Tuesday, December 4, 2007

50 basis points buys time

We have two year rates at 2.86%, and Fed funds at 4.5%. The bears will ask what does 50 basis points do? It will buy the Fed time, for further cuts whereas 25 basis does nothing. And then the markets will discount the recovery, instead of discounting a recession, that stock prices are currently now reflecting.

And if you don't like today's prices in the downgraded financial sector, turn the television off or just buy the Nasdaq momentum names. They'll be back when the bears start contemplating the Fed cuts.

Which should start this afternoon.

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