I like the sound of that title -- Free Money! Who doesn't? But at what cost? Yes, there is always a cost. And, we Americans will pay a "dear" price. The cost is known as "ZIRP." (If you forgot what ZIRP is or are recent to the blog, read my post from Friday, November 7, 2008.)
Today, the Fed cut its key rate (Fed Funds) by a whopping 1%. It stated that its target is now between "0 and .25%." (Even before the cut, the effective Fed Funds rate had been trading around 0.10%.) Further, the Fed stated that it will do whatever is needed to do to end the longest recession in a quarter-century and revive credit. Also, given the current weak economic conditions, it stated that these exceptionally low levels of the federal funds rate can be seen for some time. It went on to say that it will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. To me, that sounds like desperation.
We are in our dire economic strait because of excessive credit creation, which the Federal Reserve caused, and now their solution is more of the same!
Today's fed action reminds me of the following idiom: "A Fool And His Money Are Easily Parted." Please be careful out there in these current investment environs. Don't let your emotions get the best of you. Many believe that a stock market "bottom" is in place. For me, I will listen to the market by way of the 15 and 40 EMAs. And, it is still telling me that what we have is a bear market rally. These EMAs were go enough for me back on January 8, 2008; and I am sure that they will be good enough going forward.
No comments:
Post a Comment