Wednesday, January 23, 2008

Three Quarters Of One Percent ! ! !

In a remarkable example of sloppy reporting, The Herald trumpeted yesterday's worldwide share market dive - up to seven percent- but missed the real story.

On Radio Left Wing news at 0300 and in today's New York Times came the news that the federal Reserve has cut its base interest rate by a whopping 0.75%, in response to the fears of a US recession. Adolf can't remember such a large movement by the Fed but it certainly appears to have halted the panic. I wonder if Mr Bollard will see fit to follow? I doubt it. We will see the hot money flood back into NZ as we sit at 8.25% compared with 3.5% in the US.

As a direct result of the Fed's move the slide halted and a recovery took place.

"But after opening down by more than 460 points, the Dow Jones industrial average was off about 75 points, or 0.6 percent, at 1 p.m.

Other indexes were down slightly more, but still less than the futures markets had indicated. And European markets came surging back, shaking off early losses to post gains of 1 to 3 percent."


The NZ market posted a significant recovery yesterday, on the back of a falling dollar and associated good fortune for exporters.

3 comments:

Adolf Fiinkensein said...

It's only taken The Herald until 0730 to wake up.
http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10488249

Anonymous said...

it's 'halted the panic'..eh adolf..

(scuse me while i wipe away my tears of laughter..)

phil(whoar.co.nz)

reid said...

The last cut of such size was in October 84 Adolf. It triggered a 3-year bull then, but it won't now, since conditions are different.

The Fed hasn't factored in that no-one overseas is going to buy US stocks given the current state of the dollar and the US manufacturing base. Those platforms don't exist now they way they did in 84.

This cut may stabilise gold and equities temporarily, but in the absence of moves to strengthen those platforms, we ain't seen nothing yet.