Skip to main content

Marc Faber: rate cuts no help

Marc Faber spoke with Bloomberg News (audio) in Manila today to address the question of whether today's historic global rate cuts will help the financial markets, particularly global equities.

Bloomberg - "Faber says rate cuts will fail to stem equities rout":

"Investor Marc Faber said a series of coordinated interest-rate cuts by central banks including the Federal Reserve to ease the economic effects of the global financial crisis won't halt a worldwide slide in equities.

``Artificially low interest rates'' that encouraged consumers and banks to take on more debt were the main cause of the credit-market turmoil that caused the failure of Bear Stearns Cos. and Lehman Brothers Holdings Inc., according to Faber, who predicted the 1987 stock-market crash.

``The slashing of interest rates will not help very much,'' Faber, who manages $300 million, said in an interview in Manila. `They may cushion somewhat the decline but make matters worse.''"

In fact, not only will this coordinated easing of monetary policy not help, it is likely to make the economic problems worse. As Faber points out, the root of our current problems lie in the previous cycle of overly accomadative monetary policy (artificially cheap money).

Would you attempt to solve a crisis with more of what brought it on in the first place? Central bankers would, and did today.

"...The Fed cut its key rate to 1.5 percent, a level last seen in September 2004. Low interest rates on deposits have pushed consumers to speculate on higher yields in other assets including stocks, real estate and commodities, Faber said.

``Had central banks around the world kept interest rates that encourage saving we won't have these problems today,'' the investor said. ""

For an opposing view, see almost any cable news channel anytime tonight. I'm sure the usual panoply of government/Wall Street shills will be praising these moves to the sky.

Related posts:

1. "Global rate cuts have arrived" - Finance Trends Matter.

2. "Coordinated central bank action fails to relieve money markets" - Naked Capitalism.

3. "Timeline: Fed actions to boost liquidity" - Reuters.

4. "How's that bailout bill working out?" - Bear Mountain Bull.

5. "Faber believes market is oversold" - Stock Market Advantage.

Popular posts from this blog

Lessons from Hedge Fund Market Wizards: Scott Ramsey

Today we continue our series, "Lessons from Hedge Fund Market Wizards" , with a look at Jack Schwager's interview with Scott Ramsey of Denali Asset Management.  Ramsey, a futures trader and CTA who works on the island of St. Croix, spoke to Schwager about his first foray into the markets, his evolution as a trader, and the process he stands by to protect and grow his clients' money. 1) . Ramsey started trading in college. He was roped into the OTC metals market via a broker's ad in the Wall St. Journal. The broker charged customers a flat fee to buy and sell as much as they wanted in a particular market for six month. At the time, Scott was a novice and didn't know about futures, so he traded metals in this fashion through the inflationary run-up of the late 1970s. 2) . Scott had to rethink his trading strategy after he bought silver at $50 an oz., only to watch it collapse to $26 following a long string of limit-down days. He sold as soon as the market...

Finance Trends 2019 Mid-Year Markets Review

Email subscribers of the Finance Trends Newsletter receive the first look at new articles and market updates, such as the following piece, sent out to our email list on Sunday (6/14).   Hello and welcome, everyone! If you received our last email notice over the July 4th holiday, you'll know that this weekend's newsletter will serve as a mid-year market update and a follow-up to issue #29, " How to Reinvest in a Rising Market ".   Ladies and gentlemen, without further ado, let's start the show...  Finance Trends Newsletter: Our Mid-Year Market Review When we last spoke, back in February, the U.S. stock market was rallying off its December-January lows. As the S&P 500 and Nasdaq reclaimed their 200 day moving averages in February and March, it became increasingly apparent that a lot of retail investors (and perhaps some institutional investors) were left under-invested while watching this recovery move from the sidelines.  The U.S. stock ...

How to "Pull the Trigger" on Your Trading Ideas

In our last post, I quoted hedge fund manager, Jim Leitner on the importance of following up on your investment ideas.  Today I'd like to follow up and share some thoughts on how you can learn to consistently "pull the trigger" on your best trading setups and investing ideas. In order to help you do that, we'll take from the best and offer up key insights from interviews with top traders and trading psychologists like Alan Farley, Brett Steenbarger, and Doug Hirschhorn .  Now before we get to their key insights on overcoming trading anxiety and pulling the trigger on your trading ideas, let's remember what Jim Leitner said in his interview: "Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda...