So the Federal Reserve decided to defy market expectations and the predictions of most Wall Street economists that it would cut 100 basis points from the Fed Funds target rate and delivered only a 75 basis point cut. Economists for Citigroup, Morgan Stanley, Goldman Sachs, Standard & Poors and Bear Stearns all called it wrong.
DealBreaker’s readers did better. The chances of a 75 basis point cut ran neck and neck with the chances of a 100 basis point cut for most the morning and early afternoon. As the Fed announcement approached, however, the votes for a 75 basis point cut pulled ahead. Thirty-nine percent of readers voting in the poll favored 75 basis points, and 34.% favored 100 basis points. Joseph LaVorgna, chief U.S. economist at Deutsche Bank, also called it right by predicting a 75 basis point cut.
The market then also defied almost everyone’s staging a tremendous rally after the news broke. Goldman Sachs had warned that “anything less than the almost [one percentage point] that is now discounted will risk an adverse market response that could aggravate the fragility Fed officials are trying to repair.” Well, at least in terms of the immediate market reaction, that prediction seems dead-wrong.
Why the rally? We don’t like to offer explanations for movements of broad stock market indexes. But we do think the Fed statement probably reassured many investors by re-iterating the Fed’s awareness that the economy is in peril and repeating its new mantra about being prepared to take further action should things deteriorate. What’s more, there was something comforting in the display of a Federal Reserve confident enough to defy the clamoring of the Punch Bowl Caucus. From a Fed that has lately seemed to only ask “how high” whenever Wall Street has said “jump,” those 25 points of defiance are a welcome sign of independent judgment.
Posted by guest , Mar 18, 2008 4:11PM
That is the effect of Chinese money....
Whatever GS or LEH or anyone else FTM put out today it WAS going to go up.
How is that not painfully obvious to people who claim they work on Wall Street???
Because they all stand to benefit from "up"
makes me sick
Posted by guest , Mar 18, 2008 4:12PM
I voted for 75. Can I have the Fed chair? OK, just kidding - I don't want his job.
Posted by HAM05 , Mar 18, 2008 4:19PM
FIX THE EFFING DOLLAR YOU MONKEYS
Posted by guest , Mar 18, 2008 4:23PM
hah...75bps...bears doubled-up short, and the bulls baby-seal clubbed them good.
Posted by guest , Mar 18, 2008 4:23PM
Since the masses are often better predictors of outcomes, can the masses tell me what a hot stock will be tomorrow? I just want to see how well DB readers are at picking stocks. Who knows - maybe Hot Lap Dance Club Capital will actually be started from the investing ideas of readers. And remember, I like my stocks like I like my women and beer - cheap, yet satisfying.
Posted by guest , Mar 18, 2008 4:38PM
25 bps on Sunday + 75 bps on Tuesday = 100bps
Posted by guest , Mar 18, 2008 4:38PM
25 bps on Sunday + 75 bps on Tuesday = 100bps
Posted by guest , Mar 18, 2008 4:39PM
4:23 - for you, clearly RICK.
Posted by big r , Mar 18, 2008 4:46PM
bess levin is a stone fox
http://nymag.com/daily/intel/2008/03/a_quickie_guide_to_the_fall_of.html
Posted by guest , Mar 18, 2008 4:47PM
Jacob two two @ 4:38 - press "post comment" ONE time ONLY!
Let discuss a very important issue....JC is there an update on the batman, golden girl, girl, knit tie .... video submission for FBN?
Posted by Anal_yst , Mar 18, 2008 4:53PM
Bess, this is treasonous (sp?)!!!! (even though I enjoy nymag)!!!!
Posted by golden girl , Mar 18, 2008 5:07PM
@4:47 - wow, i didn't know the knit ties had a role. kinky. carney, would your grandfather approve?
Posted by Master of None , Mar 18, 2008 5:24PM
Now having written for Gawker (Jezebel) and NyMag (Daily Intel), I imagine Bess is trying to start a bidding war for her services.
Bess, if you leave, we will find you and drag you back to DB, where you can continue serving a small but captive audience of Wall St. Boychicks
Posted by guest , Mar 18, 2008 5:38PM
from 4:47
Golden girl i thought that costumes were part of the deal. One batman, 2 slutty santa's, and an albino with only his knit tie. A perfect submission for FBN!
Posted by guest , Mar 18, 2008 5:40PM
Please don't ever work for Gawker. Nick Denton is an asshole. Even if your readers love you, he will dump your ass unless you're generating enough pageviews.
Some people say Dealbreaker doesn't update often enough, but I prefer that to a constant stream of inane updates in the desperate hope that people will click through more often and generate more pageviews.
Posted by guest , Mar 18, 2008 9:54PM
"25 bps on Sunday + 75 bps on Tuesday = 100bps"
The 25 bps on Sunday was the discount rate not the federal funds rate
Posted by guest , Mar 18, 2008 11:25PM
Plunge Protection Team in the hizzy.