posted on Sep, 18 2007 @ 02:23 PM
Today the FED panicked. I just can't say this enough. Bad loans should be allowed to fail. Companies should be allowed to fail. Home owners, who
should be renting, do not need to be saved by the FED. Today the FED through the problem on the problem, attempting to use it as a solution. The
problem was cheap money, through low interest rates, to begin with.
The whole credit/liquidity crisis is a direct result from low interest rates. With unlimited credit being afforded to anyone, and I mean anyone, the
direct result will always be excess credit by the people who can least afford to have it. I am not just talking about the individual, but the hedge
fund managers and private equity themselves. Wall Street spoke up and said, hey....we got ourselves in a bit of a pickle here. The FED listened and
is now buying time for a few of those hdege fund managers that either bet the wrong way on credit spreads or the private equity shops that were buying
copanies with money they could no longer afford to raise. Banks were being forced to make concessions on loans to get the deals done, effecting their
bottom lines. This on top of the mortgage issues.....not good for the banking markets in general.
I see this rate cut as the first step of a multi-step bailout of the savings & loans companies that were greedy in their ways of selling and
attracting mrotgage buyers. I say it again.....you can not fix the problem by reliving what got you there in the first place. Thats like saying, in
the long run you can always spend yourself out of a deficit. it is possible to spend yourself out of a deficit, but a lot of things must take palce
for the perfect scenario to take place. This move just prolongs the inevitable. Certain mortgage banking companies will still go out of business,
people will still lose their homes, the markets will eventually go down. I remain ready to re-enter the stock markets only after the selling pressure
is gone. This rally is just short covering, painful, but short covering.
Once the markets cleanse themselves and we hav ea capitulation day, with the DOW around 12,250 and the S&P hits around 1325, I will put my money back
in the market. Until then, its just churn, churn, churn and trade, trade, trade. You generate fees that way. Stop making you brokers
Buy low, sell high.