FED cuts rate

free4440273

hethmar wrote: »

Sorry, Im not into finances that well - do we really feel its best to withdraw all monies and stick them in a safe?

Wont the value of the paper go down anyway?

Is it worth looking at buying a property which at least wont disappear?

If I were 30 Id be less fearful, but we are coming up to retirement age and all I can see is 40 years hard work going down the drain at the moment.

well, perhaps best not to take it so literally (although many would, and I would not blame them) but who is doing who a favor here: you as a depositor are shoring up a bank's balance sheet; the rate they pay you is negligible; risk/reward says (in case of tape bombs) withdraw your monies (if, say, $10k, 20k,, ).

tradetime

hethmar wrote: »

Sorry, Im not into finances that well - do we really feel its best to withdraw all monies and stick them in a safe?

Wont the value of the paper go down anyway?

Is it worth looking at buying a property which at least wont disappear?

If I were 30 Id be less fearful, but we are coming up to retirement age and all I can see is 40 years hard work going down the drain at the moment.

No, if I were you, I'd keep your money safely tucked away in a bank that is covered by FSCS, without exceeding the protection limit.

tradetime

free4440273 wrote: »

but then I look at Bonds and the yield:eek:; Great Depression II now guaranteed :think:

Yes looked at shorting those too, but still too much money moving in and with the FED threatening to buy as part of their quantative easing policy, I decided to wait a while.

WTF?_2

hethmar wrote: »

Sorry, Im not into finances that well - do we really feel its best to withdraw all monies and stick them in a safe?

Wont the value of the paper go down anyway?

Is it worth looking at buying a property which at least wont disappear?

If I were 30 Id be less fearful, but we are coming up to retirement age and all I can see is 40 years hard work going down the drain at the moment.

If we actually do get true deflation then you won't need interest anyway - your money will get inherently more valuable. i.e. Its purchasing power will increase.

After all, its not like the government can simply print more of the stuff. Uh oh, slight flaw in the argument for longer term deflation emerging....

purch

still too much money moving in and with the FED threatening to buy as part of their quantative easing policy

They can buy securities at the short end, but not further out along the curve, and that is where the real action/reaction will be !!!!

free4440273

....and the curve is virtually flat anyhow :eek:

tradetime

purch wrote: »

They can buy securities at the short end, but not further out along the curve, and that is where the real action/reaction will be !!!!

Ok, that may just prove very useful info, since I wouls short the long end of the curve, why can't the FED buy long dated bonds?

The Fed said yesterday it may expand its $600 billion initiative to buy debt issued or backed by government-chartered mortgage-finance companies. It is also “evaluating” purchases of longer-term Treasury securities.

That sentence in this article gave me pause.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a24RrkP2AETA

purch

They can, and they might be forced to, but their main focus will be at the T-Bill end to keep short term rates in their target range.

tradetime

purch wrote: »

They can, and they might be forced to, but their main focus will be at the T-Bill end to keep short term rates in their target range.

Thanx for that, will keep a close eye on it.
On a slightly different vein, same subject, I realise what they are trying to do, as their ARM's are priced off bonds, but will driving the yield down not create great problems in raising capital by bond sales, and potentially just allow foreign bond holders to exit into the strength in price. Afraid bond basics aren't really my thing.

purch

will driving the yield down not create great problems in raising capital by bond sales, and potentially just allow foreign bond holders to exit into the strength in price

In theory that should be the case, but the way that things are shaping at the moment it is hard to predict what might happen.

People seem quite happy to buy T Bills with virtually zero yield, rather than even consider touching something with a higher yield and only a tiny amount of risk.

The huge amount of new Bonds that will be required in the US, UK and around the World should drive prices lower and yields higher, even if the Central Banks buy some of the issuance.

But currently it appears what should happen in theory isn't happening.

Some of the Economic Textbooks might need re-writing after we are done with this Recession.