We all thought Fed Funds Rate would drop 25 basis points. Instead, The Fed dropped it 50 basis points.

What does this mean?

(1) It means... The Fed does not care about Inflation. I've seen a fair share of Inflation-Conspriracy videos/books to the point where it's making some sense, along with some dollars. Have you?

(2) It means... The Fed thinks we're in a Recession.

There is plenty of Recession evidence via Housing (5% of the economy), Mortgage Industry (x% of the economy), Financial (x% of the economy), and Retail (x% of the economy).

Have we gone over x% threshold to say our ourselves, "Yes, I think we're in a Recession now." - as a whole, probably not yet. But, do we have to wait for a "consensus of people" to say we're in a recession? I say, "No". Personally, things are going quite well for myself, and I see a lot of growth in the State of Tennessee. But, I see numerous people around me (mostly friends, associates, and less fortunate people) overleveraged without even seeing the dangers of where this market "could" be heading - they are oblivious. The "oblivious" people probably represent over 70% (or more) of the USA economy (meaning I think at least 70% of this economy is living under false pretenses).

Folks... let's look at the Financial Industry (20% of the S&P500). Are most of these Financial companies going to break upwards on the numbers in Q3 when the Earnings get released? Hell No! Why? There was at least a 2-week seize-up of monies during the quarter for almost all Financial companies except for a few. I say, 80% of the Financial Industry misses their numbers...which further leads us into the Recession...

Using Yahoo Historical Quotes (or your method of pleasure), go back and look at what some stocks did during the last time The Fed dropped rates - circa January 3, 2001 (six years ago, for you newbies). For a day or two, things looked great - the "layman dumbass" investor, thought lower interest rates only means higher profits for companies that borrow money and everything will be fine. However, the "layman dumbass" is probably going to get the major shaft sometime soon if not already, imo.

Look at the Jan 2001 (waaaaay before 9/11) aftermath, two months later, when The Fed cut rates the last time. Look at (1/3/2001-3/2/2001) - two months after that first cut.

Earlier today (Tuesday morning), I bought more COF (as an Averaging Down move) with all excess cash, and then sold half my entire position near the close.

This morning's PPI numbers are fake, imo - commodity prices rose a lot since then. This means "a" future PPI number will absorb price hikes and drive markets downward.

We haven't even heard from all the banks screwed up from the Q2 Lending Problems - that dirty laundry will get unveiled in Q3 (for most companies it's during October-November).

Now... Let's play Devil's Advocate and compare Today vs. January 3, 2001:

Pros - "The Bull Opinion":
1). Fed Fund Rate about 1.25% lower than it was in 2001 (not sure if that's true after this recent cut)
2). Housing, Mortgage Companies, Financial, and Retail stocks in recession already (could be construed as a "Buy Low" scenario)
3). Stocks, as a whole, are not as overpriced as in 2001.
4). USA has a war going on now, which equates to increased mid-term spending.
5). Stocks that Value Investors buy today were NOT necessarily considered Value-type stocks in 2001.

Cons - "The Bear Opinion":
1). High Deficit Government Spending (false economy continues today)
2). Consumer Inability to consume, via:
(a) negative Savings Rate;
(b) home depreciation;
(c) lack of equity access to home equity;
(d) drastic increases on short-term loans;
(e) net USA job losses;
(f) inflation, and;
(g) probably more items.

The common theme here is... stay in gold, energy, and multinational.

Now, compare Today vs. Devil's Advocate vs. What I own:

APA - Multinational Oil
BRKB - Conglomerate with cash
BVN - Multinational Gold
COF - USA Financial (sold half today for a net loss, on the fake upswing - will sell more soon)
ETFC - USA Financial (own small bit. Will Hold and Average Down, albeit slowly)
GE - Multinational
GOOG - I own a small percentage. I will Average Down slowly.
HD - USA Home Retailer - Fundamentals force me to ride out this storm. If zero houses are built, there's still a need for repair - that's where HD fills the gap.
HOG - USA Industrial - Brand name. I expect this stock to tank and will Average Down as it tanks. A cost advantage could creep up if gas prices get out of hand for any reason.
JAKK - Might sell soon.
JNJ - Multinational Healthcare - this is a good time to own healthcare.
KO - Might sell soon.
LOW - Almost as good as HD (see above).
PTEN - Natural Gas play in waiting.
PTR - Multinational Oil
UPS - Multinational - expect flatness next 2 months
VLO - USA Oil Refinery play
WMT - USA Retailer - I will ride this down, just like HD, because of Fundamentals, MoS, and Moats.

We can also throw in Buffett's "I Don't Care if The Fed Cuts Rates":
[www.cnbc.com]
If you're 70+ years old AND the 2nd (or 3rd) Richest Person in the World, would you care? Probably not. In any event, you would probably also be laughing.

Keep in mind, if you think you've got a Margin of Safety, you would also be laughing. A couple weeks ago (and even up to today), I've desired to sell up to 25% of my portfolio for cash while drooling for this opportunity which has arrived, but when I got to where I thought I would arrive, I looked again and realized (Pros#4: The Value Stocks I Own Today were NOT necessarily Value Stocks in 2001) and hence my reluctance to sell up to 25% of my portfolio.

Yes, Market Risks might force my stocks downward over the next 2 months, but I'm already prepared to Average Down, in this downward-moving market.

For those without a Margin of Safety, I think you should dump those holdings, but that's just my opinion. Risky stocks could drop at least -10% from these levels.

- Vooch

P.S. Click image to enlarge