Friday, 17 August 2007

Thanks, Uncle Ben

The markets got a shot in the arm today courtesy of the Federal Reserve's decision to lower the discount rate by .5%. Investors will rejoice today, because finally, the Fed heard their cries to open the discount window.

We are, of course, skeptical. We want the markets to go up. But we also believe that the Fed stepping in is:

A. An acknowledgement that this may get much worse before it gets better and
B. A band-aid that may stop a little of the short term pain, but will ultimately slow the process of the market working out built-in excesses.

So, today may be a good day for investors, but it's naive to believe this situation will abate because of the Fed's actions.

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