Wednesday, October 8, 2008

Fed fires last arrow - Market not impressed

A concerted rate cut was probably the last of the market boosting measures by the U.S. fed. This has happened. Yet, the market is not impressed, with the Dow down 190 points, as I write.

It soemtimes appears that the top government officials do not understand the economic environment. What is the purpose of the half percent rate cut , from 2 to 1.5 ? Was the bear market about a half percent cut ? Did the Dow fall 30% because the market wanted the fed to cut rates by half percent ? No. There is a large conomic crisis engulfing the Western world. A minor rate cut will not solve the crisis.
Bloomberg reports: "In more typical market conditions, stocks rally when a Fed chief indicates he'll reduce rates. Now, Bernanke's message may have less power because traders already anticipated for weeks that policy makers would need to make that move, and because of rising concern even rate cuts may do little to immediately help banks scrambling to reduce their vulnerability to loan losses."

This bear market will not end by one grand gesture. Mr Bernanke waves a wand and the bear market ends - this scenario is as unlikely as the Nifty touching 6500 in two months. One of the important lessons is to wait patiently before committing your money to this market.

1 comment:

Venkat said...

NIFTY 6500..for a split second i thought..u r talking abt Sensex.

Hw time has changed ???

Love Venkatesh