Online Stock Trading

Wow, the Internet really is full of a lot of junk. Like, big wow. My original intent was to find some good articles, some arguing for, some against, a rate-cut by the federal reserve, so I could use them to illustrate the opposing views. The many dozens of articles I have read almost entirely consist of cut and paste jobs from this Yahoo news article. Hell, pretty much all of the major news players use essentially the same material (all from the Associated Press). No opinions or editorials though. I give up. So here’s at least one opinion. Mine.

The primary reasons why people argue that the federal reserve should cut rates include:
1) This would encourage economic growth,
2) Which could ward off a potential recession resulting from the housing market sizzle.

The reasons why they should not include:
1) The economic growth would be false (i.e., inflationary only),
2) Which would merely procrastinate the inevitable and duly deserved recession.

So the real question seems to be: Poison now, or poison later? We may simply have to take the poison. I say poison later. If I were in a position to be the caretaker of the overall well being of all the players in the economy, both the big and the small ones, over a long-term timetable (in other words, if we were talking about my kid’s homework or something), I would say, take the poison now. Do those pushups. But that’s not what I do. I’m no caretaker. I’m an investor.

Now it’s just a time-value of money issue. What’s worse is I’m a short-term investor. I would rather take those inflated, undue gains this week, and either re-invest them or dump them into my bathtub and go swimming in them. In other words, if a recession was inevitable (either now without a rate cut or later with one) and let’s pretend either way that the recession would, over a year’s period of time, generally reduce the value of stocks by 20%, and let’s assume I never sold short, I could either pull the plug now, sit on cash for a year, then get gains once things settled down, or I could take the gains now, pull the plug later. Now there’s no question.

The biggest counterargument could be that an eventual recession could be much worse, having been put off, than a “natural” recession taken right away. My reply would be, “Not for me it wouldn’t.” If I were an auto worker, then that would change things. A recession could spell bad news for an already distressed auto worker, working for a company suddenly selling even fewer cars. Fortunately, at my day job, I would be one of the last to go.

Of course, there’s an even rosier potential upside to all of this. If the rate is cut (the more the merrier for this guy), and damn near everyone gains a few bucks from every variable rate loan and credit card out there, then maybe that kind of “inflated” activity would start a bit of a snow ball. Maybe even an abominable one. Then, maybe, once everyone gets a little overtime, pays down a bit more debt, patches up that house project they meant to do this summer, then maybe the economy gets rolling right along again—in other words, it could bypass that supposed inevitable recession.

So now the question is a completely different one. Will you get laid off if there’s a recession? I don’t see this question being the primary one asked, so I thought I’d drag it to the surface. Now you can be a devil with two heads: As a benefactor of fellow citizens, you would be right to think a fed rate cut would be bad, but under more private interests, the fed rate can’t go low enough.