options expiry thursday, page-212

Pennies

I believe the FED meeting is on Wednesday 31st.

It is always a Tuesday or Wednesday when a 2 day meeting.

I suspect a rate cut is the most negative although it will probably cause a spike either of minutes or even a day or 2.

I think most realise that the FED at that stage will have done all they are prepared to do to ease liquidity constraints without causing another bubble somewhere.

The problem with liquidity injections is that it is hard to direct it and inevitably it finds its way into some unintended area to create another bubble.

That lesson should have been learnt by now and I suspect they must be getting the picture.

The FED must also realise that lowering rates too much at a time when they suggest the economy is still OK, leaves them with little firepower to lower if and when things do get bad.

Lowering from 10% to 5% is powerful but when you start from 5% the effect is less and is like using up all your missiles to scare the enemy and then trying to use slingshots to stop the invasion.