The Economy Guy

The stock market waited for the FED to announce its Fed Funds Rate cut, and then soared up 420 points.  It is sure fun if you are a day trader.  Moves like these just don’t happen normally.

10 Year Treasury Bonds fell, and increased in interest rate to 3.45%.

Currencies pulled back from their all time highs, as they expected a 1.00% Fed Funds Rate cut, rather than the 3/4% cut.

Oil and gasoline continued their normal rise to new highs.  They are back on track to insure all Americans can’t afford to drive to the corner store.

In the news today….

The Federal Reserve Board voted to reduce the Fed Funds Rate by 0.75% to 2.25%.  In a similar move, the Discount Rate was reduced to 2.50%.

The FED announced that the US economy had weakened since the last meeting with poorer job opportunities, reduced consumer spending, and weakening industrial output.  Two of the members voted to only have a 0.50% reduction, but they were outvoted.

The FED also said that inflation was creeping up, but they expected inflation to moderate in the next 2 quarters.  (We’ll see.)

What does this all mean?

1. The US economy is in the tank.
2. The FED will probably continue to reduce the Fed Funds rate in future meetings.
3. Inflation is acknowledged to be here by the FED.
4. Foreign currencies will continue to pull back for one or two days, and then will continue their march to all time highs.
5. Oil will continue its march to all time highs.
6. Gold will continue its march to all time highs.
7. The 10 Year bond will probably stick around the 3.50% mark unless another (Bear Sterns) shoe drops.

Can you make money in this market??

1. Buy gold (or silver).
2. Buy foreign currencies (Euros, Yens, Swiss Francs)
3. Fill your swimming pool with crude oil, and sell it back to the oil companies in a year. (Just kidding).
4. Look for dislocations in the market – for example, in the municipal bond market there are high yielding bonds being big every day.
5. Don’t buy stocks.  (Only exception is if you REALLY know what the company behind the stock is really doing financially.)
6. Be in line to purchase the next investment bank to go under – don’t let JPMorgan get all the good deals.

Here are today’s Numbers:
Dow Jones 30 Industrial – 12,393 (Up 420 points)
10 Year Treasury Bond - 3.45% (Up 0.14%)
Euro - $1.5635
Gold - $1004 (Up $2)
Oil - $109.42 (Up $3.74)
Gasoline - $2.66 (Up $0.16)