Fed's Decision

The stocks are sliding again, with Fed's decision (inability) not to reduce the rate...inflation seem to pose to major threat. My view is that the Fed's would definetly be increasing the rate, to counter the situation!

What is your opinion

That slide just shook some weak hands out of the market for 3 days and the markets rebounded Friday after your post. There are opportunities everywhere to keep your portfolio diversified enough so drops like this will not overly affect your financial outlook.

The overall economy does not depend entirely on the Fed raising or dropping the prime rate a quarter point, or for inflation to rise or fall by a similar margin, except for the very short term.

yes what you said about the overall economy is quite right...i read that many analyst feel, in the long run, the situation will be much more stabilised!

Wednesday did see some action in retail sales...the retail sales of clothing and accessories was definetly on an increase. This increase in retail sales does have a positive bearing on the growth of the economy as a whole

Also the analysts are of the opinion that the Fed dont see any reason to increase the rate as of now! This definetly is a good news, as any increase would affect the stocks badly!

I invest regardless of fed decisions.

Ah, but do the Fed's decisions affect HOW you invest?

Ah, but do the Fed's decisions affect HOW you invest?

Taxes impact my investing more than the fed. I might adjust the 1% bond holdings I have if the fed does something wierd. a .25 point move is not wierd.

If you react to everything while investing, you will find yourself a day ate and dollar short way too much.

Let us take a look from the "Inflation". Correct me if I am wrong but as of now since the Inflationary pressure seems to have eased off, the Interest rate is down (Not the Fed) and guess the investment among other things including stocks would go up...am I right in assuming this.

inflation has not eased off long term. Short term maybe, but long term, I think inflation trend is upwards.

Quite right jiM I was speaking in terms of short term. Inflation does seem to be a major factor and a concerning one at that.

there was a week where two-three reports came out which suggested inflationary pressures were easing. This did not mean inflation is going away, it just was not as high as expected.

Rates will be going up... I will venture to say we will be rate neutral as long as possible to give housing bubble a soft landing (if possible). But if fed has to raise rates, they will do so without much hesitation.

If you want lower rates, I would invest in a time machine.

Now, the Fed's are all ready to slash the rate, but is this a solution, shouldnt we deal with the actual problem at hand, rather than offer a short time solution.

Short term solutions can lead to long term ones. Countrywide and companies like it need time to deal with their problems, and they can't do it while investors are in a frenzy of sell-offs. I heard on NPR that Countrywide has no intention of filing bankruptcy, AND it has the capacity to handle this problem, but it can't do it in half a day, which is what the markets would like to see -- they need days, maybe weeks, maybe months, and if a rate cut is like oil on troubled waters, that should give it the time it needs.

I feel that it is the 'psychlogical' factor that the Fed and Banks are trying to pacify.....yes it definetly would lead to more investments and all....but what about the mortgage houses?

It depends on both the future direction of the Prime rate and how lenders lend in the future. My assumption is that those who can afford them (flippers and other real estate speculators) will gobble up these foreclosed houses and there will be a strong increase in apartment rentals for the next several years until people can recoup their losses and start again.

Yes I can foresee it too, 'rising in the apartment rentals' but how do you think 'recoup' will happen, guess a 'policy' change might be required?

At this point, the only way for former-homeowners-turned-renters (due to the Subprime Mess) to recoup their losses is to start over again, unfortunately. Save up and get back into the housing market. Unless, of course, someone decides to offer some mass rebate or lawsuit to them in the future.

We're talking a about Katrina-like turnaround (slightly higher household demographic on average) of over 24-60 months (or more). This group will probably add to the future trends of Gen-X college grads (and others) and the housing market will climb at a higher rate during that period.



Unless something unforeseen happens at that time.

We are not in that Sub-Prime mortgage group but do have a 5/1 ARM that matures in three years. What do you think? Should a homeowner consider refinancing now or ride it out for three years. We have a nice rate at 5.25% for the remaining three years so I hate to refi now and pay 6.5% on a 30 year fixed but if the outlook is mid to upper 7% in three years it probably makes sense to do it now, don't you think??

That is a gamble, at best. If the Fed looks like it is going to lower rates tomorrow (and again in the near future), those fixed rates will come down (as will the adjustable rates).

I would stay on the sidelines and keep my eyes open, as it looks like you are already doing. Maybe if long term, fixed rates drop to or below your current levels, you might want to consider locking in.

http://www.usatoday.com/money/economy/fed/2007-09-14-greenspan-book_N.htm

You never know when it will happen (hence, "may be upon us sooner rather than later,"), which is why you need to inflation-proof your portfolio.

Hey, double-digit rates make for great savings accounts and CDs! Just make sure you lock in the rates for your house, car and credit cards/loans before it happens!

Ok with the reduction in the rate to 4.75%, the banks seems to have reduced their Prime Lending Rates to their top customers. This definitely has boosted the confidence of the wall street which is quite apparent in the way it is performing in the past two days. While some have welcomed the Fed's decision, some feel that they have not fulfilled their promise towards 'inflation'!

Inflation has really been kept in check, it is the CPI that has skyrocketed.

Totally off topic -- Wouldn't you like to have a job, wherein you are referred to, simply, as "The Fed"? Barring "Queen" or "She Who Must Be Obeyed", I can go for "The Fed".

I know "The Man" always gets mixed results.

The US dollar, as of today, is equal to the Canadian dollar. Will the next FED cut take us even lower? Will EUROs be the currency of choice for world reserves soon?

Should we care?

i think its a bad deal..