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IBDvalueinvestin (99.59)

FED. makes Game Changing moves.

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March 19, 2009 – Comments (4) | RELATED TICKERS: GOLD , JRCC , ERX

Commodities : Gold, Coal, Oil, Copper soaring today after the FED. makes game changing move yesterday. Others that will be helped with lower rates are Credit cards, Builders, Banks, Mortgage companies.

Here we Go Rates going to 4 1/2% - 4% now with Fed. decision and if you pay points you can actually get rates in the 3% area.

Fed said it will buy up to $300 billion in long-term Treasury securities over the next six months.


If so could help the economy because many kinds of debt -- from mortgages to corporate bonds -- are linked to Treasury rates. Fed purchases would boost Treasury prices and drive down their rates. That would ripple through and lower rates on other kinds of debt.

At the same time, the Fed left a key short-term bank lending rate at a record low of between zero and 0.25 percent. Economists predict the Fed will hold the rate in that zone for the rest of this year and for most -- if not all -- of next year.

The last time the Fed set out to influence long-term interest rates was during the 1960s with Operation Twist, conceived by the Kennedy administration.

4 Comments – Post Your Own

#1) On March 19, 2009 at 3:08 PM, IBDvalueinvestin (99.59) wrote:

How much did the FED. change the game by? $1Trillion Plus which is an historic event.

Dollar falls after big US stimulus move1 hr 2 mins ago

LONDON (AFP) – The dollar dropped further against other major currencies on Thursday a day after the Federal Reserve stunned investors by saying it would pump more than a trillion dollars into the financial system.

The US Fed's decision to buy long-term Treasury bonds and mortgage securities made US assets less attractive to investors, dealers said.

"The surprise announcement prompted investors to sell the dollar immediately," said Masato Otsubo, a dealer at Resona Bank.

Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi, called the Fed's move "a game changer."

"The Fed's shock and awe approach clearly marks it out now as the most aggressive central bank in its response to monetary easing which should weigh on the dollar," he wrote.

In late London trade, the euro rose to 1.3694 dollars from 1.3509 dollars late in New York on Wednesday.

Against the Japanese currency, the dollar fell to 93.77 yen from 96.03 yen on Wednesday.

The dollar lost more than three percent against the euro Wednesday, hitting a two-month low, while falling more than two percent versus the yen.

"The dollar's decline reflects both its diminished appeal as a store of value and reduced relative yield appeal," Hardman wrote in a note.

"The aggressive monetary easing approach should also help to further fuel the recent bear market rally in risk assets, thus undermining safe haven demand for the dollar."

The Fed said it would buy up to 300 billion dollars in long-term US Treasury bonds over the next six months and boost its purchases of mortgage securities by 750 billion dollars in an effort to revive the ailing economy.

"This is an extraordinary shift in intent that will give risk appetite a shot in the arm and send the US dollar reeling at the same time," Standard Chartered analysts said.

The Fed's efforts to get more money into circulation prompted investors to rethink their view of the dollar as a relatively safe bet.

"Fears that the US will print money and debase the currency is leading to a questioning of the dollar as a safe haven and could push the price of gold much higher," NAB Capital analyst John Kyriakopoulos said.

If the European Central Bank also announces similar moves to put more money in circulation in the eurozone, however, that could support the dollar against the euro, although it looks unlikely in the short-term, Kyriakopoulos said.

EU leaders have signalled resistance to this approach.

Some traders said the Fed's actions could ultimately be positive for the dollar if they help put the US economy back on its feet, noting that US shares had rallied initially in response to the announcement although Wall Street fell back later on Thursday.

In London trade on Thursday, the euro was changing hands at 1.3694 dollars against 1.3509 dollars late on Wednesday, at 128.48 yen (129.74), 0.9417 pounds (0.9444) and 1.5374 Swiss francs (1.5391).

The dollar stood at 93.77 yen (96.03) and 1.1204 Swiss francs (1.1391).

The pound was at 1.4574 dollars (1.4300).

On the London Bullion Market, the price of gold soared to 956.50 dollars an ounce from 893.25 dollars an ounce late on Wednesday.

 

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#2) On March 19, 2009 at 3:10 PM, KamranatUCLA (29.64) wrote:

yes operation twist 2...twist the arm of Americans to the point of breaking it.

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#3) On March 19, 2009 at 3:23 PM, Gemini846 (88.55) wrote:

You know for all the "well connected" mantra people always talked about the Kennedy he seemed to be far from a "Good ole boy liberal Democrat".  Wasn't the Kennedy administration the one that briefly issued US Notes against silver?

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#4) On March 19, 2009 at 3:52 PM, IBDvalueinvestin (99.59) wrote:

Remember the 1970's?

When average factory worker was making $100/wk

Then 10yrs later they were making $300/wk

 

Thats whats going to happen by the time 10yrs passes.

 

People earning $50k today will be earning $150K in 10yrs.

Thats called inflation.

Those that buy houses today will basically be buying them for almost free when you factor in inflation.

My dad bought a house in 1974 for 30k and sold it in 1992 for 200k thats a huge markup all caused by Inflation.

 

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