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-- Posted Thursday, 1 November 2007 | Digg This Article | Source: GoldSeek.com

Rick’s Picks

Thursday, November 01, 2007

“Phenomenally accurate forecasts” 

The Fed eased yesterday while admonishing investors not to expect any more. Yeah, sure.  Like a spoiled kid, Wall Street has learned that it can get whatever it wants from the central bank by whining, sulking, and feigning pain.  Wanna bet that by this time next month, traders will have priced in a near-certain rate cut, forcing the Fed’s hand just as they did yesterday?  But what can Bernanke & Co do?   Rule #1 in Parenting for Dummies is to absolutely mean it when you say “No!”  If you tell a kid, ‘There’s no way I am going to let you sleep over Billy’s house this weekend!” and then let him sleep over Billy’s anyway, the kid will own you. And each time a parent lets a “no” mutate into a “yes,” he will reduce the potency of all future “nos” by some appreciable fraction. Before you know it the kid won’t even bother asking any more, so certain will he be that you can’t stop him from doing whatever it is he wants to do. 

Of course, the kid you can punish whenever he breaks a rule. But the Fed, being all carrot and no stick at this moment in history, cannot.  And what is more, the carrot will only get bigger as the housing disaster metastasizes. Assuming real estate values continue to deflate, and housing inventory to grow, the Fed is about as likely to turn hawkish as Atlantic City is to crack down on prostitution. The very worst the Fed can do is threaten not to loosen at the next meeting of the Open Market Committee. Try that on your kid some time:  “If you don’t stop squirming and shut up, you’re not going to get an increase in your allowance next week.”

So Wall Street needn’t worry at all about whether the central bank will continue to accommodate. What it should be worried about is this: Can the lowering of administered interest rates much affect an economy that currently requires upwards of $8 in new borrowing to create a mere single dollar’s worth of growth?  And more to the point, does the will to borrow that $8 still exist with home prices falling?  With the Dow Industrials not far from record highs, it’s clear that the OPM managers and other such blithering idiots who have been keeping stocks pumped up have yet to ponder such questions. In time they will, though, and reality will assert itself in the markets with a punitive force not seen in many years.

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SEMINAR SOLD OUT,  BUT…

Seats for this weekend’s online Hidden Pivot seminar are sold out, but if you are interested in attending the class at a later date, click here and I’ll let you know when the next session is scheduled -- probably in December or January.  If you would prefer to attend an on-site class, possible venues in 2008 include Vancouver, Boca Raton and San Francisco.  Please let me know if you’d be likely to come to the seminar if it were held in one of those cities

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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2007, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Thursday, 1 November 2007 | Digg This Article

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