Morgan Stanley Treasury
I am going to try an experiment – trying to write the economyguy while traveling throughout the world. That means the timing of the articles might be affected, or I might miss an article if I get into a “computer unfriendly” area. But, assuming I can connect to the internet, all should be okay. I’m excited because it is a real test of whether of not someone can travel extensively in the world, and accomplish “staying in touch” at the same time.
Stocks exploded after the FED announcement that there will be NO CHANGE in the Fed Funds Rate – all this movement for no change??? Well, it was the rhetoric that moved the market – you see, the FED said that inflation was getting bad, and they have to fight it. So, if this is true, why didn’t they raise interest rates?? They couldn’t.
Bonds were not as spooked by the FED news, and rose just slightly.
The Dollar took off on the news – and that is because currencies assume that inflation scare tactics will translate into higher interest rates, and a more attractive currency.
Oil and gasoline continued their fall, helping calm the commodities market – and perversely calming inflation fears too.
Gold fell under $900 – so gold is an official “buy” right now, but buy cautiously as the metal could fall in value further. When it falls far enough, I’ll announce a “Buy with both hands” signal.
In the news today…..
The FED held the Fed Funds Rate steady at 2%. No big news to economyguy readers because you knew that major money in the bond market were betting on exactly that outcome – and those folks are connected enough to know.
The Service Sector index came in at 49.5 in July. Anything under 50 is a contraction in this economic area. Just another small sign of our recessionary condition.
Dinner Conversation Tonight….
The US Treasury just signed a contract with Morgan Stanley to “consult” with them on possible actions they could take with Fannie Mae and Freddie Mac. The contract value was $95,000.00.
Morgan Stanley can’t sneeze without spending that amount of money. So, why would they sign a contract with such a lousy amount of money???
Well, the other conditions of the contract weren’t revealed – were they?? So, let’s speculate on what they might be, and then we’ll see if that comes true. The Treasury has the authority to lend money to Fannie/Freddie and to purchase the share of Fannie/Freddie. How does Morgan Stanley make money?? Not if the Treasury loans money. BUT, if they purchase shares of Fannie/Freddie, Morgan Stanley can play the brokerage house role. That is just too obvious.
What else could Morgan Stanley be doing to make money out of this deal? And think BIG MONEY?? That’s you home work for tonight. Has Morgan Stanley bought a sweet spot with Fannie and Freddie? Could they become the intermediary for future sales of Fannie/Freddie paper?
Here are today’s numbers:
Dow Jones 30 Industrial – 11,616 (up 332 points)
10 Year Treasury Bond – 4.01% (up $0.04)
Euro – $1.5454
Gold – $886 (down $22)
Oil – $119.17 (down $2.24)
Gasoline – $2.96 (down $0.04)