Wednesday, September 19, 2007

Mood Swing

I know we are just at mid-week, but I did want to comment on that huge spike upwards in the Dow Jones Industrial Average yesterday. Chart pic courtesy http://www.nasdaq.com/

Fed Chairman Ben Bernanke announced a 50 basis point rate cut yesterday afternoon and the DJIA ends up 335 points. Absolutely amazing and another confirmation of socionomics.

There was no reasoning involved in that spike up in the afternoon. There was no logical thought, no cold analysis of the numbers. It was a herd of men and women all throwing money into one place in a very short period of time.

Now, I'm all for it, personally. The longer this market remains elevated, the more time I have to prepare for the coming economic storm. But please don't be fooled into thinking that a 0.5% drop in the fed funds rate means anything. Please note that a lot of mortgage rates key off the 10 year treasury.

Yesterday's cut was window dressing. But this entire market is one huge hallucination anyway, so I guess let's just keep passing out the intoxicants and keep the party going as long as possible. It's going to be one ugly morning after, though.

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