The stock market has become nothing more than a method of betting on interest rate policy.

Why bother making things anymore?  Just lower the rates to zero so that everybody can get rich.

Here's the updated chart of FOMC meetings going back to 1999.  Red arrows are rate cuts, green arrows are rate increases, and blue arrows are no change.  The black arrows point out emergency meetings and rate cuts.  (please note that the arrows are as close as I could get them to the actual weekly line, but some may have shifted when it was uploaded.  Close enough for government work). 

A couple of interesting points:  during the last bear, the rate cutting campaign was only for 1 year in 2001.  Then they basically sat by, with the exception of one rate cut in 2002 and one in 2003.  Raising rates didn't start until 6 months after the SP regained its moving averages.

Interestingly, I did not know they had an emergency cut on 1/3/01.  That was the first cut after the market topped.  It was around the 1300 level, which, incidentally, is where we were last week when they did the emergency cut.  Hmmm....

Here's what they said in the 1/3/01 statement:

"These actions were taken in light of further weakening of sales and production, and in the context of lower consumer confidence, tight conditions in some segments of financial markets, and high energy prices sapping household and business purchasing power. Moreover, inflation pressures remain contained. Nonetheless, to date there is little evidence to suggest that longer-term advances in technology and associated gains in productivity are abating.

The Committee continues to believe that, against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future."
(bold is my edit - I thought that was funny compared to today)

The stock market has become nothing more than a method of betting on interest rate policy.

Why bother making things anymore?  Just lower the rates to zero so that everybody can get rich.

except reamtiress tryin' ta buy Alpo with their C.D. interest

As one of our Stoolies pointed out this morning, interest rate policy is just a ST inconvenience.

The far more insidious issue is the taxpayer-funded bailout of the financial services industry, as is currently happening in the United Kingdom.

What is happening there is so disturbing that it should make you turn yellow.  This is no mere efficient resolution that the RTC did after the S&L crisis.  This is a perpetuation of bubble politix, and will use public resources to enrich the few.

at 6 AM Eastern, somebody started placing market orders to buy e-mini S&P futures in lots of 100, they bought approx 5,000 contracts I'd guess

at 9AM Eastern, somebody started placing market orders to buy e-mini S&P futures in lots of 500, I'd guess they bought at least 20,000 contracts that way

that set the tone for the day, execution of trapped shorts all day long

gov't showgoose fer GW's speech, see it's all good

AXP missed their Revenue numbers.  Didn't they warn a week ago?  How they miss that? 

Great work CB! I kept feeling as though everyone was saying under their breath "Yeah, right " whenever I posted that rate cuts were bearish. This is a great illustration, and I can tell you that as I recall, it was a common feature of past bear markets as well.  Is there any way you can easily take the arrows on that chart and point them in the direction of the change up or down, or sideways for no change. I'd like to take your two posts and post them as a Best of Capitalstool.com on the front page of the WSE.

Your data also gave me the thought that it would be fun to go back and look at past Fed statements and see how GDP growth and CPI did in the quarter following the statement to see whether the Fed's crystal ball was any good. I kind of doubt it.  It would be a huge project, but if we went back to the first rate increase in 2000 and started from there, it would give us some idea of the Fed's competence in guessing right, or even influencing the economy at all with its actions.

If any of you have any ideas on how to take this on, let's talk about it. Maybe we could start a thread in LOB and do it as a group term project for this semester.

God bless Amerika.

It would be worse if we were as gutless as the Japanese and continue paying our mortgages in spite of 17 years of declining house prices.

They can't reflate this thing.  They can't stop its snowballing.  And they can't bail out Wall Street once people abandon their homes en masse.

BWAHAHAHAHAHA!!!!

Over and done with, I say.

I thought that was the Samurai code, Your word was your bond.

In times like this, I prefer our approach better.  No reason to suffer to keep a fraudulent system afloat.

God bless Amerika.

It would be worse if we were as gutless as the Japanese and continue paying our mortgages in spite of 17 years of declining house prices.

They can't reflate this thing.  They can't stop its snowballing.  And they can't bail out Wall Street once people abandon their homes en masse.

BWAHAHAHAHAHA!!!!

Over and done with, I say.

Privatize the PROFITS, socialize the LOSSES" Is this really what Socialism is all about? 

Take a look at a 5 min GLD chart. I can't copy it on the Stool. At 1055, normal slap down time , it went sideways for the rest of the day, Can't let GLD keep rising since there is no inflation.  a real hocky stick.

I've been reading through this Herb Greenberg blog regarding raising the "conforming loan" limits from 417K to something north of $600k.

My initial reaction is that there is desperation to get that higher limit, in the belief that raising the limit will save California purchasers and allow people to refinance, etc.

Also saw some crazy claims made, like everyone in socal has a household income of $150K or more, that people need stated income loans because they are self employed and can't prove income (hello, tax returns), yada yada.

I can't imagine the panic that will be in place six to twelve months from now.

If people start rationalising that everyone on Wall Strret is a crook and the system is corrupt.

Millions will just give their banks the bird.

Some folks in the interview were complaing that they shouldn't have to pay now that house prices were falling??

Crazy logic or what.

Exactly! Stated income versus tax returns.....either they're lying about their income..or they're lying on their tax returns...which is it? 

A funny thing happened in Mexico City a while back.

They had to construct a freeway that basically went around the 20mm+ inhabited city so that one could drive across town in anything less than the 4 hours it used to take.  But they had to tear down some residential areas in order to do so, so they "offered" (read "invoke eminent domain" or something like it) to pay a "market" price for the homes they had to buy up.  Of course, the price they offered wasn't anywhere near the market prices of the time, so the owners cried foul and said the offer was way too ridiculously low.  So the government said OK, no more mister nice guy, and decreed that they would pay a much lower one, based on the levels the owners themselves used to declare their property taxes.  And they completely effed them over.   

Exactly! Stated income versus tax returns.....either they're lying about their income..or they're lying on their tax returns...which is it? 

No, elh misnames his boogie man.  It is really closer to Corporate Feudalism, not Socialism, which in theory strives for the common good.  Capitalism and Free Markets may be two of the biggest false fronts.  But then, most things seems misnamed these days, from either longterm misuse to intentional misleading. 

Exactly! Stated income versus tax returns.....either they're lying about their income..or they're lying on their tax returns...which is it? 

Not a rationalization at all -- just an accurate and long overdue assessment of the facts.

Quite a lot more than the bird is heading the banksters' way.  For individual players, expect indictments followed by convictions and long sentences.  The industry itself can look forward to reams of new regulations which will make SarbOx look like a bed of roses.  When all is said and done, financial services will regress to their historical mean as a percentage of GDP, i.e., about a third of their size today -- and "financial engineering" will look about as good on a resume as "child pornographer" or "drug dealer."

Crazy, hardly -- normative and rational would be better adjectives. 

Nobody has mentioned what a generous and caring person  the Tan Man is  for giving up his severance and retirement pay.

Mortgage Forgiveness Debt Relief Act of 2007
Typically, discharged debt is considered ordinary income to the borrower for income tax purposes. The new law allows taxpayers to exclude this amount and thus escape the tax liability.

Rewarding delinquents is equivalent to punishing honest people.

Yup...tryin' his damndest to avoid the perp walk. 

Mortgage Forgiveness Debt Relief Act of 2007
Typically, discharged debt is considered ordinary income to the borrower for income tax purposes. The new law allows taxpayers to exclude this amount and thus escape the tax liability.

Rewarding delinquents is equivalent to punishing honest people.