Please Note! This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
You are welcome to republish this article, or any portion thereof. Please, cite the actual/original source. I would be grateful if you could link back.
Earlier this morning, Dow's Futures off 300 points. Tokyo slide over 9%. After the Fed and other Central Banks announced global rate cut, Dow's Futures surge to +122 points.
The Fed cut fed funds rate by 50 bps to 1.5% and also lowered its discount rate as well. UK, Canada, ECB Sweden and Swiss also participated in Global Rate Cut.
Here is the statement:
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.
Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Federal Reserve Actions The Federal Open Market Committee has decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.
Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.
The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 1-3/4 percent. In taking this action, the Board approved the request submitted by the Board of Directors of the Federal Reserve Bank of Boston - Federal Reserve
Additionally, The Fed said it will bypass ailing banks and lend directly to American corporations for the first time since the Great Depression, and it hinted strongly at further interest-rate cuts.
Please Note! This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
You are welcome to republish this article, or any portion thereof. Please, cite the actual/original source. I would be grateful if you could link back.
About six months ago, I wrote a post arguing that copper giant Freeport McMoran (FCX) was overvalued ("Freeport Valuation Bloated Here," Top Gun FP, April 23, 2008). At the time, Freeport was trading at $118 a share and my call generated nothing but criticism.
On Tuesday, Freeport was down almost 65% to $42 a share, and I think there is value here.
As I predicted six months ago, copper prices are now down from $4 a pound in early July and yesterday, were around $2.50 a pound. That is really going to hurt its margins and cash flow. I’m not sure of the extent but it could be so bad that they are only a breakeven company with copper at these levels. We’ll find out more when the company reports 3Q earnings in a couple weeks.
But it doesn’t really matter. With 41 million ounces of proven and probable gold reserves, 93 billion pounds of proven and probable copper reserves and a market cap of $19 billion, you get the copper for $0.20 a pound and the gold for free! That’s an absolute steal.
This is just one example of a great company that has become a bargain during the recent selloff. I could do the same analysis for several others.
Disclosure: Top Gun is long shares of Freeport McMoran.
Please Note! This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
You are welcome to republish this article, or any portion thereof. Please, cite the actual/original source. I would be grateful if you could link back.
Jurg Kiener, CEO of Swiss Asia Capital, told CNBC this morning that the flight from paper currencies as a result of global interest rate cuts will lead to a doubling in the price of gold within a short period, as demand for physical precious metals outstrips supply, causing paper contracts on gold to default.
“The physical market has been on fire - it’s getting very hard to buy one ounce coins and smaller bars, most jewelry shops have been running out so we have a supply problem,” said Kiener.
Kiener said that there was a two tier market in gold, the one on Wall Street where the bankers continue to gamble, and the physical market which is “red hot” and demand is outstripping supply.
“I think we’re going to get very close where we see the environment where the paper contracts on precious metal defaulting, and with that we’re going to get a massive price increase in the overall prices of precious metal,” said Kiener.
Asked where he expected gold to go after the paper market broke down, Kiener said he expected gold to double in price, “in a very short period of time, it will spike up quite fast,” he added.
“If you had an oil rally going from $65 to $140 dollars in nine months, I think it can double in gold in a much shorter period because the market is much much smaller,” Kiener stated.
Kiener pointed out that the expected global reduction in interest rates, kick-started last night by the Australian central bank’s one point cut, means gold is a far more attractive option than any currency because purchasing power of paper money will continue to decline.
Please Note! This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
You are welcome to republish this article, or any portion thereof. Please, cite the actual/original source. I would be grateful if you could link back.
