My Fed Thesis

I still Stick with my thesis that the fed is going to hold back as much as they can.

This is a new fed, with Uncle Ben!

As in Trading, As in life; After 20 years of Greenspan and his "Put".... I think we are getting a knee Jerk to that position. Especially since many see the problem we are having, being attributed to him. Human nature would be that there would be a pent up reaction at the fed to that lenient Free money, and it's Moral, and direct Hazard.

I know how smart I am, I'm in that high end of Traders. Stock traders are in a 105-160 IQ range(certainly some are higher, and some lower)...

See, Ben and most the fed are in a 140-190 range. I'm not saying they are smarter than we are, but to think that they haven't gone over this stuff in massive detail... It's hubris... It's not that they don't think about cutting Immediately, because of the jobs numbers. It's that they chose not to..... But why??? the Bulls ask........ Because they are legitemately worried about Inflation, and may even feel that they could set off stagflation.

Ben has a speech, where he talks about one of the problems the American Markets have is lack of savings(M2 Money). .... Now ask yourself.... If ben knows that there is a lack of liquidity in US financial systems, caused by lack of investment in financial Devices that would give us Broader amounts of M4 money(all money in circulation).

What reduces M2 money? Massive consumer spending on credit, and Inflation being above the Money market, CD, and savings rates. You can bullshit everyone all you want with CPI and PPI, but people know that everything is always getting more expensive, meaning to maintain their standard of living(Excluding the Delusion of Hedonic inflation adjustments(which still have us working off the Deflationary affect of Fire and the Wheel)... Why Save money??

These people aren't fools, They want to avoid cutting at all Costs. Liquidity for home buyers is fine, the financial credit markets are fine, with the only challenge being that no one wants to loan Citi or CFC money for 3 months.

Everyone agrees that a correction in housing prices is needed, Reflating the housing prices at the cost of setting off Massive Inflation. Would be foolish. There are Tons of people who got into homes they can't afford, and who Speculated into too many real estate investments. Sure, some of them deserve to own a home, but not the one they purchased.

Bailing these people out to the tune of doubling food and energy, and commodities. would be stupid.

If you listen to Everyone!!! this is the Crowded Trade, it's what everyone says will happen....

It's not!! the fed isn't stupid.. A recession is going to happen, it's unstoppable. They know it, they have known it for a year. They are doing everything the can to keep inflation under control. So yes, they cut .25 or maybe a .50 at the next meeting. But they will Drag their feet at much as possible.(which is exactly what they have been doing)

Dare I suggest that the fed at the next meeting cuts .25 and throws a statement out like this:

"The fed intends to be responsive to turmoil in the business community, But the headwinds of rising input costs will outweigh any benefit from the higher inflation from broader Rate cuts. Commercial and residential mortgage lending is available to qualified borrowers, and overall, Credit at a reasonable rate is there to be had. Caviot Emptor."

Or even, they cut 0 and the statement is "Caviot Emptor"

I will grant that as members of academia, they will be spineless. And the idea that they act in any "Heroic" or Brave way... is beyond them... They will be passive aggressive, and Vague. But the actions show every bit of Legitimate inflation concern, and a willingness to let the "market" sort out the CDO and Derivative issues.