-- Posted Thursday, 9 October 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, October 9, 2008
“Phenomenally accurate forecasts”
Forbes online hit the bullseye with this headline Wednesday afternoon: “Rate Cut Fails to Scare the Bears”. And why should it have? Is there an investor or speculator on earth who still believes that knocking the fed funds rate down by a measly 50 or 100 basis points will somehow arrest the global financial system’s collapse? To make matters worse, yesterday the world’s bourses shrugged off the central banks’ best punch, falling on a day when coordinated rate cuts in Europe and North America were headline news. The Dow finished off 190 points after being down as much as 260 intraday, suggesting not only that short sellers have become inured to the nostrums of monetary easing, but that investors in general no longer believe that loosening credit will work. Under the circumstances, we might ask, what will the bankers do next?
We’d seen this coming and warned subscribers with the following update posted at the web site Tuesday night:
“The coordinated lowering of interest rates around the world is now the ‘story’ propping up the global financial system. With global easing rumored to be imminent, why, then, did [Tuesday’s] short-squeeze on Wall Street fizzle out before the session was 15 minutes old? My guess is that traders decided they couldn't wait even one more day for the easing to start. When it finally does, though, look out below if the all but obligatory buying panic turns flatulent in a mere hour or two.
Trust Your Instincts
“My advice is to trust your instincts on this one. Do you personally believe that lowering administered interest rates will touch off a spree of borrowing and lending, reviving the global economy and causing institutional lenders to trust one another? That's what I thought. Then why should we expect traders and speculators around the world to believe it? We hesitate to imagine that this last-ditch tactic will exhaust the Fed' increasingly ethereal bag of tricks, but it will surely come close, since only 200 more basis points of easing remain to save the U.S. and the world. One more piece of advice: If the market rallies at all on the news, don't assume you'll have a few leisurely days to short it.”
Actually, it looked as though shorts were not quite out of the woods at yesterday’s close, since stocks were trading well above their lows. However, if shares get squeezed today and/or tomorrow, that’s a rally we’d be eager to short. The Fed’s efforts must fail because money velocity has collapsed. Borrowers and lenders alike have completely lost their zeal for putting electronic dollars to work, and the extreme measures that have been tried so far to bail out the system have only further eroded their confidence. Eroded your confidence and mine. Trillions of dollars worth have assets have vanished from savers’ accounts, and there is no way that this deflationary implosion can be reversed.
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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 © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 9 October 2008 | Digg This Article | Source: GoldSeek.com
