$100 bills came floating down from the sky today and everybody on Wall Street picked them up and indisciminately bought stocks with them. I'm sure it seemed like a great idea at the time. Usually, a crowd of people makes the best decisions ever, like our team just won a sports championship, let's riot.

This Bloomberg article tells the whole story blow by blow. It's quite a bit of reading, so I thought I'd just point out the really profound bits:

``Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,'' the Federal Open Market Committee said.

I'm not sure if this is wishful thinking or we are supposed to focus on the word "some" since foreclosures have doubled since last year. According to the Bloomberg article, the deepening recession in housing has been taking a toll on the broader economy and job growth has been slowing since June.

The credit crunch was caused by losses in securities tied to subprime mortgages.

Wow, these authors can some up the derivatives markets in one sentence when both George Soros and Warren Buffet have claimed that they can't understand them. Either this is an oversimplification, or they are more financially savvy than Soros and Buffet. Hmmmm.

House Speaker Nancy Pelosi said the Fed move ``underscores the economic insecurity that middle-class Americans have long been feeling.'' The California Democrat said in a statement that she hopes the rate cut ``will bring some relief to the middle class.''

A lot of middle class people I know have been complaining that they can't roll over the commercial paper backing their off-balance sheet SPIV and it's really been cramping their style. I'm sure this will sort it all out.


These are my favourite two quotes from separate parts of the article:

Inflation has also receded.

crude oil climbed to a record and gold and copper surged.

Inflation has receded but the price of things is going up. This is double-plus-un-good. At least the article ended on a happy note:

``Lowering the funds rate overall doesn't boost housing,'' said Lee Hoskins, a former Cleveland Fed president and now senior fellow at the Pacific Research Institute in San Francisco. ``All this does is delay the day in which these wealth losses will finally be worked out in the marketplace, so I don't regard this as a particularly good move.''

My short positions may have taken a hit today, but at least I got a smile from Bloomberg

SunTzu