SocraticGadfly: You just heard the sound of the dollar falling further …

January 28, 2008

You just heard the sound of the dollar falling further …

Otherwise known as the clamor of Wall Street supposedly producing another rate cut.

First, so much for Fed chief Ben Bernanke having the cojones of Paul Volcker. It looks like he’s going to be Greenspan-lite, only his bubble, about the only one he has to play with right now, is interest rates.

Second, given how huge the backlog of unsold homes is, this will NOT, repeat NOT significantly impact the housing market.

And, it sets up negative psychology all around, as one trader recognized:
“Anticipation of another Fed rate cut is the main magnet in the market today,” said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc.

He was skeptical the gains would stick — anything the Fed decides after its two-day meeting lets out Wednesday could be met with disappointment. If the rate cut is small or nonexistent, the market will likely be unsatisfied; if the cut is wide, the market may worry the economy is worse than it thought.

“If we do rally into a Fed rate cut, we have a lose-lose situation,” Goldman said.

It’s amazing how well “capitalism” ginning of economic situations works, isn’t it?

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