With the stock market under siege from the credit freeze, what can you expect from the Fed?
Mike Darda, Chief Economist at MKM Partners joins the panel for this conversation. Following is a synopsis of his main points.
Can current economic weakness be solved by further rate cuts?
I think the Fed is pretty fearful, replies Darda, and in essence they’ve decided to push the inflation readings to the side, and be driven by the markets. I don’t think they will run the risk of disappointing markets and not delivering the cuts that are already priced in.
The market is pricing in, at 100% probability, a rate cut of 75 basis points next week, Darda says.
Is there a point when the Fed’s aggressive rate cutting provokes more anxiety?
I think they are paving the foundation for the next crisis, Darda says, which could be an inflation crisis down the road. I’d like to see them get more creative rather than just rely on rate cuts.
How do you trade it?
It probably means a weaker dollar, explains Tim Seymour. As a result I think the CurrencyShares Japanese Yen Trust is a buy, he counsels or you could look at the CurrencyShares Euro Trust .
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Trader disclosure: On Mar. 7, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (BIIB), (BKC), (C), (CSCO), (MS), (MSFT), (XLF), (YHOO), (AAPL); Najarian Owns (COP) Calls, (BHI) Calls, (AMAT) Calls; Seymour Owns (BX), (CFC), (F), (HAL), (MER), (MSFT), (SBUX), (TSO), (AAPL), (INTC); Seygem Asset Management Owns (EEM); Seygem Asset Management Is Short (FXI); Finerman Owns (GS); Finerman's Firm Owns (MSFT), (TSO), (WMT), (YHOO), (FNM), (AAPL), (MO), (AEO); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts