Etwas unkonventionell geschrieben, aber trotzdem richtig. Hoffen wir, dass die Menge nach den Wochenende mit etwas kühlerem Kopf agiert. -------------------------------- Rate Cut? It Doesn't Help
In Fact, It Makes Matters WORSE- Sept. 19, 2007 Now, you know how bearish i've been lately? well, i'm still the same. but my time horizon has shifted. the expected Fed move changed things. now i expect happy hour in the markets for at least a few days until everybody figures out that the rate cut was not good news for the markets. but why not?.Fact is, the cut has set in motion forces which will presently bite the markets very hard in the lower wherewithals. further, the cut will not help the housing market or housing prices- they'll still fall hard, well into double-digit losses (as Mr. Greenspan heroically noted recently). the mechanics of this are simple: true, the banks can take in more mortgages cheaper, but nobody wants to buy the paper because investors don't trust it anymore. so, either the banks have to offer better yields on CDOs to investors, which will cut deeply into banks' next quarterly reports and trash the markets, or, the banks just won't be doing much mortgage biz. i think it's the latter..But just suppose they do manage to flog some more bad paper to investors....The net effect will be to set us up for an even harder crash down the road as new homeowners gradually find out they can't afford the loans and (gasp) just walk away from their mortgages, which is what's already happening and is what triggered the present mess that required the rate cut in the first place, only now the fallout will be much worse. Rate Cut No Help for RE.Now, there are also some other issues with this rate cut business. there are all these other places in the world called "countries", and they all have their own economies and currencies to worry about. stay with me. Rule #1- a rate cut trashes a country's currency, and that's exactly what's happened to the dollar. even against the highly dollar-biased Dollar Index currency basket, the USD has lost magnificently (now down to 79, the 80 danger threshold was crossed a couple weeks ago). [see DX- Dollar Index]. and the rate cut announcement didn't help. any halfway decent chartist can see exactly where we're headed. but what does this mean?.It means that our "friendly" creditor countries out there, who've been buying all our debt as U.S. Treasury notes, are now in the uncomfortable position of having to decide to either cut our throats, or let the USD cut theirs. and they seem to be choosing to survive. all those dollars they're holding are steadily decreasing in value, which is good for their exports but bad for their currency. and it's so bad that it's threatening to hurt their overall economies. so, even though Uncle Sam wants them to cut their interest rates to help stabilize the USD, such a move would devalue their currencies too. India and the rest of Southeast Asia are about ready to throw up their hands and let the USD twist in the wind. Asia Picture on Rate Cut.One major problem with the dollar devaluation (which is what the rate cut really is) is that oil is mainly denominated in USD (except for Venezuela and Iran, which will now only accept yen for oil). so here you sit in a developing economy, using googobs of oil per minute, and some guy comes along and raises oil prices by 10% in USD, what do you do? keep holding those ever-crashing dollars, or cash 'em in for some other more stable currency? right. and that starts a carry-trade unwind like never before seen, meaning heavy dollar dumping, which in turn devalues the dollar even more..So, yeah, i'm temporarily bullish- but only 'til the bulk of market retailers (read, "knotheads") figure all this out. well, maybe i shouldn't call them names like that, but i find it highly perplexing that the markets- for two days- have taken all this as good news. so i take it back- they're not "knotheads", they're just folks like me but who haven't yet put in the time to study this complicated mess. http://www.whattolearn.com/crash.htm#updates |
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