Wednesday, August 29, 2007

Take out the eraser

It's now as if yesterday's market fall did not happen. Today was a mirror image and, if a portfolio was weighted toward technology and small caps, the image may even be a little more attractive. Market commentary suggests that opinion shifted. There is for the moment a renewed belief that the Fed will cut the discount rate in September and take it down further before the end of the year.

Is it possible that a rate cut or series of rate cuts could lead to higher long term interest rates, fuel inflation, and promote speculation? The short term benefit of this popular option may be offset by resulting negatives such as these within a year. A rate cutting agenda by the Fed is not a panacea and is by no means an absolute certainty.

1 Comments:

Anonymous kf said...

A rate cut is essential. You heard Jim Cramer. The Fed must act because this is a crisis. You must be reading the New York Post or something.

8:39 PM  

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