The Fed Rate Cut Aftermath

Mr Practical Oct 04, 2007 9:45 am

As stocks climb to new highs, let’s look at what the Fed’s rate cuts have really done. 30 year mortgage rates before the cut... 6.375%. 30-year mortgage rates after the cut... 6.625%. Stocks’ reaction... priceless.

Forget about 5-year ARMs and interest-only loans. Those are priced completely differently now and are bones in the sand. A mortgage broker at a big bank tells me business is down significantly with no signs of picking up.

http://www.minyanville.com/articles/banks-Fed+rate+cut-mortgage-ARMs-speculating/index/a/14350

The Financial Big One Hit

This is one of the best explanations of why lowering the interest rate would be extremely bad for the United States. There are lots of technical articles, but this one is easily understood.

http://www.oftwominds.com/blog.html

The Big One Just Hit
September 8, 2007

Here in California we refer to the next catastrophic earthquake as The Big One--not a modest little 7.0 temblor like Loma Prieta in 1989, but a massive 8.0+ quake like the 1906 event which devastated San Francisco.

The financial Big One hit today. Though the markets are still standing, the apparently modest damage is illusory--deep inside, the supports have broken. Over the next few weeks, we will witness a seemingly sound structure start collapsing under its own weight--the global house of structured debt. Though to the naked eye it seemed to have survived today's modest financial quake, reverberating shock waves will soon bring it down.

Let's start with a chart of the U.S. dollar index. The mainstream media is full of stories about the Federal Reserve cutting rates, but the bigger story--the fall of the dollar below the multi-decade support level of 80--was barely mentioned.