Wednesday, January 23, 2008
Ice Cream After A Beating
Remember when you are a young kid, you did something wrong, your parents whacked you, and after they felt sorry and gave you ice cream. Well, thats close to why the Fed cut 0.75%. Is that enough? I have argued before, that won't be enough because this is not something a rate cut can rectify. It has to play itself out. If your property is heading for foreclosure, a 75 basis point cut will do nothing to save your home. Not in an era of slowing economy. The rate cuts is largely anticipated, though better than the 50 basis point but there is really not much the Fed can do now.
The entire movie has to play out on its own in entirety. I may sound like the ever bearish Marc Faber now cause I was never bearish for a long time, but this is pretty bad, and its pretty bad because the majority still are unsure why the correction is happening, and that is the killer blow.
Its a devious bursting of the credit bubble which had been engineered for the past 5 years, yes, Greenspan was largely the culprit, though he would not admit so. If you have a tumour, you cannot stop the surgey halfway by putting more chloroform onto the patient. The patient has to go through with the surgery for complete recovery. Still not time to buy yet.
The scrambling to cut 75 basis point also indicate some kind of panic, nothing much left for the Fed to do, any more they risk the USD going into a freefall. Just like antibiotics, you have to take the medicine for the whole course, cannot stop halfway. Any rebound in any stocks are likely to be a dead cat bounce (have you ever tried to bounce a dead cat).