Maybe If You Ask Nicely
November 28th, 2007 by 
reality
The Fed’s Vice Chairman Donald Kohn reverses course and indicates that the Fed may be open to a rate cut after all (surprise!).
In my view, these uncertainties require flexible and pragmatic policymaking–nimble is the adjective I used a few weeks ago. In the conduct of monetary policy, as Chairman Bernanke has emphasized, we will act as needed to foster both price stability and full employment.
I continue to be stunned by the sheer arrogance of these guys - the Fed - in thinking that they can do anything but make things worse, as they always have. Especially now, when the juggernaut of deleveraging is rolling, crushing everything in its path, as a direct consequence of years of tinkering and distortions. The consequences of their actions - malinvestment, for example - can be deferred for years, while in the short term the psychology improves, leading them to believe that they are not responsible when bad things happen. It is the travesty of reality that is Keynesian economics, which allows people to abandon common sense and believe that there is a free lunch. There isn’t, lunch for the last twenty years or so has been charged to our account, and the bill is being presented.
Posted in Economics, The Economy, The Fed | 
November 28th, 2007 at 7:10 am
You beat me to the punchbowl on your comment…. I knew they were going to mealy-mouth themselves to a rate-cut.
See, all the Fed can really do now is dance and keep on dancing, even though Chuck the Prince has been thrown out of the window. If Citibank stopped dancing, well, it’s the Fed’s turn.
I am afraid the spectre of 1929-1932 marches inexorably closer.
Dance, dance, dance…. Drink, drink, drink.
Hey, who’s gonna add more punch to the punchbowl? Donny Kohn or Benny Bernanke?
The market will also inexorably head lower, lower lower. Just as the drunkard portfolio managers keep on hitting the Buy buttons thinking that stocks are even betetr valued…. Investors should fire these people who very professionally make shrink their portfolios - with the ability to sweet talk them to believe that taking a 30-50% hit in your portfolio during a bear market is normal….
Then again, we need more fools to buy all the way to the top and sell all the way to the bottom.
The market rallies…but soon it will be surprised again as the bears take huge chunks out of fresh meat offered. I am sure Goldie and her hedge babies will be licking their chops - just taking huge bites out of long only managers and short specs through these rallies and cliff falls. Great for their prop desks….
Thanks Donald and Ben. What would Wall Street do without you???
November 28th, 2007 at 3:10 pm
I knew these guys would chicken out. Politicians (and the Fed is a political beast) will always take the path of least resistance. It’s also smart fiscal policy to devalue the real value of your debt when you’re the largest debtor nation.
This counter trend rally gives us another golden chance to short financials. I’d give the bounce a little more leash, but if you’re shorting, you actually want higher prices for entry. I was disappointed, though, that CFC could not get a lift even today, might have to short XLF instead.
November 28th, 2007 at 5:20 pm
Nothing wrong with shorting XLF. Closed my Dec XLF puts yesterday and was able to put the Jan on today at a much better price.
November 28th, 2007 at 5:36 pm
True, XLF is the QQQ of 2000.