The Federal Reserve And Its Central Banker Posse Ride To The Rescue

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We hate to interrupt yet another rendition of the Wall Street chorus singing "Happy Days Are Here" again but today's rally could use a little sobriety. We're sure it is wonderful news that the Federal Reserve has convinced the central bankers of the world to cooperate with its plans to snatch, well, something or other from the jaws of recession. But no amount of coordination, no amount of monetary injections, no new levels of central bank creativity is likely to solve the underlying problem of mispriced assets.
The now popped real estate bubble unleashed a torrent of malinvestment so deep that it seems a new class of credit products freezes up (or melts downs) ever week. The newspapers read like a bowl of alphabet soup each morning. Some days we half-suspect that we're being put on, that the best and brightest of Wall Street cannot really have fallen for things such as auction rate securities.
Apparently the central bankers are convinced that what must be avoided at any cost (or at any inflation rate) is a reckoning of values. They believe they can control stock prices and prop up credits until, well, indefinitely it seems. When one bubble pops, start blowing another.
The Fed's moves today, following so closely on the Dow Jones falling to its lowest levels of the year, smacks of desperation. We avoid as best we can speculation about market movement. But as the euphoria of the moment wears off, we cannot help but expect the rally will fade as well.
But back to the chorus, lads and lasses. Pop that champagne. The central bankers are riding to the rescue, doling out the punch, and the grand Wall Street nemesis Eliot Spitzer has been laid low. Enjoy it while it lasts.

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