Another Week, Another Day

Finally. I think the Fed really needed to do this and I think it was done very well. In general I am not convinced we have found a bottom. Once again it does not really matter (trying to pick a bottom and top as I have said before is a fool's game, what matters is fundamental) but I always enjoy thinking about it. The rally was impressive but not earth shattering. I think it was five or six days in a row the DOW finished down. Before the Fed came out with the cut yesterday I indicated that I thought we could be in for a good 3 to 4% rally. It was bound to happen. Also the Dow was up well over 300 at one point in the day so it finished well off it's highs but this cut at the discount window was not about the markets (as it shouldn't be). It was about freeing up a credit market that had closed its doors, adding liquidity to institutions that may need it to stay alive, and helping out on the psychological front. It was needed and I thought it was timed very well by the Fed. Don't fool yourself though, the fact the Fed had to do this was not a good thing. The Fed recognized the very real danger of slower economic growth at this point. That was the what I have mentioned briefly once or twice. You know I do not know if they just have to say it or these big names in the world actually believe it but from Greenspan, to Robert Toll, to Bernanake, they have all way underestimated the consequences of this housing downturn. I remember when Mr. Toll was saying we would have a short downturn (6 months) and Bernanke saw no risk to a true economic downturn. Every step of the way various important Fed officials and people in industry continually said they were not worried about X and X ended up happening. Like I said maybe they actually do not believe it they just feel like they are supposed to say it. Anyway I think the Fed is either missing or lip servicing the very real possibility of a recession at this point.

One interesting thing on the Fed's decision that I only heard briefly mentioned once was the Poole did not vote. Apparently when asked, a FED spokesman said that it was a unanimous decsion but that Mr. Poole had a prior engagement and could not make the meeting. C'MON, hear you have one of the larger credit market meltdowns in the United States in last 100 years and you can make a Bloomberg interview two days ago but cannot make a emergency Fed meeting. Sounds like Poole made his position known but the Fed wanted to make a strong statement and so Poole was conveniently busy with a prior engagement and decided not to come so the FED could be unamious. Just something interesting I heard.

I did not make a trade today. (most days I don't) The real battle for me psychologically was yesterday trying to decide if I wanted to keep my various short positions. I decided I did and so today it was like oh I am losing some money. Oh well next week is another week. The market behaved much more rationally today though. As a result my longs helped offset the losses I had on the short side.

Amazing how many bull stories come out right after a market rally like this. This is actually a pretty good one. http://www.fool.com/investing/general/2007/08/10/the-best-buying-opportunity-in-12-years.aspx I think it at least crystallizes what the true arguments and gives them a fair shake. I disagree with their conclusion but at least I thought it was more well thought out than some of the other things I read today.

Country Wide Financial. Is it to big to fail? I wonder how close it was on the brink of collapse and if that was a reason the FED was forced to move. Three weeks ago even though I was short several financial names I would have told you I thought you were crazy if you said CFC had a good chance of going bankrupt. I even thought about selling a couple of naked puts on it but decided I couldn't really get comfortable that I would be a guaranteed winner. Anyway things changed in a hurry and Countrywide was in serious trouble. No special insight here just curious if it gets special treatment because the Fed consider it to big to fail and the damage that would cause to the financial system at a time like this.

Well another week in the books. Market goes crazy and finishes down and I was able to finish about flat on the week. I'll take it though nothing to write home about. It's only money. I think I am headed out tonight or may read Benjamin Franklin's autobiography (the one that was recently redone in today's English). I need a break from the markets after a truly mental taxing week. Probably will try not to (guaranteed not to happen) think about the markets until Saturday night when I pick up a Barron's or something. No work for me though. Work is my play. I LOVE this stuff.