The stock market is cautiously waiting to hear from Ben Bernanke this weekend. What is at stake is the notion of the Fed coming to the "rescue" of Wall Street by beginning a series of fed funds rate cuts later this year. Late afternoon talk show icons James Cramer and Lawrence Kudlow have flip flopped so many times in the past 14 days...first pounding on the fed to reduce rates, then calling them magicians after the discount rate cut, only to recently lambaste them days later as if they are failing the U.S. of A. since they haven't cut the fed feds rates in the meantime and the Dow drops 280 points in one day. What is going on here!?
The Fed has a choice. Maybe a hard choice. Here's the question: If they do in fact announce rate cuts, are they imbedding the "Bernanke put" into the hard wiring of the capital markets? Would rate cuts validate the idea that the Fed will bail out any financial market participant when in trouble? Would this insure against losses and encourage risky behavior? I don't have the answers, do you?
PS--that picture is of a big bull elk from Yellowstone Natl Park!
No comments:
Post a Comment