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Whaddaya think about the Fed's most recent rate cut?
Old 12-16-2008, 10:58 PM   #1
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Whaddaya think about the Fed's most recent rate cut?

Seems like it stirred up the markets a bit...here's a link if you havent heard:


Fed reduces benchmark rate to as low as zero - Yahoo! News
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Old 12-17-2008, 06:20 AM   #2
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Why anybody believes the Federal Reserve knows what they are doing is beyond me. They have been consistently wrong. Coupled with the current and most likely future administration, we have the perfect storm. No one will escape unscathed.
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Old 12-17-2008, 06:27 AM   #3
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No one will escape unscathed.
Not even you guys who keep your nest egg under your mattress?
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Old 12-17-2008, 06:46 AM   #4
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How will this affect mortgage interest rates?

Mike
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Old 12-17-2008, 06:50 AM   #5
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How will this affect mortgage interest rates?
Fed Rate Cut Affect on Mortgages - How Mortgage Rates are Determined
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Old 12-17-2008, 07:31 AM   #6
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Thanks

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Old 12-17-2008, 07:36 AM   #7
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I think. It will all be sorted out in time. The markets will go back up along with interest rates. Then this whole thing will happen again.That is my naive head buried in the sand outlook.
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Old 12-17-2008, 07:41 AM   #8
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So I should be moving my investments to stocks?

Mike
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Old 12-17-2008, 07:51 AM   #9
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Not even you guys who keep your nest egg under your mattress?
Inflation will kill my nest egg.
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Old 12-17-2008, 07:58 AM   #10
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Fourth and long so they punted and hopefully it wasn't shanked OB.
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Old 12-17-2008, 08:13 AM   #11
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The Fed shot off a "shotgun" load instead of the usual .22. Shows how bad they believe things are - but also shows their resolve to jump in with both feet to try and gets things going again.
I am staying the course -- and have been doing my part.....spending money.
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Old 12-17-2008, 08:53 AM   #12
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I guess the bad part is they have nothing left in this part of the arsenal if things get worse!
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Old 12-17-2008, 09:01 AM   #13
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As Elmer Fudd once famously said, the Fed now has "no more buwwets." At least with interest rate policy.

But in reality, interest rates aren't the problem. Willingness to lend -- and confidence that loans will get repaid -- are the bigger problem.
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Old 12-17-2008, 09:01 AM   #14
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I don't think the lowering of the Fed fund rate was much of a weapon, mostly symbolic. The real firepower may be the other actions the Fed is planning to take to juice the economy, such as implementing the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.

Yeah, "Isn't that what got us in trouble in the first place?" ...
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Old 12-17-2008, 09:03 AM   #15
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I think it is great - My Interest only HELOC adjusts next week and will drop to 2.75% - basically, free money to me. I was going to pay it off but think I will keep it for now. Payoff money would come from a CD ladder rung paying 6% so the net difference, after taxes is about, $2,400 - that will pay most of my utilities for the year. Love it when Ben said they plan to keep it at this level for the foreseeable future.

I also notice that we are entering "disinflation period" - CPI down about 2.7% over the past two months. So CD's rates become REAL plus disinflation factor?
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Old 12-17-2008, 09:07 AM   #16
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I also notice that we are entering "disinflation period" - CPI down about 2.7% over the past two months. So CD's rates become REAL plus disinflation factor?
For the time being, yes, as long as deflation lasts. There are, of course, two schools of thought on this, one being that deflation will last for many years (and in fact, TIPS yields are largely reflecting this belief) and the other (mine) is that as long as the government is going to attack the problem by borrowing and printing money, inflationary pressures will overtake deflationary pressures within a year or two.

These are interesting times, indeed.
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Old 12-18-2008, 06:25 AM   #17
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Fed rate cut sparks a rush of refinancing - Real estate- msnbc.com
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Old 12-18-2008, 08:40 AM   #18
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As long as the refinancing and new mortgages are conventional fixed rate mortgages (no toxic ARMs, interest-only or no docs), I don't think the mortgage fiascos triggered by the Fed giving money away in 2003-05 would happen again. And I think most banks are too tight on lending to do that now. So if this can eliminate a lot of potentially toxic mortgages that could blow up in a year or two, so be it. Sucks to be a saver dependent on interest income, though.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 12-20-2008, 09:10 AM   #19
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I am at 5.875% with a $180K balance. If I can find 4.875% I only save about $120. per month and after you add in points and fees, it would probably take two or more years to recoup. I am not feeling a big need to go out and refinance at that rate. Now if I could get in at 4.5% I would consider it. If the fed cut the rate so low, are the banks just making out like bandits at the current rates they are charging, which in my opinion are high. We need some competition to drive down rates between competing banks. Come on Well's, Chase and BofA.
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Old 12-20-2008, 09:45 PM   #20
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For the time being, yes, as long as deflation lasts. There are, of course, two schools of thought on this, one being that deflation will last for many years (and in fact, TIPS yields are largely reflecting this belief) and the other (mine) is that as long as the government is going to attack the problem by borrowing and printing money, inflationary pressures will overtake deflationary pressures within a year or two.
The other (yours & mine) is correct. The government has been planning for some time to hyperinflate debtors, such as the government, out of debt. I wouldn't wait for a year or two.

This is going to CRUSH savers.

Yet people still see the government as benign.
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