Tuesday, January 22, 2008

Fed to the Rescue....Finally

Finally the Fed and Ben Bernanke decided to lower interest rates in the face of recession and falling world stock markets. The surprise reduction in the federal funds rate from 4.25 down to 3.5 percent marked the biggest funds rate cut on records going back to 1990. Yesterday stock markets worldwide logged steep declines due to US and world economic worries. Finally our Fed stepped in, even though financial experts have been calling for intervention for weeks as the economic news worsened.

Hopefully this will mark the bottom of the current stock market cycle and we can head up from here. The low interest rates, coupled with the massive write-downs of the last few weeks, should allow the banking sector to move forward and being making profits once again. The Citigroups, Bank of Americas and Bear Stearns of the world look like very attractive buys at current levels. It takes guts to buy when everything is doom and gloom, but three years from now the investor that buys the banks will be sitting on big gains. So buy and hold and watch as the cycle improves over the next few years.

1 comment:

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