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Rough ride this week....

March 16th, 2008 at 07:46 pm

In an emergency meeting today, the Fed cut the discount rate by a quarter to 3.25% and approved Chase's purchase of Bear Sterns.

The street is also looking at the Fed dropping the fed funds rate to 2% on March 18th (a full percent).

I personally believe this is the other shoe dropping and this deals directly with confidence in the market.

We moved from credit quality issues (sub prime, CDOs, SIVs, municipal bond insurers, and CDS where the counter party was Bear Sterns, to solvency issues (Countrywide, muni insurers which led to issues in ARS, Bear Sterns), to the fed now flooding the market with liquidity.

I still haven't rebalanced my portfolio as I have been waiting for the market to settle. I believe this is the last shoe to drop and will wait for the dust to settle.

Most of my rebalancing was selling international to invest in my US stock portfolio and my small REITs. I believe this week we will see downward pressure on stocks (especially financials) and downward pressure on the dollar.

Good luck all!!! And cash is king (just not US Big Grin ).

Source: www.bloomberg.com/apps/news?pid=20601087&sid=asg0H5x.VQ4g&refer=home

1 Responses to “Rough ride this week....”

  1. Broken Arrow Says:

    Well said.

    This move isn't actually all that different from what Greenspan has done back in the stock market crash of 1987. The only difference was that Greenspan was pretty aggressive about it, and was then credited with a decent recovery, whereas Bernanke is much more conservative here....

    I know this sounds crazy, but I actually saw an interview with Donald Trump speaking on this subject matter, and I think he may have a point that Greenspan was "ahead of the curve" whereas Bernanke so far is "behind the curve". So far, he's been only reacting rather than proactively attacking....

    Anyway, I haven't done anything to my portfolio either. Truth is, I'm not entirely sure what needs to be done with it, if anything at all... other than to jump in with more money and buy buy buy!

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