Thursday, September 20, 2007

Stocks Don't Always Do Well After Cuts, Let Alone The Fed's Recent "Shock Therapy"


“Don’t assume rate cuts are bullish for stocks,” warns our Chris Mayer. “The last time the Fed cut rates was from January 2001-2003. The fed funds target went from 6.5% to 1% and the stock market fell anyway. In Japan, during the 1990s, even after the central bank cut rates to near zero, the Nikkei still got cut in half.”
“One little interest rate doesn't make or break the economy,” Chris advises. “Look for situations where you stand to make a lot if you're right and lose little if you're wrong. We'll still need water, we still need to eat, we still need energy and our infrastructure is still old as hell. It's very simple, and the federal funds rate has nothing to do with any of that.”

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