Dennis Lucey

Expect a 1% Cut From the Fed

Even at .75% the market celebrates.

It's funny that the Fed sees inflation risks cooling later in the year. I'm not going to predict prices over that short a horizon, but in the long run continued worldwide demand for raw materials and commodities is going to push prices up for many items. The fact that the Fed continues to take steps to dilute the value of the U.S. dollar will only exacerbate price pressures here.

Lesson From Bear: Don't Hold Large Chunks of Company Stock

We'd been down this road at least twice before. If you're a hotshot at BSC, you should know from LTCM not to keep your eggs in one basket. If you're not, you should know from Enron not to keep your eggs in one basket.

Coincidence or Cause: Market Performance on Days When Bernanke Speaks

What happens when Bernanke acts on a weekend?

Thinking About the Bear Stearns Bailout

Bear bought for $2/shr by JPM.

www.jpmorgan.com/cm/Sa...

The Big Whoosh: Is This The Beginning?

BSC bought for $2/shr by JPM

www.jpmorgan.com/cm/Sa...

What's In Store for Bear on Monday?

The buyout is for $2/shr.

www.jpmorgan.com/cm/Sa...

Paulson Defends Fed Backstop

In response to Paulson's boast that the Bush administration will do "what it takes" to return stability to financial markets and the economy, Schumer derided Paulson and Bush, claiming their "hands-off attitude is reminiscent of Herbert Hoover" during the Depression.


Wow. Where to begin?

(1) Let us re-debunk the myth that Hoover sat idly during his administration. A noted opponent of laissez-faire, Hoover oversaw the nation's first unemployment assistance, increased public works spending in the face of economic slowdown, established the Federal Home Loan Bank to bring the dream of homeownership to people who couldn't afford it (sound familiar?), raised trade tariffs and created a worldwide trade war by signing the Smoot-Hawley Act into law, and raised income, estate, and corporate taxes. This is the kind of record that would make Keynes smile. If only Hoover had indeed done nothing!

(2) How has the Bush administration been "hands-off"? By offering to freeze foreclosing on ARMs? By offering to write $300-$1200 checks to Americans? By overseeing dramatic cuts in the Federal Funds rate? By instituting programs like the TAF and the TSLF?

(3) Schumer's statement implies that he's in favor of a hands-on solution? What would that entail? Government assumption of all MBS tendered to it? Greater government spending, just to stabilize the economy while we sort out this mess. (Of course, they'll cut spending once the economy stabilizes, right?) Keep defaulting borrowers in their homes by eliminating foreclosure?

Is Hoover regarded as "hands-off" because his actions didn't work? If so, do Schumer or Paulson feel they can successfully be hands-on?

Don't Get Fried With McDonald's - Barron's

Every time I ask a McDonalds employee about the new coffee bar, they look up, shake their head, and they say, "It's been busy. Very busy." If this success is parlayed not only nationally, but into China, they may scoop SBUX given their strong presence already in place.

Slusiewicz: Commodities and Cash Still King

While I agree with Slusiewicz when he says that "it pays to be patient," I'm not so sure about the 16-20% rally he's expecting to see in the broader market. What's the fundamental change that's going to justify grinding upward? It seems increasingly unlikely that we'll get a string of economic data to buoy stocks, and the Fed has lost the power to raise hopes with a magical rate cut or a new T-acronym.

Bear Stearns Gets Emergency Funding From NY Fed, JP Morgan

Re: Ames' comment. The problem of the trade deficit is not that it exists, but that our trading partners hoarded their dollar surplus in Treasury bonds. By investing in Treasuries instead of the productive private sector, capital that could have gone to work producing things of value (the self-correction of trade deficits) instead went to finance the greatest wealth destroyer in the U.S.

As for our currency being in a ditch, look no further than the Fed for the source of the problem.

Best and Worst Performing Stocks Since the March 10 Bottom

Tony Soprano said, "Fed is doing just fine. Now we know why the Fed set up the TSLF and TAF."

Yeah, to fix the problems they created in the first place.

But, wait...besides the TAF and TSLF, the Street's betting the Fed will cut to 1.75-2% by May. This morning's CPI report will be the ammo they'll use to say that inflation worries are overblown (read: slowing economy counters rising prices of commodity inputs) and that it's OK to open the spigots like they did pre-housing bubble, pre-dot.com bubble, etc.

Austrian monetary theory shows that these up/down, boom/bust cycles are exacerbated by Fed actions.

It is folly to think that the malinvestment of the housing boom can be cured quickly or painlessly. It's inescapable that firms will fail as part of the housing bust, and as part of the price-correcting process necessary to get real investment funds, not Fed paper, back into distressed markets. The more the Fed tries to prop up the system, the longer the pain will be felt. We're at over nine months and counting...

Financial Stocks Trading Near Book Value

As of this minute, BSC is trading for less than half of book!

Oh, wait...never mind.

Bear Stearns Gets Emergency Funding From NY Fed, JP Morgan

Now the market is pricing in a 75 basis point cut in rates by the Fed next week, if not larger and if not sooner. This, too, will pass, but there will be pain.

Can Bush Save the Dollar's Fall?

I'm not interested in a strong dollar, or a weak dollar. I'm interested in a dollar whose value is determined by market forces, not by inflationary policies of the Fed or by poor fiscal management by the government.

Is Malaysia Heading Towards Cost-Push Inflation?

You can replace every occurrence of "Malaysia" with "the United States".