Re: Why will the dollar rally?
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lol, riiiiiiiiiiiight...the only thing keeping f*cking goldman sachs afloat is liquidity injections and a devaluation of the dollar.
it couldn't be that even if every single dollar goldman has invested in subprime paper off and on balance sheet were worth absolutely nothing, goldman would still be an extremely valueable company. their earnings were solid, but suspect. even if the suspect part (8bil trading profits w/ 2.5bil coming from inhouse pricing models of illiquid "level III" assets) was worth nothing they'd still have 5.5bil in profits. they were also smart enough to big time short mortgage backed assets and made a ton there. so point is that goldman is not a bank standing on a shaky cliff.
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why is the fed pumping money to them then?
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what?? the fed (rightly or wrongly) is not "pumping money to them" as it is to the economy in order to attempt to reduce the chance of a recession. the last quarters growth #s were rediculously good and probably won't last another quarter or two.
the employment situation also looks amazing especially given all the turmoil in the credit markets.
one very real possibility is that it will take a few months to a year or so for the turmoil to work its way into the real economy...
...but, it will also take many months (about 6, maybe more w/ the housing mechanism in poor shape) for the effect of interest rate cuts to work their way through to the real economy.
so the fed is simply trying to move in ahead of any huge fall in growth, not specifically to prop up failed insurers. bernanke (and his counterpart at the BoE) is aware of the moral hazard that can lead to similar problems in the future and i don't think he is happy about having to cut rates w/ inflationary pressures so high and growth still pretty strong in order to avert the big threats to growth down the line.
that being said, it is very clear the fed has a bias for lower rates.
anyways, i think i went far to deep given the level of your post...short answer: "lol, the fed could raise rates and goldman would still post a profit & the fed isn't cutting rates w/ goldman sachs's bottom line in their scope"
Barron
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