Bringing a fire truck to a bank robbery
How does a half-point help us if Costco is out of toilet paper?
Fed cuts half point in emergency move amid spreading virus
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Re: Fed cuts half point in emergency move amid spreading virus
#22>The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.” So why cut the rate? Doesn't make any sense.
Political optics. Current POTUS's claim to success rests, in part, on a high performing financial sector. If the market tanks or stagnates, he no longer has that as a talking point.
Re: Fed cuts half point in emergency move amid spreading virus
#233-2-1, bull market returns. (I hope)
Why? Are you retired? Because if you aren't, if you're working and putting money into a retirement plan, you are much better off with a bear market, especially one like this that is practically guaranteed not to run for years. When you're a buyer you want prices to be low.
Perhaps this person bought stocks outside of their 401k when it was low and is excited about another run of high returns.
Re: Fed cuts half point in emergency move amid spreading virus
#24I'm retired and mostly not in the market. I won't invest in the market while it is overpriced. With such low interest rates, what is a safe investment?
Re: Fed cuts half point in emergency move amid spreading virus
#25We're basically running out of tools to combat an actual financial crisis. https://www.investopedia.com/terms/l/liquiditytrap.asp
Hey look on the bright side, we have another 100bps left in rates and then QE4. After that, yeah then it gets tough, but then again, maybe we get some actual fiscal stimulus which maybe buys the US some China style infrastructure!
We will likely see negative interest rates before the Fed decides to raise
Re: Fed cuts half point in emergency move amid spreading virus
#26We're basically running out of tools to combat an actual financial crisis. https://www.investopedia.com/terms/l/liquiditytrap.asp
Hey look on the bright side, we have another 100bps left in rates and then QE4. After that, yeah then it gets tough, but then again, maybe we get some actual fiscal stimulus which maybe buys the US some China style infrastructure!
We could always just end the practice of paying interest on excess reserves which the Fed started when they thought banks were collapsing but there wasn't any economic downturn back in 2008, so they needed to get the banks not to lend out the money they were pumping into them somehow. The Fed's inflation models have been predicting higher inflation than we've seen ever since. Currently the interest on required reserves (IORR) and interested on excess reserves (IOER) are both 1.6%, well above the Fed lending rate of 1.25%.
Re: Fed cuts half point in emergency move amid spreading virus
#27From what I gather after spending more time than I'm willing to admit listening to every finance talking head out there, the consensus on the street seems to be that this will result in a temporary market recovery followed by the continued deterioration of stock prices given that fiscal or monetary* policy can't really affect the real economy in the near term* i.e. if the supply chain is indeed impacted due to COVID-19, no amount of fiscal or monetary* stimulus can make up for the time / productivity losses in the near term*
On the margin, I'm still slightly bearish on the whole situation due to the combination of the virus' absurdly high infection rate[0] and its long incubation period (I'll let each one of you be the judge of how long that is...)
[0] https://duckduckgo.com/?q=infection+rate+sars+vs+coronavirus...
Re: Fed cuts half point in emergency move amid spreading virus
#283-2-1, bull market returns. (I hope)
Why? Are you retired? Because if you aren't, if you're working and putting money into a retirement plan, you are much better off with a bear market, especially one like this that is practically guaranteed not to run for years. When you're a buyer you want prices to be low.
Except people lose their jobs in a bear market.
Re: Fed cuts half point in emergency move amid spreading virus
#29We're basically running out of tools to combat an actual financial crisis. https://www.investopedia.com/terms/l/liquiditytrap.asp
It can go negative, or Fed can do another round of QE, there are plenty of tools. The real question is whether the deficit can grow indefinitely without consequences, and if this is a moral hazard (e.g. no risk priced in borrowing).
The European experience has shown that negative rates aren't really working, other than killing the local banking system.