A Different Fed?

A great message post on RealMoney.com is titled "I Fought the Fed and the Fed Won!"

After laughing at that title, I read the post and the gentleman made a great point

"Fighting the fed might be like fighting city hall but put me in the camp that thinks this 50bps is excessive. I'm just thinking out loud here, but if things are bad enough to warrant 50 bps then why did they actually wait until the official meeting to cut, instead of doing so a few weeks ago? Also, it seemed as if different fed governors were out distancing themselves from the possibility of 50bps cut. Is it really the job of the Fed to surprise investors?"

I especially wonder about that last part.... I mean Fed governors were out in force speaking a week from Monday, 8 days ago - indicating housing was not 'that bad' and foreshadowing a 25 basis point cut. What has changed in the past 8 days? And if nothing - are we in a new era of Fed governorship where surprises are the order of the day?

The initial 25 basis point discount rate cut was a surprise, smashing shorts as it was done pre-market after the market was at its lowest point and now this - at least in Easy Al's Fed everything was telegraphed one way or the other... is Ben going to be "The Surpriser" (as opposed to GW Bush's role as "The Decider")

Again, we all come from certain bias so those 100% long today could care less about any of these issues, whereas being 25% cash and 10% short I have a different bias - but a lot of people I read on various websites who are pretty astute people seem taken aback by this. A very strange day - with that said, all major indexes now broke above technical resistance including the Russell 2000 broke above both the 50 and 200 day at the close. This was by far the weakest index.

So now we ask where does this ongoing liquidity bubble get pushed to - it went from stocks to real estate... now where? perhaps the commodity bull already in full swing gets a lot more gunpowder. As do equities again. It all comes full circle.

While I don't want to judge Big Ben today because there could be something ominous we don't know about that comes out in the wash that he is trying to ward off - and we won't know about for months later; unless something that specific is the case - it will be dissapointing to see this action if its simply to 'bail people out of bad positions'. As individual traders we all have to live with bad decisions in our own portfolio and no one comes to save our goat when we screw up - somehow the upper crust seem to be living by another set of rules - and many people suffer in the process - ask all these out of work mortgage brokers and upside down home owners whose lives have not changed one iota from 2 PM this afternoon to 4 PM. For now that can be construed only as whining, so again I will hold off judgement until down the road when we see what the Fed was seeing. But I can't imagine their world changing so severely in 8 days.

As for the fund, today it was really trailing the market for the first time, up only 1.5% vs 2.5-3.0% for major averages (and 4% in the Russell) - a few days like that and your whole year is messed up. Unfortunately, now it appears one must dissasociate from the logic that 'when the next shoes fall' you want to be positioned conservatively because all the lemming institutions are going to be rushing in buying hand over fist globally, as they were in many cases short or in cash. I don't plan to chase tomorrow, but on the next moderate pullback you just need to load up and play on the same side of the street as the world banks. As stated in earlier posts - you can't let your macro views of a situation cloud your return.

Well back to normal business - tomorrow we look at the CPI number which is a fake measurement, and start talking about the dollar devaluation and gold plays in force... also look for a lot of Europeans and Asians to be buying a lot of real estate in US neighborhoods in the coming years! Welcome (new) neighbors!

In terms of themes/positions - while the financials are going to get a major bounce I still want to be away from them because all is not well. Domestic consumer facing stocks - still avoiding. If people are paying 14.89% or 14.39% on their credit cards - doesn't change anything. The main difference is instead of waiting for positions to pull back in the areas already highlighted in the blog, now one must do some chasing. Now my fear is once all the cautious come in from the sideline en masse they will get whacked, but much like the Fed I will push out that problem "for another day".