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Bob:
I am certain they were trying to get the maximum bang for the buck. They have
learned over the years doing rounds of FX intervention that typically, their
moves are expected. This was quite effective [just ask the missing S&P floor
traders] and for only a 25 basis cut in a series of cuts yet to come, it will
probably be the one that will be remembered. They not only got some liquidity
back into a tightening lending market, but they got a rather hefty jump in
stocks--though only time will tell how long the stocks will hold onto this gain.
Best,
Tim Morge
Bob Fulks wrote:
>
> The timing of the expected rate cut seemed very clever. By announcing the
> cut a half hour before the close, Greenspan/Rubin must have known the
> market would jump and option traders of expiring options would have to
> cover shorts and buy into the close. Then the Dow would skyrocket so the
> reporting on the evening news would be very positive, convincing the public
> that the downdraft was over.
>
> Could this have been in their thinking?
>
> At 4:29 PM -0400 10/16/98, Timothy Morge wrote:
>
> >No forwarning. My wife was watching headline news--they just cut in and
> >said that in a surprise move, the Fed had lowered rates. My opinion is
> >that they gave Greenspan the go ahead at the ladt meeting to move again on
> >25 basis points if he felt it was needed. yesterday at lunchtime, he
> >apparently took a phone poll with the regional Fed Chiefs and most
> >actually asked fo him to exercise that 25 basis point cut. I would also
> >suggest that he probably called the White House and told the President, as
> >well as the Speaker of the House, that he would cut rates again IF and
> >When they agreed upon a budget--if you remember the last time they had a
> >budget impasse, Greenspan waited to cut rates until they had come to an
> >agreement. This is one of the few times he gets to hold those two to the
> >fire...
>
> >As for the floor, they have huge boards all around the pits, neon green
> >letters on black background...They have reuters and Telerate news and it
> >just flashes on the screens--those that were looking when the news came up
> >got a jump--otherwise, believe it or now, most get the news because a bank
> >or fund trader knows the news and picks up his direct line and tells his
> >or her floor guys.
>
> >Best,
>
> >Tim Morge
>
> >DLCRL@xxxxxxx wrote:
>
> >>Was there any forewarning yesterday that the fed was going to make an
> >>announcement ?? how were those that watch the news informed ? dale
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