Pimco's Bill Gross has just floated more trial balloons in his latest monthly article just released. To summarize...

"A systemic delevering likely requires a systemic solution, which moves beyond cyclical interest rate cuts, liquidity provisions, or even the purchase of subprime mortgage-backed bonds. We believe that the Federal Reserve must now act as a clearing house, guaranteeing that institutional transactions clear (and investors receive) their Big Macs at the second window. They must also take another bold step: outright purchases of commercial paper. They should also cut interest rates to 1%, because we are experiencing asset deflation, and the threat of headline inflation is long past."

Note that it was Bill Gross in his September article that formulated government bail-outs for Fannie/Freddie and Wall Street (Paulson Plan). Thus it seems Bill is the trial balloon floater, the FED/Treasury the architects, and Warren Buffett the pressure inducer and/or confidence builder. They all have their roles to play in their Perfect Sting or Circus Act, depending how one looks at it.

Therefore and according to Bill Gross, we might see a major interest rate cut as early as this week. Asia is presently down about 2-5% across the board tonight and an interest rate cut may at least provide a temporary reprieve to the sell-off in global equities.

Regards - VHF

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