Finally after a year of looking like he knows nothing, Ben Bernanke takes drastic measures to get the economy back on track. The Federal Reserve interest rates have been lowered to it’s lowest in history. The benchmark interest rate has been lowered to zero to 0.25%, making it easier and cheaper to borrow money and pay their mortgages.
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With the Fed’s actions, the stock market rallied like it had no sign of a lack of confidence. The DOW gained 4.2%, and the NASDAQ and the S&P 500 over 5%. It’s a clear sign that they (Federal Reserve) is willing to do anything and everything to avoid a depression. Investors pumped capital into the markets right after the announcement was made shortly after 2:00pm Tuesday.
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Several banks have lowered their prime lending rates to 3.25% and it look like more will follow in the coming days. It’s now a matter of people (who still have fears of the economy), are willing to borrow money and take on more debt.
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The only bad thing about the rate being lowered to these levels is that there is no where else to go. The Federal Reserve has always had the power of cutting the interest rate as a tool against economic troubles. At this point though I would think that unless World War III was to break out, the worst of the problems are behind us.
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I’ve felt that Ben Bernanke has always been behind the curve when it came to putting stability in the economy, but this move has shown that he’s finally up to speed with what needs to be done.
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This has been the sign I’ve been waiting for for me to get back in the stock market a lot more aggressively and I started doing that this week when many buying opportunities were available on Monday. If you were the many that have been doing your research and waiting on the sidelines, I suggest you start taking positions in those companies that you found attractive. I don’t recommend you going all in yet since there is that margin of the unexpected still there, but putting about 50% of your capital to work just might be the thing to do right now.
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Be patient and happy trading.
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In America, if a company can’t make a profit and loses money, they have one choice and that’s to file for bankruptcy. Just because a company is big doesn’t mean that the government has to lend them taxpayer’s money to save it.
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It’s amazing to see how the CEO’s of these big corporations have destroyed the company so much that they need the assistance of the U.S. government and the American taxpayer to save their skin. How can these men with such education be so stupid to take on the extreme risks that they did?
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What I really want to know is how stupid is Congress to keep on bailing out these companies that shouldn’t even be allowed to operate as a business after losing that much capital. Using the excuse that they’re such big business’ within the United States is a lame one at that. Yes, many people will lose their jobs and the unemployment rate will jump into the double digits, but what other choice do we have? Do we keep giving them money until the Federal Reserve runs out of paper to print more? The airline industry went through bankruptcy years ago and they’re still in business (except for Eastern of course).
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Do you really think that if the big three automakers go into bankruptcy that they (or we) won’t survive? We as American people have to not fall for the hype that the CEO’s, Congress and the mainstream media are trying to feed us. Look at all the money that’s was given to the financial industry and now it turns out it wasn’t used for what it was meant to be used for.
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What about the banking system mess? These companies along with Congress have also done the wrong thing to the American people. If it wasn’t for Congress passing all those bills in the 1990’s that allowed the financial sector to lend money out in sub-prime mortgages, we wouldn’t be in this mess.
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What has me really PO’d is that none of the people who are actually at fault, are being held accountable. Hank Paulson, Dick Fuld, Christopher Cox, Frank Dodd, Barney Frank and the President-elect are all to blame for the financial mess. Dick Wagoner, Alan Mulally and the UAW are to be blamed for the failure of the auto industry. I would like to blame Bob Nardelli from Chrysler too, but he just got there (I will blame him for the fall of The Home Depot).
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Capitalism is what this country was built on, if we are to continue as a capitalistic country we need to let companies fall when they fail to make a profit.
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When the decision was made to let Lehman Brothers filed bankruptcy, the company had no other choice but to restructure everything and sell of the assets that they had to clear their debt. If the American automakers are forced to do the same, they too will do what they have to to make the company survive. If they need to sell off assets, I’m sure that there’s an entrepreneur some where in this country that is willing to make profitable business out of the ashes. He could name the first model Phoenix.
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Henry “Hank” Paulson was the CEO of Goldman Sachs for many years. He has too many friends in the financial sector as well as on Wall Street. The man should never have been selected by President G.W. Bush, but he was and at the time everyone thought it was a great idea.
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Why was it a great idea? Because at the time the markets were recovering from the tech bubble collapse in the Stock market. He was also one of the guys who help redesign the hedge funds (another reason we have this financial meltdown) as well as pushing the idea of sub-prime mortgages. The Democrats loved him because he was full-filling the “American Dream”, getting everyone into the house they wanted, no matter what.
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It’s now come to a point that he’s out-lived his usefulness in the Treasury Department. He’s been having press conference after conference in just the last couple of weeks that shows that he doesn’t even know what to do for the economy while still trying to help his cronies within the financial sector.
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I’m counting down the days until Paulson will be out of the position. The job will now fall on Obama’s choice for Secretary of Treasury. Timothy Geithner will fill that position next month. The man has a long history with the economy and the Treasury department as well as being in charge of the New York Federal Reserve. Timothy Geithner has made a name for himself on Wall Street and some of the rallying in the markets last week was most likely due to the decision.
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Unfortunately the rally the only last so long in what is now “officially” a recession. That’s right the news was released Monday. The economic advisors and experts have now made it official. Like anyone with a half a brain couldn’t see that two months ago.
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The markets typically show the signs of a recession before it actually is made official. With that in mind, it’s nice to think that a recession is usually 8-12 months long. Looking back the markets have been showing signs of it for at least four months, which means that we can be half way through this mess already.
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As I’ve been saying for the last to months, build up some capital (40%-60% of your portfolio) and wait for the right time to buy to build a new position in the stock market. That time is just about upon us, so I say when the DOW reaches 7500 points again, start putting your money to work behind all that research that you’ve been doing.
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