BAC's lookin' pretty good right about now. ;o) 4.5% yield is better than a sharp stick in
the eye.

What do you guys think are the chances for an eventual rate hike and a rate cut (%-wise)?

Rate Cut: 92.5%
Rate Hike: 7.5%

To me, those are great averages... (to think a rate cut will happen).

I agree with Sophia (and, it seems, Mr. Saratoga) that there will be a rate cut. Although
I am very diversified to help protect against something like an unexpected rate hike, the
entire stock market would fall if there were a rate hike. Thus, I plan to keep a little
bit of cash on hand (which I normally don't do) as a hedge against my otehr bets. If the
market gets hit, I will likely average down in my favorite mutual fund [personally, I
would average down in MGRIX... Sophia, if I were you, I'd average down in the FidCo...
lucky woman :-) ]

Also, I wouldn't be all cash... in fact, I'd keep most (pretty much all) of my money in
the market. I am just suggesting that - for those who are all-in the market - maybe only
put a little bit of the cash you'd normally put into the market each month, and keep the
other part that you'd normally put in on hand for a rainy day (keeping it in a money
market instrument until then). This would allow you to take part in any move up, while
still keeping some cash on hand to average down if we get knocked down to 1350 or below
(although an unexpected rate hike would most definately knock us far below 1350...).

Maybe, two of us, you could put the money you are holding on to into a money market
insrument while you're waiting around. This would allow you to earn a good growth rate
while you wait (they still pay 5 % right now). I've heard good things about VMMXX...

they can defintely perform differently (as the tech bubble showed).

Sophia: TIPS are, indeed, a great way to protect principal for younger people (people not
yet retired), b/c it basically locks in a real growth rate. However, I have heard that
most TIPS mutual funds are poor investments. Thus, it was my plan today to go and do some
research on the cheapest way to get your hands on TIPS (in other words, I will look at
every way one could buy TIPS, through every brokerage, and find the cheapest solution...).


In regards to good diversifiacation, though, I do believe that TIPS are a great way to
diversify.

Mr. Cox: The only thing about going in and out of short-only isntruments is that you can
be goign short right when the market makes an unexpected jump. Personally, I advocate
keeping about 5-10% in alternative investments, meaning long-short funds, short-only
funds, and commodity funds. Thus, if you do use something like QID, make it a permanent
part of your portfolio. Personally, I would use BEARX, b/c they short all different kinds
of stocks, and have the potential to make money even when the market is up (while the QID
can't). I also wouldn't put more than 2% of my money in such a fund... But for some people
taht are more active traders, then they might try to go in and out of such funds, yes...
But I feel that it's too dangerous to risk my money on subjective feelings like short-term
market flcutuations. Now long-term changes, I think those are more playable, b/c those are
gradual movements, and are less subject to momentary market sentiment... Some people would
definately disagree with my beliefs, however...
An interesting thing to keep in mind when looking at those various interesting short
ideas, however, is that the DOW, the S&P, and the Nasdaq have something like a 97%
correlation with one another. Thus, over the long-run, they should all do about the
same... short run, however,

Great insight, Mr. Saratoga. Do you ahve any other realtor friends in other areas that are
expressing the same sentiment?

That has actually been a crucial part of my belief for a rate cut (rising inventories in
the spring, massive layoffs, falling consumer confidence at that point, falling housing
prices, etc...), and the down-side risk of this is just too high for another hike. But,
again, I think we should all keep the possibility in mind.

For me, b/c I'm so young and b/c the only account I have is basically a retirement
account, I try to basically stay 100% in the various financial markets, averaging in once
a month. However, right now, I will prolly keep a very small part of my paycheck that
typically goes all into the market and put it into some type of money market instrument,
so that it can earn 5% while it waits.

Want to discuss TIPS a little? Also QID, DOG, SH, PSQ... just a tad...

But we do need to think about where the Fed is going and maybe try to hold some cash or
Fed-neutral stocks during this interim...

How do you feel about QID, DOG, SH, and PSQ as portifoilio hedge plays?