Financial update from Bob Martin - Metro Mortgage

Here is the latest from "The Guru" (Mr. Barry Habib).....
Bob

Guru Report:
The Federal Reserve led a global coordinated emergency interest rate cut this morning that included the European Central Bank, Canada, UK, Switzerland and Sweden. The Federal Funds Rate was lowered by 50bp to 1.5%, while the discount rate was also cut by 50bp to 1.75%. The joint effort was to ease the economic effects of the worst financial crisis since the Great Depression.
The coordinated effort helped keep the currency markets in balance - this gave our Fed the green light to cut, without the inflationary concerns from a weaker Dollar. Additionally, the strong Dollar is keeping oil prices in check...much different from the past string of isolated US cuts that led to a much weaker Dollar and skyrocketting oil. And the European Central Bank, which had turned its back on rate cuts (they actually hiked not too long ago) because of its single mandate of fighting inflation, gains cover in making the move to avert a global collapse. Look for more cuts ahead, especially from the ECB and the Bank of England, which both have lots of room to slash rates.
On Monday we speculated that a coordinated global rate cut, although never done before, may be possible.
Here's what we wrote to you on Monday -
Typically, and contrary to the media and general public's understanding, Fed Rate cuts have an adverse effect on mortgage rates. However, with the world-wide financial crisis, it would be nice to see a coordinated effort by our Fed, the Bank of England, and the European Central Bank to simultaneously cut rates. This would help the currency markets remain stable. In the past, when our Fed has cut rates alone, our Dollar weakens, which is inflationary, and that is a big factor in the negative movement for Mortgage Bonds. But a coordinated effort would keep the Dollar, which has already made a major comeback against the Euro, near unchanged levels. This means that Bonds just might like a Fed cut, if it's done in tandem with other world central banks. By the way - Stocks would likely move much higher following a move like this. We are just speculating on this, but given the global financial situation, the stage is now set for a possible coordinated action. Currently, there is an 84% chance that the Fed Funds Rate will be lowered by 50bp at the upcoming October 29th Fed meeting.
(note: this was written earlier today, so while the Guru was right on the coordinated effort, he was way off the mark as to the markets responses. Currently the stock market is down almost 200 points and the mortgage backed securities are down 84 basis points, which is why the rates are getting hammered)
Stocks are slightly lower, but this is an enormous improvement from what the Stock futures were showing in overnight trading and prior to the Fed announcement, as the Dow was set to open about 500 points lower. We think Stocks may in fact gain upward momentum and move higher from these levels. Our "old reliable" indicator, the VIX, tells us that we may be up for higher stock prices ahead.
Additionally, we discussed that a Fed Cut that was in tamdem with the ECB and BOE would be a positive for Mortgage Bonds. Usually Mortgage Bonds react negatively to a Fed cut because of the inflation and Dollar weakness that comes with a cut. But as mentioned, this coordinated move keeps currencies, oil and inflation in check.
But volatility will likely remain for both Stocks and Bonds. Mortgage bond prices remain in a sideways to higher trend riding along the 25-day Moving Average. We will float, but be ready to lock should sentiment change.