Tuesday, September 18, 2007

50 Basis Points

With the fed cutting 50 basis points today we have to wonder what the long term effects will be.

  1. The dollar has taken a quick response and devalued further.
  2. Gold is rising in value letting everyone know that the dollar is getting worth less daily. It seems only yesterday that gold sat at $350 instead of the mid to high 700's.
  3. Countrywide may survive too by slight of hand and balance sheet

Does this mean the real estate problems are resolved? Not at all, now they will get dragged out for longer with no true bottom of the market in sight, everyone will still be shy of CMO's, ABS's etc so lending will be lax, but interest rates will be lower for those that can refinance. All the subprime borrowers will still not be able to obtain their refinance. Therefore we should still enter a recession, just a few months later!

Copyright Jonathan Rose 2007 - Creative Commons License

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