All the past studies of interest rates cuts and stimulus show that they take around nine months to have an effect. March 2009 minus nine months is June 2008. In June, 2008, the Fed was cutting rates, but not enough. And the wimpy Q2 2008 stimulus was still hitting consumer purses. And gasoline prices were sky high heading to $4/gallon.
So why does anyone thing the economy should already be showing signs of a turn ?
I suppose the shorter news cycles and hyperventilation on the financial press and other press leads the naive to expect quick results. Some efforts DID produce quick results. Hank the Tank and Battleship Ben's superlative work in October did prevent the banking system from collapse. Libor rates have fallen greatly and the risk of default by money market funds has receded. Commercial paper markets are looser and corporate bond markets are again seeing issuance.
But we must await the rest of the effects to hit in Q2 and Q3 of 2009. And Obama's stimulus will not hit hard until at least Q3.
I wait and think and pick my stocks. Over this year I will put all new cash to work in stocks as I am quite underweight there. Not by choice, but my substantial remaining fixed income investments are unfortunately locked in non-tradable investments. I've done all the easy re-balancing I can do and must do the rest with new money.
That's a reality of running a real fund, not a paper one. My Krypto Fund is mixture of several retirement accounts, taxable accounts and annuity-like investments (TIAA as Mrs. B was an academic). TIAA and its real estate fund cannot be withdrawn and used to re-balance. Neither can my old whole life policy.
Word of the Day
"Lubricious" - adjective [$10] from the card file
Lubricious means 1. smooth, oily, slipper; 2. lewd, prurient.
Sentence: I suppose it's no surprise that the many US congressmen and state legislators are lubricious in both senses of its meaning: they prey on young women or boys, grease their supporters with payoffs (aka earmarks) and are greased with bribes.
Le Mot du Jour
"Douleur" - noun, feminine.
Douleur means pain.
La Phrase: Pourquoi est-ce que la droite recommende d'habitude la douleur pour l'homme du commune pour réparer l'economie du pays?
Sentence: Why does the right usually recommend pain for the common man to repair the national economy?