Fed Cuts Interest Rate 75bps!
Lance on Jan 22 2008 at 7:37 am | Filed under: Economics, Investing, Lance's Page
From The New York Times:
WASHINGTON (AP) — The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut a key interest rate by three-quarters of a percentage point on Tuesday.
Quicker and larger than expected. I am curious whether investors will, at the margin, consider this a move to celebrate or evidence that things will get much worse?
Sphere: Related Content
Your Ad Here
7 Responses to “Fed Cuts Interest Rate 75bps!”
Trackback URI | Comments RSS
The View From the Bluff: Lance’s Economic and Finance Blog
Women sense desperation in a suitor like he was bathed in garlic & onion aftershave, and then they run like hell.
Investors are going to make women look polite in such encounters.
My guess as well.
Heh. Best comment so far:
And a “A Few Good Men” reference in title to boot!
Oh, I think we’re in for a bumpy ride. This move by the Fed seems to have closed off a bit of panic selling, but the fundamentals haven’t changed.
I’ll tell you what I’m watching, though.
Harley-Davidson (HOG) reports earnings on Thursday. It’s a solid company with a loyal customer base–I’m one of them actually–but, motorcycles are a luxury item. For every guy like me that rides practically every day, and uses a motorcycle as their primary transportation–there are about 10 guys that ride for maybe 2,000 miles a year. Or less. Those people are gonna stop riding–and buying–new motorcycles.
In fact, if the rumors are true, they already have, and Harley’s results for last quarter will be below analysts estimates. In the last year, Harley sold substantially fewer motorcycles than in 2006. Also, Harley’s stock has already lost about half of it’s value in the last year already, and disappointing earnings for last quarter won’t help.
The thing is, Harley is an interesting proxy for luxury buying. If Harley’s sales are looking bad on the 24th, when earnings are announced, that’s a pretty good indicator that consumers are shutting off buying non-essentials, a good indication of belt-tightening, and general economic cooling.
That smells to me awfully like the beginning of hoarding cash.
Great minds think alike. First of all Harley is a company I watch closely because I like great consumer brands (I think Buffett may pick them up if they falter too badly.) And yes, I watch consumer discretionary sales very closely, and Harley is an interesting bellwether.
The great thing about Harley is that they’re almost a pure luxury product. None of that silly commodity manufacturing mixed in to muddy up the picture. Even their accessories are luxury add-ons to the main luxury product. And the maintenance spending goes mainly to dealers, not to Harley itself.
It really is a fascinating company for analysis purposes.
I’m disappointed to learn that you watch them, too. I was hoping to offer a tiny nugget of wisdom.
I always pay attention to great brands, with what Buffett calls “moats” around them. Long term they build value. GM destroys it.
I don’t want to imply you didn’t offer wisdom. My rationale was more inchoate, and I think you made some great points. It isn’t up yet, awaiting compliance review, but I posted your thoughts (from QandO) on Harley at Risk and Return. So yes, I think your insight was worth something.