when people lose their FEAR. In my opinion the FED just signaled NO FEAR, don’t worry. That makes me nervous.
Think about some of the biggest drops we have had historically in markets. They never come when people are worried, they come when we think we’re safe.
I hope I’m wrong on this, but I have to be honest here. Does anyone really think this market should be 340 points away from it’s all time high with everything we know about the credit markets, the economy and housing?? Remember, interest rates were NEVER the problem, they’re still at historically low levels. The problem is, if you paid $300,000 for a home in 2005 and used an ARM, that home is now worth $250,000. There isn’t a bank in the world that will loan you $300K on $250K house. Add to that a lot of those people CAN NOT qualify for new mortgages under tightening lending standards. Year over year foreclosures are up 135% and people are literally WALKING AWAY from their homes. I must get 20 phone calls a week from these people.
To me THAT’S the issue. The overnight lending rates for bank to bank loans is not going to change those facts.
Very insightfull great response, it has got me thinking the same way as you…