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Friday, 4 January 2008

Be Prepared - A Note From The Collection Agency

A happy New Year to one and all.

I want to send you a quick note with a warning of possible Federal Reserve action with regard to Federal Fund Rates.

Today saw an openly acknowledged meeting of the Presidents Working Group on Financial Markets and a follow on meeting with Pres Bush, attended by Mr Bernanke. Although the wires presented it as this:

"White House has confirmed Fed Chairman Ben Bernanke will be in the 1pm ET meeting update to Pres. Bush from the Working Grp. on Fincl. Mkts; that meeting is not about discussing possible stimulus programs." (my emphasis)

With the likes of Goldman Sachs being quoted as follows:

"US ECON: It's official, Goldman says they expect a 50bps rate cut by the fed AT or BEFORE the Jan 30 FOMC. But, they say an intermeeting cut would "probably require a major downside surprise in consumer spending within the next ten days." (MNI)

I believe the Fed may cut rates as early as Monday, before the markets open. They will probably cut by 0.25% with a further 0.25% at the scheduled Fed meeting.

These are dangerous times, the quickening pace of the slowdown in the economy is a surprise to the Fed et al. Ensure your strategy is adjusted accordingly.