What a difference a day makes. Just two days ago, DealBreaker’s reader poll revealed an almost even split between those who thought the Fed would today announce a 50 basis point rate cut and those predicting a 25 basis point cut. The 50 bps cut had a slight edge, in fact.
Late yesterday we began a new poll asking about the cut, and it shows a dramatic shift in sentiment. The 25 bps cut now leads decisively, garnering support from 58.2% of responding readers. Good economic news, perhaps coupled with suspicions that last Monday’s sell-off and subsequent emergency rate cut was sparked by SocGen selling off positions by their allegedly rouge trader, seems to have persuaded many readers that the Fed cut won’t be as deep.
Others have begun to argue that the Fed won’t cut deeply today in order to preserve some dry powder for later cuts.
“Bernanke has the choice of give his all (meaning 50 to 100 bp) and seeing the market rise briefly, then fall under the weight of ongoing reality. Or he can do 25bp, and watch the market fall,” Finn of the Blax Alternate blog argued in comments. “With the small cut, he can save face and and say, ‘Well, we could have propped the market if we wanted to, but are being responsible’ (all the while praying the market rises). With a 50bp cut or more, he basically tosses all his power into the ring, only to demonstrate to all that the Fed is powerless (as well as desperate, and foolish).”
Becky Quick made a similar argument this morning on Squawk Box.
This shift occurred prior to the release of data this morning showing that the the U.S. economy slowed sharply in the fourth quarter of 2007. Gross domestic product rose at a seasonally adjusted 0.6% annual rate October through December. These numbers were likely available to Ben Bernanke yesterday, and so may have already played a role in the FOMC’s rate cut discussions.
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I’m going to say its because you posted it at 5pm and all the traders hoping for the 50 bps had gone home by that point
Ha!
How great would it be if the Fed RAISED rates like 100bp just to stick it to the banks/brokers etc and to lower co-op prices on park Ave?
Will be at least 50 if not 75 bps. The Fed is looking at 100+ bps gap to the 3 month treasury they have to close.
it’ll be 50. gdp numbers suck major donkey balls.
I need cheap money, cut 200 bps!!!
All rational, austrian economic common sense be damned!
Practice what you preach:
The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 3.8 percent in the fourth quarter, compared with an increase of 1.8 percent in the third.
Excluding food and energy prices, the price index for gross domestic purchases increased 2.5 percent in
the fourth quarter, compared with an increase of 1.9 percent in the third.
(no cut for you)
Okay well the graph isnt exactly 2nd year analyst quality, but I appreciate your attempt at least to start providing graphics for your stories again.
Yeah. Sorry about the poor chart. I’m writing this from a laptop underneath Ben Bernanke’s desk today. Dude needs to learn about shoe shines.
@10:41 or blow jobs
@9:29
Park Ave coop prices do not go down with interest raises as most of the coops are cash-only financing (mortgages are not allowed).
John, as I said, points for trying. Happy for any sort of visual stimulation these days that is not my screen bleeding red
Okay, prices in Manhattan don’t correlate anyway, but any home prices, co-op, cash only or not, implicitly have an interest (or discount) rate built in them. Finance 101 man.
@11.15 — were you around in the late 80s/early 90s? doesnt seem like it
@11:15 Agree, but I think its more subtle. The source of a many of the big down payments on the better real estate in NY is people cashing out of places further down the food chain. The ability to do that is a factor propping up prices on the real good stuff. Granted it becomes a smaller and smaller factor as you go higher, so you might not see price cuts on Park Avenue, but a $2 million classic 6 on West End Avenue could suffer a bit if an MD is having trouble selling his $1 million condo at Trump Riverside.
Yes, of course, wherever mortgages are accepted, property prices will respond to the interest rates, but…
1) Late 80s/early 90s: Park Ave is naturally susceptible to downturns in the economy, but not interest rates on their own (and that is the argument here), and
2) West End Ave has very little in common with Park Ave.
Doesn’t $1m in Trump (anything) Riverside get you like a 900sq ft 1bed?
@11:35 Yeah, but that place was bought for $550 maybe 5 years ago, so there’s your equity to buy into an entry level grown up pre-war apartment on say West End Avenue. The seller of which will move to CPW or RSD. Hence my observation that the low end of the market does impact the higher levels, but less and less as you climb, since other factors (higher cash requirements, difficult co-op boards,etc.) start to take hold.
OK John, two quick polls:
If the Fed cuts 25bps, how does the market react? (I say SPX down 175bps)
If the Fed cuts 50bps? (I say down 100bps)