In 45 Minutes We Will Know
Posted by Ray on October 29, 2008 under Main | 
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As expected the markets opened to the downside and has been volatile today. Although the volatility is more reminiscent of years past rather than the 4% swings we have seen in the previous weeks.
With only a 200 or so point swing it reminds us of the good old days before the FMOC revealed their interest rate decision. This is good news and even better news is the fact that the Dow is holding above 9,000. While the decision is still 45 minutes away we do suspect that the Fed will cut only by .50%.
Anymore would signal that the Fed is panicking and any less would send the markets plummeting. We believe only a .25% rate cut is enough, but the Fed has gone from making monetary decisions to now accommodating the equity markets. Even upon the news of the .50% cut we suspect that profit taking will ensue as the markets tend to buy on the rumor and sell on the news.
The pundits will be out saying that they should have cut more, but that is an opinion based on greed rather than necessity. Banks carry the US government backed guarantees now, they have plenty of funding and the last thing the Fed wants to do is take all of its recession fighting power away with one single huge cut, of the 1 – 1.25% some nut jobs say they should do.
So, as far as the markets, no matter what the decision it will more than likely lead to a selloff today. We could be wrong, but with the huge run up from yesterday before the news it is a pretty good bet that negativity will take over.
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