Fed cuts 75 bps

As I was telling my bro - all this market fall is just plain blackmail to the fed - cut or else! It is important to understand that the two biggest recessions in US memory were caused by huge stock market crashes and the fed is very wary of that - in the US a growing or stable market also feeds in to their ever growing consumerism - alan greenspan himself says that in his book - so the fed is extremely wary of another stock market crash causing a cut in spending as well whenever it sees a huge market crash. The problem is that I feel that the market has been using this to blackmail the fed - u look at the days before sep 18- markets worldwide fell by a huge margin and in the US and the fed reacted by cutting 50 bps. My friend ganesha doesnt agree - he says no fund will take such a huge loss to make the fed cut - I disagree these losses are notional - and they will recover them quick enough. Now again the funds held the entire world to ransom pushed down every damn market - and then fed cut rates by 75 bps even before the us markets reopened. Amidst inflation concerns et al! Here are the markets sledging the fed to say u better cut that! While everyone I knew today was saying what to buy - how is this correction and all in my office and my batch mates and colleagues - the one question that crossed my mind was when will fed cut and by how much- and when my bro called - told him i expect the fed to cut 75 bps asap! and then cnbc breaking news - fed cuts by 75 bps! - for the love of coincidence

Credit Crunch

Here is a damn good article on the credit crunch scenario. While most other stuff make a hue and cry scenario of the situation, this article looks at the good points of the situation. The way i look at it is this - excess credit in the market at a macro level is somewhat like excess money at a company level. We all know at the company level this leads to agency costs and bad capital allocation decisions. With excess liquidity, the same thing happens at a macro level. This is what the article is trying to point out. At the india level I still think the underlying story is strong. I think the RBI has done well albeit a bit late on some of the issues - but as they say - better late than never