This Week in Stocks: 8/11 - 8/17/07

[clester]

From revshark's free commentary,
"heavy buying in the final hour -- possibly partially spurred by a short-squeeze in the financial sector -- allowed the market to finish well off its lows of the day in mixed territory."

Short covering makes sense.

 

[Show-me]

Expiration Day!!!

 

[Show-me]

WoW!!! FTSE just blasted off!!!

 

[ATCJeff]

WoW!!! FTSE just blasted off!!!

Discount Window rate cut .5 percent

 

[Show-me]

I would have bet against that. The Fed has lost all credibility.

 

[Show-me]

Wall Street got their demand and that should send the markets through the roof.

 

[Show-me]

For those of us learning the ropes.

Federal Discount Rate

The interest rate set by the Federal Reserve that is offered to eligible commercial banks or other depository institutions in an attempt to reduce liquidity problems and the pressures of reserve requirements. The discount rate allows the federal reserve to control the supply of money and is used to assure stability in the financial markets.

A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in the supply of money in the economy. Conversely, a raised discount rate will make it more expensive for the banks to borrow, and would thereby decrease the money supply. Funds borrowed from the fed are processed through the discount window and the rate is reviewed every 14 days.

 

[ATCJeff]

Big difference between Discount Window Rate and the Overnight Federal Funds rate. Federal funds rate still at 5.25%. The change was to the discount window rate. It's now 5.75%. Banks do not like to use the discount window. Many look at the discount window as a problem solver. It's like going to your kids piggy bank to pay bills.

 

[Show-me]

Problem not solved.

Big difference between Discount Window Rate and the Overnight Federal Funds rate. Federal funds rate still at 5.25%. The change was to the discount window rate. It's now 5.75%. Banks do not like to use the discount window. Many look at the discount window as a problem solver. It's like going to your kids piggy bank to pay bills.

I was thinking along those lines too. So how do we play this?

If your out, do you what to buy at the close today? I would not. To volatile and like you said it is a band aid of sorts.

If your in, do you look for the exit? Cut your loses?

The problem is not solved, IMO. People still can not afford their high mortgages.

 

[ATCJeff]

Re: Problem not solved.

I was thinking along those lines too. So how do we play this?

If your out, do you what to buy at the close today? I would not. To volatile and like you said it is a band aid of sorts.

If your in, do you look for the exit? Cut your loses?

The problem is not solved, IMO. People still can not afford their high mortgages.

1. Still thinking
2. Thinking maybe I fund. Japan should shy-rocket Monday.
3. Yes. If I was in I would sell today.

We've got 3 hours and 12 minutes to decide.

 

[350zCommTech]

Re: Problem not solved.

I was thinking along those lines too. So how do we play this?

If your out, do you what to buy at the close today? I would not. To volatile and like you said it is a band aid of sorts.

If your in, do you look for the exit? Cut your loses?

The problem is not solved, IMO. People still can not afford their high mortgages.

I agree, but I will enjoy the euphoria for a day or two then run like hell...

 

[Wrngway]

Quick question:

Might this have any effect on mortgage rates in the near future? I'm assuming not for right now. The wife and I just made an offer on a home and it would be a nice bonus to go with a lower rate than what we planned for.

 

[vectorman]

Discount Window rate cut .5 percent

Fed had to send a message to the world, that they're aware of the credit problems ( and under the table possilbe mini market crash coming) and will not ignore it. Now lets see what spin the media puts on it. Inflation or recession fighter.

Now it brings up the problem, if your already in the market, do you sell today or stay put? Or if your out do you wait for a possible retest to get in?

View attachment 1930

 

[ATCJeff]

Tom spoke the other day about the spread between rates. We should have seen this coming. This is a great play on the Feds part short-term. They leave the overnight rate alone and change the discount window rate. All this really does is allow "banks" access to emergency cash at a cheaper rate.

For once CNBC is covering this event pretty well. Many people probably didn't even know about the "discount window."

 

[Show-me]

I certainly respect and appreciate everyones opinions and look forward for others to chime in. Thank you!

My gut is saying run like hell. Perhaps I should start listening to it.

 

[Bullitt]

This should burn just about every short today.

 

[ATCJeff]

I still agree with 12. We should see a rate cut in the overnight Federal fund rate soon. This move on the Discount Window buys the Feds a little time.

 

[Show-me]

Tom spoke the other day about the spread between rates. We should have seen this coming. This is a great play on the Feds part short-term. They leave the overnight rate alone and change the discount window rate. All this really does is allow "banks" access to emergency cash at a cheaper rate.

For once CNBC is covering this event pretty well. Many people probably didn't even know about the "discount window."

That is the key IMO. Only the banks get relief, the people that Jim Cramer is "looking out for" are still loosing their homes. This is a bank bail out and that is all.

 

[Show-me]

This should burn just about every short today.

You bet, I can see the flames from my house.

 

[350zCommTech]

Quick question:

Might this have any effect on mortgage rates in the near future? I'm assuming not for right now. The wife and I just made an offer on a home and it would be a nice bonus to go with a lower rate than what we planned for.

No, it will actually make it worst. A fed cut right now(discount or overnight) kills the dollar and sends yields higher as people leave the safety of bonds for higher risk, or foreigners sell our bonds(like China) because the dollar is losing value.