Bernanke Soon to the Rescue
Monday, January 14th, 2008
By Michael Lombardi, MBA for Profit Confidential
Only 18,000 jobs created in the United States in December, bringing the unemployment rate to the highest level in two years…
The stock market off to its worse yearly start this year since 1982…
Merrill Lynch’s recession indicator’s flashing red…
But have no fear, Bernanke is to the rescue.
But too late, Ben; interest rates should have been cut more deeply in 2007 when the Fed had its chance. The recession is coming and there is very little you can do with interest rates to stop it.
In his first speech on the economy since the Fed’s December 11th interest setting meeting, Fed Chairman Ben Bernanke had these words, “We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.”
Translation: Expect interest rates to fall 50 basis points when the Fed meets on January 29, 2008. That’s what the stock market is expecting and I’d be surprised to see the Fed disappoint the market given its pathetic performance so far in 2008.
Futures contracts on the Chicago Board of Trade indicate a 76% chance that the Fed will cut interest rates by half-a-point when it next meets. The U.S. Federal Reserve brought down interest rates three times last year, bringing the current discount rate to 4.25%, a two-year low. A 50 basis-point cut on January 29, 2008, would bring the rate to 3.75% — already discounted as a “sure thing” by the stock market.
What does this mean for stock market investors? If the Fed doesn’t deliver the big 50-basis-point cut in interest rates everyone is expecting at the end of this month, the stock market could fall sharply. Investors beware.
NEWSFLASH — As I sit down to write this morning’s PROFIT CONFIDENTIAL, gold bullion has reached a new record high of $911.00 per ounce. I hope that most of my readers have heeded my advice on bullion (I started recommending its accumulation at about $300.00 U.S. per ounce back in 2003) and are now sitting with substantial gains. It looks like my “2008 Forecast for Gold: Next Stop $1,000 per Ounce” is not far off.
Next Post: Let the Market Action Take its Course
Previous Post: Is There a Silver Lining for Canadians, as Recessionary Pains Hit North America?
Tags: gold, interest rates, stock market
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
