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More Rate Cuts, Good Sign or Bad?

Jupiter, Fla. (PRWEB) March 22, 2008 -- Jack Crooks takes a closer at the Federal Reserve and reoccurring rate cuts. In this issue of Money and Markets, Mr. Crooks discusses why the rate cuts seem like good ideas but most likely are not.

Leading up to the Fed's announcement on Tuesday, March 18 to cut interest rates again, the market was overwhelmingly betting on a full-percentage-point rate cut. Now, it's worth pointing out that the Fed had already taken other steps a few days earlier. On March 15, it cut the discount rate and opened up its discount window to make it cheaper for commercial banks and institutions to borrow money. The Fed also agreed to back the already infamous Bear Stearns buyout.

Perhaps that's why they opted to only cut rates by 75 basis points on Tuesday. But there are two important questions yet to be answered:

1.    Is less than expected good enough this time?

2.    And are these simply acts of desperation?

Initially, the stock market seemed happy enough with the 75-basis-point cut. The Dow Industrials rallied more than 400 points the day of the announcement. Of course the market gave back much of those gains the very next day. That's one of the reasons to step back and wonder whether the Fed fell short this time; or whether they actually needed to go the distance. It could take quite a bit more to restore confidence in the system. The Fed will need magic to keep the wheels of the U.S. economic and financial machine greased until we power our way out of this mess. In addition to that 75-basis-point cut, the Fed pulled out a whopping dose of inflation rhetoric. It was a bit excessive, but they probably just wanted to make the point that they haven't forgotten entirely about rising prices.

"Also, the announcement the Fed served up on March 18 sparked a small dollar rally. However, it probably won't last, and it's expected that the Fed's tactics will wear off rather soon. Simply because there are no signs that the Fed Funds rate is anywhere near a bottom. And there are no signs that the Fed has restored confidence in credit markets, financial markets or equity markets. They've simply deflected the latest round of concerns in hopes of stemming the next inevitable round of worry from surfacing. And considering the host of threats weighing on the dollar, nothing short of an epic maneuver by Ben Bernanke and his cast members is going to help," Mr. Crooks states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspx?NewsletterEntryId=1577

About JACK CROOKS & MONEY AND MARKETS     

John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.

Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.

Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.

Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.

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