Tuesday, January 22, 2008

Wall Street Owns Federal Reserve



In a move that basically puts central bank interest rates below the rate of inflation, the US Federal Reserve lowered their prime rate 75 basis points to 3.5% before markets opened this morning.

Just a reminder to everyone out there, this is exactly the stupid type of move that got us into the whole mortgage mess, housing bubble, credit crisis. Look for the next bubble to start anytime now with even more interest rate cuts left to come with the inflation beast lurking and about to be let out into the street.

What is your bet on the next bubble?

Here is my short list of candidates:

Infrastructure
Agriculture
Alternative Energy

9 comments:

Inwonderment said...

"On the Cusp of Economic History"

Interesting article from the International Herald Tribune in advance of the upcoming annual Davos economic forum.
Link:http://www.iht.com/articles/2008/01/22/business/dprotect.php

Drachen said...

Of the three you list I'd have to say alternative energy is the only likely one. People want something new and different to believe in, otherwise it's too hard to come up with reasons why it's 'different' from past bubbles. It's also possible with the advances of the last decade or so that we'll see another tech boom like the '90s. Back then there was little fundamental value to most of those companies but now there are some who are raking in the big bucks (google, ebay) and many more that LOOK as if they may one day become hugely profitable (facebook, myspace)

Dignan said...

Housing affordability survey out. Last year Vancouver was at a 7.1 multiple.

Dignan said...

http://www.demographia.com/dhi.pdf

there's the link

freako said...

Last year Vancouver was at a 7.1 multiple

For some reason, Demographia always bungs up Vancouver numbers. The ratio is probaby closer to 13. I checked the number for some U.S. cities, and they were bang on.

jeff said...

How about adding "Gold" to the list of next possible bubbles?
It's gone up 3 fold in only a few years. If the US "officially" goes into a recession, and bad news keep hitting the street and the US dollar continuing to deflate due to fed lowering interest rates every other month, eventually a dollar collapse may occur, although nobody is talking about that (yet). If we ever get close to that situation, expect Gold to sky rocket. Also Silver is trading at very distant ratios from Gold, and may see an upward correction.

Comments/Contrarian Opinions? I'd like to hear them.

patriotz said...

Gold is always in a bubble. It yields no income, and its market price is always far greater than its value as an economic input (electronics, etc).

Gold is only worth what the next guy is willing to pay you for it, i.e. its value is purely speculative.

Gabriel said...
This comment has been removed by the author.
Jordan said...

Freako how do you come up with a multiple of about 13 for the affordability survey?