Prague Twin

Tuesday, August 28, 2007

Reality Sets In

But not everyone wants to admit it. With the major averages correcting and an impending (or already real) credit crunch bearing down, some pundits are blaming the Fed for not cutting rates months ago. I just don't understand this thinking. With inflation remaining above the stated comfort level, the Dow setting new record high after new record high, and unemployment extremely low, the Fed was supposed to cut rates?

Reality for the markets is finally setting in, and this is a good thing. In my view, low rates let the markets get out of control by letting the housing market get too hot, and flooding the system with liquidity. The sheer momentum of the move pushed the markets well beyond their logical top.

Now I think we will continue to see high volatility with the Dow ranging between 12K and 14K until the end of the year.

Housing prices will start to drop fairly rapidly and another big chunk of wealth we be transferred from the overextended to the flush as bargain hunters "save" us.

I don't believe that the Fed will cut rates anytime soon....for the record.

I've been wrong before.

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6 Comments:

  • Somehow, I don't think you'll be wrong this time.

    By Anonymous rockync, at 6:05 AM  

  • Whatever the nanny state can do to bail out those big investment banks

    By Blogger Graeme, at 9:11 AM  

  • I know it's not the way it is for most of the people - but whatever happened to living off the income you have, small or not - and deciding you aren't entitled to every little thing your greedy, coveting heart desires? The economy would be so much better off. If people would learn to be satisfied with what they have, instead of wanting what they really can't afford, and insisting that they get it. And gee, just imagine if the world governments would do this too!

    By Anonymous diane, at 4:30 PM  

  • Diane,

    Unfortunately, as much as what you posit here makes sense, I have to disagree.

    It is the pursuit of more and more and more that has brought us to this level. That doesn't mean that excess is necessarily all good.

    It is something I struggle with. I am generally humble in my desires for material things. Yet I'm fully aware that our rabid pursuit of material is what feeds me, you, and graeme for instance.

    If we were satisfied with what we have, the economy would collapse.

    Sad, but true.

    By Blogger Praguetwin, at 6:44 PM  

  • Diane, I'm with you. The older I get, the more I realize how wise the older generation was in keeping to the "live within your means." My husband and I have been scaling down over the last several years as we approach the far side of our working lives in preparation for our retirement years. Somehow, I don't think either one of us will ever completely retire, but it's would be nice not have to worry about a huge pile of recurring bills.

    By Anonymous rockync, at 8:19 PM  

  • I know PT, and that is very unfortunate! It's a mess we got ourselves into, and we can't get ourselves out of. My daughter, hazardouspastimes, sent me a short video, on how this ecomomy "makes" money - for some reason I think she might have gotten it from you, or at least another blogger - continual and constant debt is how it works, there is not enough gold to back up all the printed money out there - and it's ALL based on greed and lust, and coveting. And that is SO UN-Biblical - and how we got in this mess! I truly believe, from reading the Bible, and studing the Scriptures - if we just did it God's way, it would work!!

    But nor do I wish to go back to the "Little House on the Prairie" days either - I do enjoy my comforts - like a roof over my head, where I don't have to chop wood to have heat, or go "fetch" a pail of water, etc, etc. But where's the line???

    I can honestly say I am not doing my part in keeping this economy going - I have no credit cards, and don't want any, I live within my humble means, and I go without a lot of "luxuries". I know the difference between a want and a need, and I can truthful say that God takes care of my NEEDS, and throws in enough "wants" to keep me happy ;)

    Thanks, rockync - and good for you! And I hope you reach your reach your goal, of a comfortable retirement,(or semi-retiremnet) without a pile of bills saying, "FEED ME!" for the rest of your life.

    By Anonymous diane, at 6:20 AM  

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