Bernanke Soon to the Rescue

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.