Unprecedented Times, Unprecedented Moves

Well once again shorts get blown up by the "independent of the market" Fed. In some unprecedented moves, 4 world banks are setting auctions for money to inject into the global system (read: banks). While this is being celebrated, this same money is available each day of the week through the discount rate, but since it is too "shameful" (read: embarrassing) to borrow through that methodology this is a work around. While it will be a smart move; again it's nothing different than what they could get today, yesterday, or 2 weeks ago. It's just a less embarrassing way to get at the money.

Anyhow all my Ultrashort positions added yesterday are getting fried of course... but until we break S&P 1525 or so I will still not declare a new trend up.

The question needs to be asked - why was this not announced yesterday. Why such a calculating step? These sort of initiatives are worked on over time - they are not suddenly made out of thin air. Essentially either this is a calculated move to burn those on the short side of the market and/or when mommy (Fed) saw baby (markets) crying and whining yesterday afternoon - mommy decided to give more toys. This could of been announced any time - yesterday, 2 weeks from now - etc. Again, I have no issue with the announcement and while continuing to just return to the same easy money policies that started all this, it is almost necessary to keep the banking system in tact.... I just have an issue with how calculating this all is. The central banks are supposed to be independent and above markets, governments, etc. This is essentially timing things to provide utmost pain for those who see the bigger picture of degradation.

While I think effective in the near term, and it helps sentiment (sentiment is all that matters in the near term), again it is no different than what is available to the banks now - it just is a way to tap money in a less embarrassing way. I guess thats a hollow victory.

Once again these measures are not a surprise - just the timing - the bailouts are accelerating even faster than I expected....as I wrote just last week:

I expect a lot more programs to "save" the banks, save the poor homeowners, save everyone. More government programs, more bailouts, more money printed out the wazoo at the Federal Reserve, perhaps a surprise cut here or there, perhaps a major discount rate cut.

I think central banks in developed world by next year will begin cutting rates in unison as (a) Western Europe enters its own slowdown and (b) they are forced to, to bail out the USA for its mistakes. Inflation will have to be worried about another day. We will be going back to a world of easy money, so we can repeat this whole cycle once more (how sad)

Fed Joins Other Banks in Measures to Inject More Funds Into Markets

• The Federal Reserve has joined with four other major central banks to announce a series of measures designed to inject added cash into global money markets in hopes of thawing a credit freeze that threatens their economies.
• The Fed said today it would create a new "term auction facility" under which it would lend at least $40 billion and potentially far more, in four separate auctions starting this week. The loans would be at rates far below the rate charged on direct loans from the Fed to banks from its so-called "discount window." But the new loans can still be secured by the same, broad variety of collateral available that banks pledge for discount window loans.
• The European Central Bank, Bank of England, Bank of Canada and Swiss National Bank simultaneously announced parallel measures.
• The Fed also said it had created reciprocal "swap" lines with the European Central Bank, for $20 billion, and the Swiss National Bank, for $4 billion. These will enable the ECB and SNB to make dollar loans to banks in their jurisdiction, in hopes of putting downward pressure on interbank dollar rates in the offshore markets, principally the London Interbank Offered Rate, or Libor, market. The inability of foreign central banks to inject funds in anything other than their own currency has been a factor creating the squeeze on bank funding in those markets.