Question of the week
The Fed is now widely expected to cut interest rates when they meet in September..., maybe not everyone is convinced, but anyway the Fed ultimately pursues objectives like: stable prices, low unemployment and growth, regardless the meeting is this September or next. In case Fed cut it won't be particularly surprising per se but is going to be another crucial test for the Chairman. One of the most reliable effects of eased monetary policy is on the housing market, where lower interest rates mean lower monthly mortgage payment what as result is supposed to weather the risk of massive defaults on subprime mortgages and heavy debts considered a big threat to U.S. economic prosperity, bigger than terrorism, a panel of U.S. business economists said on Monday.
Lower interest rates also induce state and local goverments to increase the size of their capital budgets. But what's a the place to be:
Financials and Consumer Discretionary sectors may be the place to be if this scenario plays out, and Industrials may also do well outperforming six to 12 months later.
I believe that my DryShips, Inc. (DRYS) Strategy Lab Open portfolio stock will benefit as the Marine industry is cyclical and so lower interest rates is healthy environment for its business. When all the second hand acquisitions and disposals are concluded by the end of the first quarter of 2008, DryShips' fleet will include 46 drybulk carriers comprising 5 Capesize, 31 Panamax, 2 Supramax, 1 Handymax and 7 newbuilding drybulk vessels. Albeit the easier repayments of eventual company's debt and easier financing of the new buildings through the year 2010 this company is in good position to benefit from such scenario, going forward. Eased monetary policy is healthy for the global economic growth too. The company's fleet carries various drybulk commodities, including coal, iron ore, and grains, bauxite, phosphate, fertilizers, and steel products all necessary for various industries worldwide.
Comments: View Comments | Monday August 27, 2007
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