Fed Cuts Discount Rate

[Finster]

http://www.federalreserve.gov/boardd...72/default.htm

Release Date: August 17, 2007

For immediate release

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.

[dbarberic]

Re: Fed Cuts Discount Rate

So now what...

To little... to late....

Start of the Poom.....

I'm still waiting for EJ's crash worse than 87.

[Rajiv]

Re: Fed Cuts Discount Rate

Another attempt by the Fed to prevent a Friday meltdown (today being Double Witching)

[jk]

Re: Fed Cuts Discount Rate

this is what meyers suggested would happen according to ej's notes on the goldman conf call-- lower the discount rate but not the fed funds rate. the futures are pointing to a big pop in equities, and a resumption of dollar weakness. we'll see if it holds.

[Sapiens]

Re: Fed Cuts Discount Rate

LOL, the in$iders will cash out, mon and pop, Jane and Joe Sixpack will be left destitute and ready to once again jump on the hamster’s wheel when the dust settles.

The borrower is subject to the lender, simple enough. Being Friday, we don't want people spooked going into the weekend.

Cheers,

-Sapiens

[Finster]

Re: Fed Cuts Discount Rate

So now what...

To little... to late....

Start of the Poom.....

I'm still waiting for EJ's crash worse than 87.

Even the most vicious bear markets don't go straight down. There were phenomenal countertrend rallies all through the 89% plunge in 1929-1932. When the short positions pile up, they're like kindling waiting for a spark. Which is why what happens in the stock market today also has to be interpreted along with what happens in Treasuries, gold, etceteras.

[c1ue]

Re: Fed Cuts Discount Rate

I thought I felt something

I got my Apple puts sold, but I was too spooked by this to put in the rebuys...

Looking into yesterday's action I was wondering if it was the S & P hitting what many many newsletters had called major resistance at 1375 or something else.

Good thing I left my money on Apple puts off the table...starting to reload.

I even bought GLD

Today I finally succumbed to Lukester and bought GLD - first at $65 then averaged down with a $63.82. Damn I missed the $63.50 by about 1 minute.

So my Schwab 401K is now 70% GLD, with the remainder Yahoo and mostly cash.

To be clear, GLD is a trading position not a core holding.

Time to clear out of my major C and JPM positions - looking to trade out in the next 2 weeks. Both positions were core holdings (bought in 1992 and 2002 respectively).

I see $54 as a top for C and $52 as a top for JPM, but anything can go with the pump starting to work.

[qwerty]

Gold

It's not doing THAT much is it? No great rally in face of Fed's action.

What do people make of that?

[Jim Nickerson]

Re: Fed Cuts Discount Rate

So now what...

To little... to late....

Start of the Poom.....

I'm still waiting for EJ's crash worse than 87.

I'm not near solidified in my own thinking about KA-Poom's timing, if it in fact plays out, but if EJ is proven correct again, then what you recall about EJ's notion of the collapse making '87 look benign seems to me to be a bit still out in the future--how far? who knows.

It seems me to any talk of Poom right now is premature.

The corrections even down to Thursday's intraday lows are still not big market drops.

[Finster]

Re: Fed Cuts Discount Rate

I'm not near solidified in my own thinking about KA-Poom's timing, if it in fact plays out, but if EJ is proven correct again, then what you recall about EJ's notion of the collapse making '87 look benign seems to me to be a bit still out in the future--how far? who knows.

It seems me to any talk of Poom right now is premature.

The correction even down to Thursday's intraday lows are still not big market drops.

Yeah, it's amazing how much weeping and wailiing and gnashing of teeth there has been about a piddling 10% selloff. A symptom of the extreme level of leverage that has been assumed.

And agreed it is unlikely we have seen the bear's last act. In the mortgage market alone, ARM resets are scheduled at least well into next year. And the leverage has been far from eliminated. We can also look to the last bear market (down 50%!) for rough precedent - the Fed had actually started cutting its announced Fed funds target at the beginning of 2001. The stock bear continued for nearly two more years.

[FRED]

Re: Fed Cuts Discount Rate

this is what meyers suggested would happen according to ej's notes on the goldman conf call-- lower the discount rate but not the fed funds rate. the futures are pointing to a big pop in equities, and a resumption of dollar weakness. we'll see if it holds.

Fun knowing what's going to happen before it happens.

[Mega]

Re: Fed Cuts Discount Rate

Just Wacthed "Cramer" That f*cking ,back stabing SOB got His way!
Oh Yes he now telling "Joe sixpack" to BUY in heavy!

One thing though, he said that if the FED had NOT cut rates the market would have imploded today (i think he right).

One day, one day we string up up you little turd!
Mega

[WDCRob]

Re: Fed Cuts Discount Rate

Mega, how do you type while wielding a pitchfork and torch?

[Finster]

Re: Fed Cuts Discount Rate

Just Wacthed "Cramer" That f*cking ,back stabing SOB got His way!
Oh Yes he now telling "Joe sixpack" to BUY in heavy!

One thing though, he said that if the FED had NOT cut rates the market would have imploded today (i think he right).

One day, one day we string up up you little turd!
Mega

A day late as usual. Where was this brilliant, insightful advice yesterday when the DJIA was down 300 points?

Still, I don't think even yesterday was a wonderful buying opportunity. I nibbled on some REITs when they refused to go down while everything else was getting tossed out like last week's trash. But this last selloff was probably just the second salvo (February's was at least a foreshock) in a bear market with at least one or two more maulings ahead.

[EJ]

Re: Fed Cuts Discount Rate

A day late as usual. Where was this brilliant, insightful advice yesterday when the DJIA was down 300 points?

Still, I don't think even yesterday was a wonderful buying opportunity. I nibbled on some REITs when they refused to go down while everything else was getting tossed out like last week's trash. But this last selloff was probably just the second salvo (February's was at least a foreshock) in a bear market with at least one or two more maulings ahead.

We have also been in constant communication with our sources.

As tempting as it is to obsessively watch the activity on the surface and to see the surface data as relevant, it's important to keep the key dynamic in mind that I mentioned in Financial Crashes are a Process, Not an Event.

One of the realizations that has not yet occurred is that Central Banks, while having a powerful psychological influence over markets have a far reduced real and direct influence over liquidity than during any previous credit crisis.

The credit markets and commercial banks are better able to handle the current instance because credit derivatives, in theory, flatten the markets and make them less prone to cascading defaults. Our theory of Risk Pollution, however, suggests that while credit dependencies are reduced, concentration of risk in the hands of weaker credit market participants is actually greater than before.

The most serious problem was pointed out by H. (Woody) Brock at Strategic Economic Decisions, Inc., that the level of risk in the credit markets can no longer be measured to close to the degree of confidence that was possible when credit was mostly created by banks versus the credit markets, and that which cannot be measured cannot be managed. Thus decisions in the credit markets are now being made blind, based almost entirely on gut, habit and instinct. While the rumor fly and mood swings from greed to fear and back again, overall the trend is toward greater risk aversion and thus all asset classes continue to sell as the de-leveraging continues. (De-leveraging means lower returns.)

The 1987 type event I warned July 25 is coming does not happen until the market participants lose confidence in the ability of central banks to control events. Typically this happens some time after several of the kinds of Fed interventions that we saw today in a 50 basis point discount rate cut. If a major revelation follows soon after, then market participants start to wonder if there is a bottom at all. That's when the shit really hits the fan. Now there's still hope, and as long as their is hope there will be high volatility but no 1,000+ crash days. But those days are coming.