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1, Consumer confidence plummets, manufacturers contract and more people are losing their jobs. That's the backdrop against which the Federal Reserve cut interest rate this week. For the second time of the month, Alan Greenspan, the Fed., lowered a key short term interest rate by half percent point to 5 and half percent.
2, Explained it must be an aggressive monetary easing in 19 years, the Fed said the reason was worsening consumer and business confidence, which he says
quote "exacerbated by rising energy cost that continue to drain consumer-purchasing power and press on business profit margins." And Fed added that with the inflation contained, the circumstances have called for a rapid and forceful response of monetary policy. Yet its response do not expect to end here.
3. "I think this is what the market wanted, what the economy required the moment, the economy will need more, I think alternatively the fed will have to lower short term rate down to 4% or even less over next 6 or 12 months in order to reduce a...a normal economic recovery."
4. But even so, Gross believes it will only be a mild recovery by next year, he believes we are in a recession right now. But hope for still lower interest rates
bulled some buying, especially the blue-chip Dow was heated at highest level in 4 months.
5, And one noted investment strategist Christine Callies of Merrill Lynch says, in a time like now when Fed's cutting rates, that historically is the best time to buy stocks even we are in a recession.
6. "Well, because the Fed is the only organization, that it can cause direct positive impact on stocks by causing the money to move off the sidelines
and back in stocks. Money starts to move when return on cash goes down. This is what happening when Fed lowers interest rates."
7, Callies recommends to invest on diversified financial service companies, such as credit card and travel giant American Express, and recently merged bank and investment firm J.P. Morgan Chase, discounters
Wal-Mart and Kohl, what she calls "growth retailers", and said won't disappoint. And with technology, Callies liked contract manufacturers, like Simina, which make electronic components for tech companies.
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