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Economic & Market Highlights 10/20/08

Posted by Larry Doyle on October 20th, 2008 10:45 PM |

The markets had a very solid rebound of app. 5% across the board which brings us back to the levels seen literally one week ago. What prompted the rally??

1. Credit continued to loosen. 3mo Libor moved down to 4.05. This rate was in the 4.75% a week to ten days ago.

2. Speculation that the Fed will cut rates at next week’s meeting. The Fed Funds rate is currently at 1.5%. (I also am concerned about this move. I think it increases the chance for real growth in the money supply which becomes a precursor to increased inflation)

3. Speculation that there will be another stimulus package coming from Washington. This package would be in the vicinity of $100-150bln. This package would likely be a mix of extended unemployment benefits, spending on infrastructure, and debates about tax cuts vs spending on liberal programs. (I view this as a shot of morphine to a patient that needs a long term program of more exercise, a balanced diet, and clean living) (more…)

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