The market is expecting the Fed to cut its key interest rate by a quarter-percentage point next week and then signal that it is finished cutting rates for the time being. However, I think the best action would be to leave the interest rate unchanged. This would help deter some of the rampant speculation that has been driving commodities to record levels.
Financial companies have seen severe declines over the past year and they still have the potential to go down a lot further. The reason financial companies are on such shaky ground is because the risk of rising foreclosures and loan defaults has resulted in a really severe credit crisis.
Bank of America is down moderately since my initial short recommendation and I think now would be a good time to cover and take the gain off the table. I still think financial companies are going to see further weakness but they will most likely rally tomorrow when the Fed cuts interest rates.
Should the Fed Continue to Drastically Cut Interest Rates?
Wall Street pundits are saying the Fed should lower interest rates by a full point at its next meeting. I think such a rash decision would be unwise and the Fed should actually think about keeping interest rates the same or lowering interest rates by a more modest amount, 0.50 at the most.
I came across Converted Organics on a day trading stock blog a few weeks ago and I have been following the stock out of curiosity. The stock price of Converted Organics has risen from around two dollars to the current price of $16.59 in the past half year. I am not sure what initially caused the stock price to surge but the stock price has continued to go up on sheer speculation.