I listened to Bernanke speak live at the German Bundesbank and I REALLY liked his speech. I am going to cut Bernanke some slack.
Listening to his talk here is my guess on what Bernanke and maybe the Fed will do next.
- 25 basis point cut – 35%: If he cuts he will give a stern talking that this is not the start of a series of cuts.
- No cut – 45%: He will say that he is watching the market closely and will react if , and he will say that he is watching the market closely and will react very quickly if things go wrong.
- 50 basis point cut – 20%: I not guessing he will do this.
I came to this conclusion because I got the impression that Bernanke was not that happy that people are not saving as much as they should have. And he does not think the low savings rate with an aging population is a good thing. So what I am guessing is that he wants to send a message to the markets and to the people that it is time to start saving. If there is a cut then it will probably be a split vote with some for and others against.
I know I am pretty contrarian here since most people think a rate cut is backed in. Though I think Bernanke is trying to think long term here.
So I think there will be no cut, but I am not totally sure here. Though I really doubt there will be a 50 basis point cut. If my view is true, watch out to what the market is going to do. It is going to be a wild ride and a good time to step back. (NOTE this is just my gut feeling and I do not advise anybody to follow my opinion because I could be REALLY wrong.)