Wall Street to Fed: Cut rates now!

Wall Street to Fed: Cut rates now!

money.cnn.com

More gloomy economic data has investors crying for Ben Bernanke & Co. to slash rates sooner than later. But should the Fed listen?

By Paul R. La Monica, CNNMoney.com editor at large
January 15 2008: 12:41 PM EST

NEW YORK (CNNMoney.com) -- A nearly $10 billion loss from Citigroup. Weak retail sales last month. Rising inflation pressures. It's ugly out there.

With all that in mind, investors are now betting the Federal Reserve may cut interest rates before its next scheduled meeting, a two-day session that wraps up on Jan. 30.

Some economists have argued that the United States is close to a recession or may already be in one.

"Fundamentally, we're on the verge of a recession. The economy may pull back from the cliff but I wouldn't count on it," said David Wyss, chief economist with Standard & Poor's.

(visit the link for the full news article)


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It had been reported that the FED would most likely cut the rates by 1/4 - 1/2 % somewhere around the end of Jan. However with Wall Street requesting a cut right now, are the markets tipping on the edge of a possible crash without the cut?

Along with this news,

BofA to gut investment unit: Report
CEO Ken Lewis lays out plans to restructure the bank's business banking division, according to The Wall Street Journal.

January 15 2008: 3:40 PM EST

NEW YORK (CNNMoney.com) -- Bank of America will drastically reorganize its corporate investment division as it retreats to focus on its core competencies of big business banking, said CEO Ken Lewis in an interview with The Wall Street Journal.

After laying off about 650 people, on top of the 500 layoffs announced in October, the bank's corporate and investment unit will be shrunk by about 12 percent both in terms of employees and scope, reported the Journal. Bank of America will also sell off its hedge fund lending division, and shut down parts of its trading and debt-based operations.

There are other indications that things are far worse that previously suspected.

Citigroup's $10 billion loss is worst ever
Writedown: $18.1 billion. Dividend cut: 41%. Job cuts: In the works. Chief Executive Vikram Pandit says financial giant's performance was 'unacceptable.'

Even though oil has backed off the $100 per barrel, it looks like the dollar will take another hit this week via the market and the banking situations.

The beginning of 2008 sure is looking ugly. Will the FED be able to hold the market or has it already gotten out of hand?

Investors might be preparing to bail like rats from a sinking ship.

"All the dismal data cement a half-point cut. But things have gotten so bad that just a 50 basis point cut would trigger a disappointing reaction,"

Hold on to your nickers the ride is going to get rough.

money.cnn.com
(visit the link for the full news article)

Merrill receives $6.6 Billion Boost
(visit link for full news article)

Merril may write down $15 Billion
(visit link for full news article)

[edit on 1/15/2008 by pstrron]

What's the time frame on everything going tits up. There are some very nervous rumblings here in Australia. Our rates are going up and up. Our new treasurer is virtually begging our Federal Reserve to stop raising rates. Everyone i know in Australia is on a very fine tight rope.

Bad bank earnings: Prepare for the flood
Citi and Merrill are expected to take giant writedowns - and it doesn't look like the worst is over just yet on Wall Street.

By David Ellis, CNNMoney.com staff writer
January 14 2008: 11:58 AM EST

NEW YORK (CNNMoney.com) -- Sometimes when it rains, it pours on Wall Street. And this week forecasters are calling for a flood.

Starting Tuesday, Wall Street will most likely find itself drowning in a torrent of dreary earnings news from some of the nation's biggest banks, marking yet another grim milestone for the troubled financial sector.

"It's not going to be a pretty sight," said Frank Barkocy, director of research at the investment advisory firm Mendon Capital Advisors in New York, which owns shares of a number of large banks including Bank of America and Washington Mutual.

Of the five banks and brokers scheduled to report results this week, three are expected to post a fourth-quarter loss - Merrill Lynch (MER, Fortune 500), Citigroup (C, Fortune 500) and Washington Mutual (WM, Fortune 500). JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) are expected to report a decline in quarterly earnings.

More bad news from the financial sector. Banks and the Fortune 500 are taking hits from all sides can it holdout much longer? Could this also be a clean setup by the FED to bring in the Amero via NAU as the only hope of financial survival?

reply to post by dingleberry77


All that I have read and seen is that the Fed is trying to prevent a total collapse of either the market and or the banks. However, as I see the trend, they are between a rock and a hard place and one little mistake will bring this house of cards crashing down at any moment. Though I suspect they will try and let it down faster than they would like just to prevent just such a collapse.

reply to post by pstrron


The house of cards has been propped up by the FED since the middle of last year, each time they pumped in new capital, wall street begged for more, all the while, giving those who have the ability, the time needed to protect their interests and sheltering their wealth.

Once the big money players, Merrill Lynch, Goldman Sachs etc. came out and acknowledged that the economy is in trouble (after their players protected their wealth), the market is free to fall because they know that they will be able to survive and JUMP back in on a depressed economy and further increase their wealth.

Old game, still the same.

reply to post by JacKatMtn


In other words, same old shell game just different players. Of course those that have the big bucks win no matter which way the market goes. After the collapse of 29, all the little fish were gone and nothing remained. The real wealth remained with the wealthy and they were able to basically buy the market for pennies on the dollar.

Do you feel that this will be a similar ploy this time around with the injection of the Amero to force a 10 to 1 ratio on the conversion?

I'm pretty scared for the markets today. ( Jan. 16 ).

There is going to be some slaughtering at the open thats for sure. The Canadian markets were killed on the 15th, just plain bad.

You know whats really scary? The agriculture commodity prices. Last week stuff was going limit up, Canola going up 24 bucks a day. Parabolic disaster in the making for agriculture stocks...

What is going to save this mess? I fear it is too late. What can you do? I got out of the market and I have not looked back. I couldn't handle it anymore.

I don't care when the market bounces back for one day or two. This is not a good environment.

reply to post by Dulcimer

The agriculture commodity prices. Last week stuff was going limit up, Canola going up 24 bucks a day.

Canola up $24 in one day , watch out for the rug to be pulled on that one soon. There is no way AG can sustain that kind of pricing. If AG crashes it could cause a slide on the rest of the market. Looks like someone is manipulating the market for a quick gain on the up stroke and a slam dunk on the down.

.....Looks like someone is manipulating the market for a quick gain on the up stroke and a slam dunk on the down.

You betcha, pstrron...

Those speculators who used the sheer amounts of "money" they have to massively inflate equities, derivatives and currencies in some cases and make their money at or near the top are indeed making another fortune shorting everything they can on the way down...

So much for transparency and fairness for all investors in financial markets

Peace


EDIT - spelling

[edit on 16-1-2008 by Rilence]

Originally posted by dingleberry77
What's the time frame on everything going tits up. There are some very nervous rumblings here in Australia. Our rates are going up and up. Our new treasurer is virtually begging our Federal Reserve to stop raising rates. Everyone i know in Australia is on a very fine tight rope.

Here too. Don't worry that's the way to fight inflation.

reply to post by Vojvoda


Love your signature, though not exactly correct. Bernanke really didn't tell the whole truth of the matter.

signature
New Federal Reserve Chairman Ben Bernanke said in a speech in 2003: "The US government has a technology called a printing press (or, today, its electronic equivalent), that allows it to produce as many US dollars as it wishes at essentially no cost."

The cost to the FED per million dollars is $20 for the printing. In turn the FED lends it back to the US government as $1,000,000 + interest Tell me the FED doesn't have a scam going on here.

Now the US gov trusts the FED with the economy. Don't see any problems here.

BTW the Federal Reserve Bank is about as Federal as FedEx, its a private bank.

The only thing the constant cutting of the Fed Rate will do is facilitate the redistribution of wealth from those who previously held it, and so disgustingly unfair prices its simply ludicrous...

Governments should absolutely control central banks in this day and age....How else are the ordinary people most given countries can go on living in faith and hope to live out a normal, comfortable life ?

The US Fed needs to raise interest rates by at least 2% this year in order to bring it into line with say the economies of Australia and New Zealand...

No more covering the bankers asses....Trust me, 200 points over 12 mths will hurt the bankers and the Europeans who run the Fed much more than anyone on the street...

It has to happen for all your sakes in the US, I just hope someone comes along with enough guts to make it happen...

If it it doesn't, they are going to get away with small losses, and your average joe will lose a lot of his retirement account with no comeback....

And probably no house if you've over borrowed for it...

Why is the US pretty much the only major economy with a "loosening" bias when it comes to rates ? Whos is the Fed protecting ?

Pretty much every other Central bank in the world ATM is at neutral or tightening bias...

Given the economic situations world wide, and the risks involved if one correlates to close to the US economy, no wonder there has been a huge capital flight out of US assets in the early part of January...

Which has further sparked US equities markets....Its time the rubbish needs
to be thrown out...Rates needs to be increased probably 200 basis points over 12 mths....The US economy needs to stagnate for a bit...The rest of the world
will get a long just fine as the USD is no longer the main world currency in valur/volume the last 6 mths...

Unfortunately, the US has to take the medicine the Bush Administration has forced it to take...

Time to tilt your neck, and swallow as a consumer....Trust me, it aint so bad for you...

The further up the tree you are, the more you will suffer...You created an unsustainable bubble just like 9 yrs ago, and again it has popped...

Few winners, many losers....

Just learn this time...Because, as always with these bursts the US seems to be far more adversely affected than any other nation...

Get legislative frameworks in place, MUCH more transparency in the whole of the institutional sector....Parltuclar derivatives where the ultimate ownershipor risk may be in doubt...

Make it certain

Make the US the Major player in worldwide markets when it comes to transparency and true equities in markets...

Now....Do I believe anything close to what I've said here will happen ? Nuh-uh...The US is FAR too selfish, greedy and self interested a nation to ever do any of these things...

But the thing is, denying any of what I've said will only Send the US (and indirectly many world economies) further into the poo... The thing is the US will cop at least 75% of the pain, the rest of the world 25%

WOW !!! That would have been unheard of 20 yrs ago...But lo and behold, the rise of the Asian giants and the resource rich economies...

Anyone in the US who thinks a US recession or depression will affect EVERYONE in the world is misguided...

The rest of the world is so disentangled from the USD as the world's reserve currency at any time since WW2...

Many economies could EASILY survive a recession in the US with VERY few ill effects...Some may suffer greater effects given their trade position with the US....

But Australia, Canada, China, India and Japan would be largely unaffected by a recession in the US...

Europe is a tough call...there is some very strong economies backed by old money, but the key in Europe is labor reform, tax cuts, and wage increases tied to productivity...

Tax cuts, reducing the social welfare bill in many European countries would go a long way to REALLY stimulating the EU zone....I mean, how long has it been since we have had really great numbers out of EU countries as a whole...

By that I mean, low inflation, reasonable wage growth roughly in line with productivity...?

I honestly believe the EU zone should trade outside the US in order to achieve the things I've mentioned...

Anywho, the US needs to take very big yucky tasting pill before the end of the year, or year after year the pill will get bigger and yuckier and after a while, they won't offer a pill...it will be like, "Well we have a train to "Such and such" where we have work for you...

Think about it...

Peace

reply to post by pstrron


Hey pstrron...

I'm sure you noticed the Gold price going through the roof which is a definite sign of a collapsing dollar....

www.monex.com...

It's quite ridiculous actually, in the last year gold has gone up by AT LEAST $250/oz....that should be a sign right there. Guess I should have invested in gold earlier when I had the chance.

Gold opened up today at $890/oz, down from $910/oz just yesterday or the day before I believe, very interesting...get it while its hot!!

Purduegrad05

reply to post by pstrron



Wall Street & those various major banks want an emergency cut before the Jan 30-31 fed meeting

because they are playing the Fed (imho) they are using a bad situation and
acting the proverbial 'gnashing of teeth and wearing sackcloth' and proclaiming behind the closed doors that economic doomsday is at-the-door....
Pshaw, they want a full cut of 1.00% by 1 Feb and a .5 or .75 cuts to follow,
so they can leverage their discount rate verses their loan return rates.
(and remain in their lavish elitisms)
they want a less painful (for themselves)way out of the mess they fraudulently created.


reflect that the banks 'discount rate' is different than the public's interest rate... watch that margin of difference between rates grow wider in the months to come.

Here is the Wallstreet Journals headline about the inflation reports...

Inflation Rose 0.3% in December, But Jump Is Unlikely to Deter Fed

U.S. consumer prices soared at their fastest rate in almost two decades last year as higher energy, food and medical bills took a toll on consumers, suggesting that the economy faces a stagflationary mix of slower economic growth and rising price pressures.

Still, the inflation data aren't alarming enough to prevent the Federal Reserve from carrying out a fourth-straight interest rate reduction later this month amid signs that the housing slump has spread to the broader economy.

online.wsj.com...

Perhaps The reason the Stock Market is asking for more rates cuts, is because the worst of more financial institutions write outs is not in the open yet.

As we have seen since the beginning of the year it was about 400 billion write outs unaccounted for.

So far Countrywide fall out (Bailed by Bank of America) was this week followed by Citgroup but the amount of their lost do not fill the 400 billion dollars.

Keep your eyes open because we may see more fall out this coming weeks.

Thanks to the last three posters after my last post...

I mean, this is going to be hard as hell on a lot of people...But people must understand and learn that those further up the tree have more to fear from interest rate rises...

The general populace will have to put up with some inflation short term until the supply of debt settled...

But ultimately, you will see the idiots of the corporate world who chose to lend to substandard credit consumers, and said consumers suffer...

If this is allowed to happen in a sensible and orderly manner, the US economy can recover from this situation in 3-5 yrs tops....

It is simply a matter of FORCING those at the commercial and consumer end of this disaster to take their medicine for the benefit of the whole nation...

Any government who fails to do this is in my opinion weak a piss and not fit to govern, regardless of affiliation...

This has to be fixed, now...Else every consumer in the US will suffer in ways not experience for several generations...

Bite the bullet know for your own sakes, not doing it isn't worth it...

reply to post by marg6043


Heres another one for you Marg (and I would be willing to bet that Wells Fargo is hiding a good % of losses)

LOVE, LOVE, LOVE how they keep calling it a subprime crisis. Spin at it's best, IMO

Wells Fargo 4Q profit drops 38 percent

Wells Fargo Inc., one of the nation's largest banks, said Wednesday fourth-quarter earnings fell 38 percent, hurt by a charge to cover fallout from the subprime loan crisis.

news.yahoo.com...;_ylt=AiQ0TpMlI4nuWbBRYLnJMl1u24cA

reply to post by SEEWHATUDO


That on top of the weak job creation and lost of jobs due to cuts after companies fall out, is going to get very ugly for the consumer.

US retail sales fell in December

US retail sales fell in December as shops endured weak Christmas trading, the latest indication that the US economy is under pressure.

news.bbc.co.uk...

Wholesale inflation hike largest in 26 years

Labor Department says soaring energy costs, from gasoline to home heating oil, responsible for 6.3% increase last year

money.cnn.com...

Detroit's bumpy road to better times

U.S. automakers struggle with weak sales, ongoing losses as Detroit auto show kicks off, but lower labor costs, overseas growth could help in future.

money.cnn.com...


[edit on 16-1-2008 by marg6043]