Thread: Do you really want a rate cut?

Originally Posted by offtrack

It seems to me that many here prefer technical analysis and weigh market psychology over fundamentals. No specific knock intended toward those strategies, but for retirement planning I believe we should be giving a more thought to long term possibilities over our short term greed.
When one looks at the relationship between the dollar index, the DJI, and historical fed funds rates. one doesn't see a pretty picture.
Cutting the rate into rising commodities and a historical low dollar seems potentially suicidal. There simply isn't much room for manuever and then what? The baby boomers are beginning to age and drop out of the work force which will strain the economy further. Anybody else feel a wee bit concerned?

http://www.federalreserve.gov/releases/h15/data.htm

http://www.fxstreet.com/rates-charts/usdollar-index/

http://www.chartsrus.com/chart.php?i...p?ticker=FUTDX

http://finance.yahoo.com/charts#char...urce=undefined

Our couse there is concern, but you have to consider the greed, i.e. psychology factor..the only reason that I can figure why the markets are continuing to climb.. the rest is noise...Remember, you gotta have faith. That is what we all have been running under for the past 100 years since the $ is basically not worth the paper it is written on.
D

Originally Posted by offtrack

It seems to me that many here prefer technical analysis and weigh market psychology over fundamentals. No specific knock intended toward those strategies, but for retirement planning I believe we should be giving a more thought to long term possibilities over our short term greed.
When one looks at the relationship between the dollar index, the DJI, and historical fed funds rates. one doesn't see a pretty picture.
Cutting the rate into rising commodities and a historical low dollar seems potentially suicidal. There simply isn't much room for manuever and then what? The baby boomers are beginning to age and drop out of the work force which will strain the economy further. Anybody else feel a wee bit concerned?

http://www.federalreserve.gov/releases/h15/data.htm

http://www.fxstreet.com/rates-charts/usdollar-index/

http://www.chartsrus.com/chart.php?i...p?ticker=FUTDX

http://finance.yahoo.com/charts#char...urce=undefined

I really didn't know we had a choice? I want a strong dollar and a powerful industrial base to our economy, but we gave that away, they didn't ask me if that's what I wanted then either.

As someone who uses technical analysis almost entirely in my decision making process, I totally agree that we have to keep a close eye on the fundamentals...and react accordingly. However, those decisions are made in the voting booth not with your IFTs. We don't control or even remotely influence the market with our trades.

At this particular moment, the debate boils down to the Fed short circuting a recession versus being inflationary. The .50% basis cut may seem extreme, but it added the confidence to keep business moving. That psychological factor was important and the Fed built in the flexibility to make that move through multiple years of rate hikes....don't be suprised if they hold in October (in fact, at this stage of the game, I strongly believe they will hold).

I comment about the baby boomer situation with some regularity - but there are two sides to that coin as well - the baby boomers will shift more of their assets to bonds and cash (pulling liquidity out of the stock market) - but they are also going to increase their spending due to the increased time they have available to play - consider service based companies (i.e. restaraunts, crusie lines etc...) and health care.

Just because the market is behaving irrationally, is no reason to miss out on opportunity...been there, done that....twice.

My two cents.

Originally Posted by offtrack

It seems to me that many here prefer technical analysis and weigh market psychology over fundamentals. No specific knock intended toward those strategies, but for retirement planning I believe we should be giving a more thought to long term possibilities over our short term greed.
When one looks at the relationship between the dollar index, the DJI, and historical fed funds rates. one doesn't see a pretty picture.
Cutting the rate into rising commodities and a historical low dollar seems potentially suicidal. There simply isn't much room for manuever and then what? The baby boomers are beginning to age and drop out of the work force which will strain the economy further. Anybody else feel a wee bit concerned?

http://www.federalreserve.gov/releases/h15/data.htm

http://www.fxstreet.com/rates-charts/usdollar-index/

http://www.chartsrus.com/chart.php?i...p?ticker=FUTDX

http://finance.yahoo.com/charts#char...urce=undefined

Offtrack, Griffin,
This has been concern for me as well. We are all so busy and focused on trades, trying to pump up our TSP accounts, while, at same time, isn't the buying power of the $ in our Accounts now under attack? Gov't already is moving to ween us Boomer's off SS, to where our 401K's were our saving grace. Now, inflation will effectively erode away at this too?

Is dollar's value really the Fed's responsibility or Treasury's ?

I think a TSP GLD Fund (ETF) might help!

This seems to be such a viable solution. However, I don't believe they have the substance to back all of us Government employees.

Additionally, I'd be willing to bet the US Government would loose its direct access to its G-Fund purse strings if the investment option existed within TSP?; to a very large extent.

Originally Posted by hessian

... I think a TSP GLD Fund (ETF) might help!

We wouldn't be in this conundrum if our dollar was backed by something other than interest rates. There's now a 90% chance we'll cut rates at the December meeting, a 67% chance that we'll cut again in January, and a 47% chance we'll cut again in March. I'm guessing that with those odds, they may cut 50 basis points in December.

Last week, we had the Chinese indicate they'll be getting rid of some of their U.S. dollar reserves. Now we have the Arab nations revaluing their currencies by leaving the U.S. Dollar. The dollar's free fall is just getting too ugly. It's times like these when people like Ron Paul don't sound so crazy when they've been insisting for years that our currency needs to be backed by something like gold and/or silver.

Lowering the interest rates just shows how true it is that Americans are spenders and not savers. Is it any wonder personal debt levels are as high as they are when its the national policy that is encouraging that behavior?

The dollar needs to be supported, and that means NO:
Lower RATES!
Dollars need to be removed from the system!
$$$$$$$$We NEED a STRONGER DOLLAR!!$$$$$$

Politically it would be unfavorable not to lower rates going into a election year. Look at the federal budget, sound economic policy does not have a seat at the table right now.