Wednesday, October 31, 2007

Another meeting another rate cut.

A completely predictable, and rather banal 25 bp rate drop today by the reflators. The day the GDP came out at 3.9%, their assymetric approach to asset bubbles rears it's ugly head again. It won't save either the RE speculators, or the CDO/SIV peddlers' asses. It's become an amusing spectator sport to watch Paulson talk about the strong dollar, while the dollar continues to get pumelled. It's my understanding that there is a flight from all currencies into equities, which will be bullish for equities for some time. This is quite a paradox, since it seems to be a time of decreasing earnings growth and debt deflation. This can only lead to increasing multiples and yet another equities bubble, which will probably pop leading to another leg in the RE bubble. This waxing and waning of asset markets has become the single obsession of the central banks. Quite bizarre. And ultimately, it will fail. The only question is when. Maybe it will take 10-20 years. Perhaps 1-3 years. Who knows? It's getting boring waiting for the other shoe to drop, especially when the entire capatalistic world is propping that shoe up!