I keep kicking this thread up to the top about every two weeks so we can all keep abreast of our history, and our predictions.
So today the Fed lowered the Funds rate to 1.0%, a level not seen since 1958. (personal sidebar: that was a
very good year...)
The markets responded by shedding some value, having already factored in the quarter-point cut.
So at closing:
DJIA 9011
Nasdaq 1602
S&P 975
Here's a great link, including this take from the fellas at BusinessWeek:
Quote:The trouble for the Fed, though, is that when it cuts rates, the money doesn't necessarily flow to the parts of the economy where it can do the most good. Despite all the money that the central bank has pumped out, industrial companies remain gun-shy about taking on new debt to finance investment. Commercial and industrial loans at banks have actually shrunk over the past year, by $75 billion according to the Fed.
Even though lending rates are extraordinarily low, chief executives in the goods-producing sector are reluctant to borrow for fear that, with prices falling and demand lackluster, they will have a hard time repaying loans. In essence, manufacturers are mired in a localized deflation and low interest rates make very little difference to them. Adjusted for expected deflation in the price of goods they sell, real interest rates for those firms "have been going up," says Wachovia Corp. economist Mark Vitner.
Fed officials say that Corporate America is also holding back on borrowing and investment because company execs are still skittish in the wake of recent accounting scandals. Rather than focusing on ways to expand their businesses, corporate execs are focused on minimizing risk and keeping their jobs.
The Scary Side of Low Rates
All I could say after reading this was, "Whoa". How 'bout you?