Via CNBC.com: 2nd Quarter GDP grew 3.8% and Jobless Claims Tumbled
"The economy rebounded with a good head of steam in the spring before a credit crisis raised new fears about longer-term business health. The Commerce Department reported Thursday that the economy grew at a 3.8 percent annual rate in the April-to-June quarter, the strongest showing in just over a year."
Ok, so the Economy grew from a stagnant .6% in the first quarter to a 3.8% rate in the second quarter; the highest in over a year. In the following months we got a 50 point bases cut by the FED which "surprised" most Economists and those on Wall Street and led to a 350 point rally in the Dow the same day.
Forgive me for seeming naive but does this strong GDP number and "tumbling jobless claims" seem like it is deserving of a 50 point rate adjustment? Now I understand credit has tightened, and housing has worsened, but unless we are looking at a negative GDP number in quarter three I see no need for a rate cut at all unless....
"Merrill Lynch May Write Down Assets by $4 Billion" via Bloomberg
"Bear Stearns 3Q Profit Falls 62 Percent" via CNBC.comOh, nevermind.
"Morgan Stanley Profit Falls More Than Expected" via CNBC.com
"Lehman Net Falls 3%" via WSJ online
I guess all the screaming from Jim Cramer about his Hedge Fund buddies was all we needed to make Bernanke and the FED get to steppin'. God forbid that the likes of Lehman, Morgan Stanley, et al have to show net losses for a few quarters. And all because they made bad bets with over-leveraged hedge funds on a real estate bubble that was created with their loose credit. We will have none of that!
We have to make sure those bonuses make it out on Wall Street come this Holiday Season.
1 comment:
What does it say about our economy or our expectations as investors when a decrease in profit is huge news? It isn't a loss; its just a decrease in the amount of profit. Its interesting that people around finance all their lives forget that things fluctuate.
My limited knowledge leads me to believe that the rate cut was just a precaution. I think the market trend was down and the FED is concerned about how much further it will sink if the housing situation does not abate.
i think the FOMC is stuck now in a position to lower rates again the next time they meet because the housing situation will probably not get much better and the market will need something to stay up.
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