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US Fed cut-What does it mean?

Tuesday, January 22, 2008 Leave a comment Go to comments

US Fed has cut interest rates by 75 bps. This might be seen as an attempt by the authorities to stem the fall in the US markets. At the same time it is an acknowledgment of the fact that “US is in a recession”. Many market participants expect a further 25 bps cut in Jan end meeting of the Fed.

Now this might not come as a surprise because Mr. Bernanke is doing his last bit to save the US economy. But history has shown as again and again that Govt action can do little to avoid the bursting of bubbles. The Fed is already behind the curve and one needs to watch as to how quickly can the US come out of this slowdown.

Currently US is facing the bursting of the credit bubble and it might take months (or may be years) for things to get back to normal. US economy runs on the “consumption story” but with US consumer getting into severe credit problems, things are looking very uncertain!

And if US goes into a deep recession, the news might not be so good for the global equities. The bull run in global equities which started in 2003 might finally come to an end.

I find it very difficult to digest the fact that India can remain “isolated” from a global recession. On top of it, if there is an economic slowdown Indian companies might be caught on the wrong foot because of massive investments being undertaken by the Indian corporate sector.

Imagine what will an Infosys do with those thousands of employees it is regularly hiring?

And do you think those employees shall be spending loads of money when they know that their jobs are uncertain?

In this uncertain world, things change pretty quickly . So wait and watch might be the best policy in the coming times. And be mindful of the RISKS of going too aggressive.

Gold might be better investment than the equities in the coming times. It might be a good idea to buy it on dips!

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Categories: NIFTY Strategy
  1. sagecapital
    Wednesday, January 23, 2008 at 9:01 pm

    Buy Gold ETF.
    It is traded on Exchanges like a normal stock. One of the gold ETF (and most liquid) is -Benchmark Gold ETF currently trading around 1090.

  2. Parimal Bajpai
    Wednesday, January 23, 2008 at 3:51 pm

    Gold – apart from physical gold are there other convenient ways of owning gold for mid-long term? If yes, what are typical minimum buying units?

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