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#11
08-18-2007, 01:21 PM
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Re: Fed Rate Cut Discussion Thread
[ QUOTE ]
Barron, I agree the value here is in betting that the fed will hold rates steady. Where can retail investors make that kind of bet? Obviously there are indirect plays like shorting firms like GS and JPM, but how do I do it directly? [/ QUOTE ] fed funds futures market (i don't know notional but i'm pretty sure it is like $50k or $100k w/ maybe a 10% overall margin at interactivebrokers.com) and options on fed funds futures. fed funds futures are quoted similar to eurodollar contracts and the current price of sept. fed funds futures is something like 95.08 (i may have mentioned this earlier). so if you think that is incorrect, and you think it should be 94.75 (a rate of 5.25%), you would go short the futures contact. similarly, you could buy a put on the contract at 95.00 maturing in september. Barron 
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#12
08-19-2007, 12:14 AM
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Re: Fed Rate Cut Discussion Thread
[ QUOTE ]
[ QUOTE ] Barron, I agree the value here is in betting that the fed will hold rates steady. Where can retail investors make that kind of bet? Obviously there are indirect plays like shorting firms like GS and JPM, but how do I do it directly? [/ QUOTE ] fed funds futures market (i don't know notional but i'm pretty sure it is like $50k or $100k w/ maybe a 10% overall margin at interactivebrokers.com) and options on fed funds futures. fed funds futures are quoted similar to eurodollar contracts and the current price of sept. fed funds futures is something like 95.08 (i may have mentioned this earlier). so if you think that is incorrect, and you think it should be 94.75 (a rate of 5.25%), you would go short the futures contact. similarly, you could buy a put on the contract at 95.00 maturing in september. Barron [/ QUOTE ] EDIT time expired: the 95 bet is if you don't feel sure about a hold and think the 25bp cut is likely. 94.75 is if you feel sure about the hold. i think the 95 bet is a virtual sure thing. no WAY fed cuts 50bps. Barron
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#13
08-19-2007, 12:21 AM
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Re: Fed Rate Cut Discussion Thread
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That isn't true. Even if you think that the fundamentals of the economy are sound and that the market at 13900+ was not overpriced (as most do), [/ QUOTE ] The market was undervalued at 13900+, its on its way back and is going to surge. The whole sub-prime/credit thing is being blown way out of proportion.
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#14
08-19-2007, 05:04 AM
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Re: Fed Rate Cut Discussion Thread
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The market was undervalued at 13900+, its on its way back and is going to surge. The whole sub-prime/credit thing is being blown way out of proportion. [/ QUOTE ] Well even with fed intervention the cost of credit/money has increased and this must have knock on effects for consumption. Add to this that lending criteria has just got a lot tougher and finance companies wont be handing out money like confetti anymore. As a consequence consumer spending will drop off significantly I am fairly certain. Also sub prime may only be the tip of the iceberg as far as consumer defaults are concerned ARM resets will be revealing + no one knows who owes what to who in the Banking system. For all of the above reasons I cant share your confidence.
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#15
08-19-2007, 05:40 AM
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Re: Fed Rate Cut Discussion Thread
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The market was undervalued at 13900+, its on its way back and is going to surge. The whole sub-prime/credit thing is being blown way out of proportion. [/ QUOTE ] LOL
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#16
08-19-2007, 10:45 AM
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Re: Fed Rate Cut Discussion Thread
[ QUOTE ]
[ QUOTE ] The market was undervalued at 13900+, its on its way back and is going to surge. The whole sub-prime/credit thing is being blown way out of proportion. [/ QUOTE ] Also sub prime may only be the tip of the iceberg as far as consumer defaults are concerned ARM resets will be revealing + no one knows who owes what to who in the Banking system. [/ QUOTE ] I remain convinced that jumbo Alt-A's are the worst of the loans. J
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