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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Wednesday, December 17, 2008

The Fed cuts lending rate to 0.25%

The fed cut its short term lending rate to ZERO to 0.25%, which, is basically 0%.
The Fed basically said it's goal is to lend money for free!

Reaction?
The US Dollar continues to tank, huge!
Gold continues to soar, GDX hits 32.50!
And the stock market DOW rallies 359 points to DOW 8.924!

The media hype machine is right on queue to yell buy buy buy! The Fed by cutting rates for over a year "finally" fixed everything with its last possible cut. The previous cuts didn't work, but this one will, after all, money is now free!

The key thing to remember is, this is NOT good news! The picture to the right (click on it) tells the true story, the Fed has just kicked the problem out about one more month. When Obama takes office, lowering interest rates will NOT be an option, since it is already at zero.

The fed, outside of just buying junk "illiquid assets" and transferring the debt to the US Taxpayer, is about all that it can do now. The news today in fact, was in reality horrible! The fed ammo has now been spent, if the sh*t hits the fan in the next few months, the fed can't lower rates in an attempt to make it easier on banks.

About two weeks ago I said that we will hear mainstream media say its time to buy.
I kept all my positions and added some yesterday to the penny miners. My target is to sell when DOW hits 9,500 or Friday EOD, whichever hits first. I may sell anywhere from 50% to 90% of my positions. I bought and held from DOW 7,552, and a 2,000 point run in 4 weeks is enough.
Also this Saturday is "options expiration", quite possibly we'll see some bad news and open down Monday. This will result in market makers settling trades from options expiration at a better price. Another reason for me to jump ship a little early, is I'm still a long term bear, hard to hold long positions after such a short run. I may buy back in from a pullback (possibly as early as Monday) to get more gains from Obama taking office. I will likely hold oil, unless it starts to run into Friday hard.

In any event, DOW 9,500 and GDX approaching 38 are both strong signals to sell, until we get a pullback closer to GDX 30.

1 comment:

  1. As you mentioned, the trend recently has been more-or-less when the market sells and goes back into cash, the Dollar rises. You're anticipating the market to sell-off next week and gold (well, GDX) to fall. Combined with other Central Banks undoubtedly making rate cuts, do you still see the dollar floundering short term and long term?

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