Fed rate cut in the mirror

Detroit is asking: Ford CEO Alan Mulally became the latest high-profile business executive to suggest that the Federal Reserve needs to cut interest rates, according to a report published Friday.

Detroit is near a deep, deep crisis. If the housing will hammer Detroit, probably Michigan will be like the Death Valley.....

Contrywide CEO Mozillo predicts recession

Angelo Mozillo, Countrywide Financial CEO, predicts a recession:

"I can't believe when you're having this level of delinquencies — [home] equity is gone, the tide has gone out — that this doesn't have material effect on the psyche of the American people and eventually on their wallets."

The doubt remains if the housing slump will contaminate the stock markets in a decisive way that originates an economical recession. The problem is no longer contained on the mortgage lenders but on the depreciated houses' prices that turn impossible for low income families to continue to meet their mortgage payments, put their homes to sell and few people and for few dollars wants to buy it.

Recession?

Think of this:

• Fed Rate: 5,25%.
• ECB: 4,0%. Near a new increase.
• Month after month, new starts in homebuilding decrease.
• Mortgages and foreclosures, rising.
• Investor confidence in Germany, at the lower level from the last 8 months.
• Nikkei performs poor, even with a 0,5% rate of BOJ.
• Volatility is high.
• Bank stocks are decreasing everywhere.
• Commercial paper reduced dramatically.
• What else do you need for a..............

The un-Greenspan

"Bernanke: the un-Greenspan" by Mark Eavis at Fortune.

Cleaning...

The "moral hazard" gets harder. In the US, acording to today's news, foreclosures is rising.

"Foreclosures rise in July

Meanwhile, there was more fuel for the mortgage fire this morning: The number of foreclosures jumped 9% in July from June to 179,599, data firm RealtyTrac said.
That number represents a 93% jump from July 2006."

The Bernanke uncertainty

After all the last week's turmoil, people are much more uncomfortable. We are like in a big nine meters sea, particularly if you look to the volatility: The Chicago Board Options Exchange Volatility Index stayed near the highest since 2003 after the Fed unexpectedly reduced the rate it charges banks for loans on Aug. 17 .

The Friday's comeback, probably was a technical rebound together with an emotional reaction to the FED's reduction. This confirms our vision: The Fed said it reduced the discount rate to 5.75 percent because risks to economic growth have risen ``appreciably.'' The statement was a departure from the previous week, when central bankers kept rates unchanged a ninth straight time and reiterated inflation was their ``predominant'' concern.

But after all, we will focus in these two main issues:

• Goldman Sachs Group Inc., whose hedge funds lost $3 billion in August after the S&P 500 declined 6.9 percent from a July 19 record, said in a letter to investors last week that a ``significant investment opportunity'' now exists.
• The Fed's actions have been less predictable for investors since Chairman Ben S. Bernanke took over in February 2006 after more than 18 years under Alan Greenspan's leadership.

Moral hazard versus bail out

That's the decision which is being balanced. The ideal move would be to let the market enforce the pedagogy of punishing the banks that made the foolishness of lending money to subprime borrowers. But reality prevails over ideals and the move had, and will continue to be - until crash do us part -, to cautiously bail the banks, and indirectly the hedge funds that should receive the "moral hazard".

The problem now is that the financial markets and the "real economy" are, completely and immediately, interconnected and the real economy suffers with its upturns and downturns. I don't ignore the lessons this crisis permits but, for the time being, the priority, for Bernanke and the bunch (and Bill the Butcher also...) is to sustain the market. I think Jim Cramer's alert was fundamental to ignite an answer from the FED.

Crash Comming?

Big volume

Credit crunch are not solved, even tough, this is a huge volume for the Nasdaq in August. Pay attention to some volatility.

Jimmy Cayne: fired!

Read this:

Chief Executive Jimmy Cayne and his one-time protege Warren Spector attended the National Bridge Championship in Nashville in July just as the credit markets were starting to implode, showing how much their priorties were out of whack.

This is unacceptable. This is the Lay and Skilling type of business. This is outrage.

The cherry in the cake: Spector, who was fired Sunday as the subprime meltdown engulfs the Wall Street bank, actually won his first national championship in the four-day competition which attracted about 5,000 people from 18 countries, according to Rick Beye, the tournament's director.

Who is Warren Spector?

Every crisis has a name.

Remember John Meriwether? The guy from Long Term Management Capital.

Remember Nick Leeson? The guy from Barings Bank.

Probably you will listen to this name: Warren Spector. Why? Because of this: The Wall Street bank’s board (Bear Stearns) is reported to be meeting on Monday to consider the future of Warren Spector, its co-president and head of capital markets. One analyst said that if Bear made no statement before the markets opened on Monday investors would fear there was “more bad news to come”.

Cramer: Bernanke, Wake Up

Mad Money host Jim Cramer makes a passionate plea to Federal Reserve Chairman Ben Bernanke to consider cutting interest rates and, in turn, help the market and the people who are losing their jobs on Wall Street.

Jim Cramer looks like very angry with Chairman Ben Bernanke. See the interview: