FED rate as low as zero?

[dg]

I'm starting to think that this time it really is different!

finance.yahoo.com/news/Fed-reduces-benchmark-rate-to-apf-13850379.html

[bankedout]

So we are going to rejuvenate the economy by helping consumers and businesses obtain more debt? What a brilliant idea

[ira85]

Fed rates cut nearly to zero? The Fed said it expected to keep its funds rate at "exceptionally low levels ... for some time." Unless interest rates go negative, sounds like rates only have one way to go. That seems like a rare investment opportunity. With Treasuries at a level where they can't go down, then shorting Treasuries seems like shooting fish in a barrel. The ony question is how long it will take to be profitable. Seems like the Fed is issuing a buy signal on ProShares UltraShort Lehman 7-10 year Treasury etf (PST) and ProShares UltraShort Lehman 20+ year Treasury (TBT).

[ira85]

Well, I realized an error in my comment above and wanted to correct it. I was hasty in saying the Fed issued a buy signal on ETF's that short Treasuries.
The Fed sets short term rates. The market sets long rates. Theorectically the Fed could have very low short term rates and long term rates could still be high. So the Fed action isn't necessarily controlling the Treasuries shorted by TBT or PST. Nevertheless, in the recent flight to safety, the yields on Treasuries have dropped dramatically. Look at a chart of TBT. It dropped off a cliff in November and is trading way below moving averages. So even though the Fed didn't issue a buy signal, the opportunity in TBT and PST is still there.

[dg]

Right now, I'm afraid to short anything. Look how I did in the last horse race!

However, it seems to me that interest rates have only one future short term direction possible (UP). So as treasuries rise in interest rate, lessor issues will lose value. Of course, the dollar could always collapse instead. I think I'd rather bet in gold. We know the dollar will continue to devalue.