Thoughts On The Fed

Whew! After dodging the Fed bullet (and being grateful as a result), it is fun to read the reactions of some following today's disappointment. Here are 10:

"Thinking as a trader, the most counter-intuitive outcome here would be a resumption of the Santa rally and run into year end. It's just become my favored scenario, because it seems so outlandish after the Fed news." - Alan Farley

"The assumption this afternoon is surely going to be that if the market falls so much on a day the Fed cut rates, then that has to be a bad sign going forward. I see the logic there, but logic usually doesn't have much place in the stock market. Going back to 1971, I checked for any time that the S&P dropped 1% or more on a day the Fed cut. There were only five instances that popped up, and the S&P formed at least a short-term low within two days four of those times. The best bet was had by waiting for an additional 1% - 2% of downside, then buying and holding for a few days or 2% - 5% upside." - Jason Goepfert

"Aside from the declines seen on the FOMC day on the first trading day following 9/11, this is the worst decline on a Fed day since 1990. We went back and found all FOMC days in which the S&P 500 fell by more than 1% to see how the market has performed going forward. The results are positive for tomorrow and the next week, but negative from now to the next Fed meeting on January 30th." - Bespoke

"I'll leave the berating of the Fed to others and will spend my energy trying to deal with this market. Things look very poor going forward. The technical conditions support further downside, and the Fed was really the only good positive catalyst we had going for us. Without that, we have some end-of-the-year seasonality that may help, but that is not a sure thing by any means." - Rev Shark

"Fed members are probably amazed at the market reaction, believing that they not only did what seemed right on a policy basis but something close to market expectations. Wordsmiths need to come up with synonymous phrases for "behind the curve." I am sick of it already!" - Jeff Miller

"With only a quarter-point cut, we will no longer be able to forestall the bankruptcies. Banks are holding on for dear life, homebuilders the same. But their lifeline just got choked and far fewer will live because of this. Lots of times people talk about stock traders being complacent. Lots of times you hear about bullish money managers that are way too excited about stocks. But I have never heard a statement from a more bullish group of people in my life. They genuinely think that inflation remains a big problem. I am aghast." - Jim Cramer

"The Fed blew it once again. They are still behind the curve. Expect the bears to enjoy the fruits of the Fed's whiff as the A.I.R. pauses. They should just let me make monetary policy. Like 2000, 2004, and 2006 when I had major disagreements with their policy, I expect they will come around too little too late." - Robert Marcin

"What is just breathtaking to me is that the Fed sees balanced risks between inflation and growth. I understand that the Fed is destined to be behind the curve (because it relies on past data to dictate policy that takes time to flow through the economy), but these guys are so behind the curve that they are getting lapped." - Dan Fitzpatrick

"Dollars to donuts, perhaps literally, the FOMC couldn't cut fitty without invoking the wrath of foreign holders of dollar denominated assets. As it is, we're in a pretty pinch." - Todd Harrison

"Boom Boom almost did the right thing. Had it spared us the pandering 1/4 point begged for by financial speculators, he would have finally shown the kind of stones that will be needed to guide us out of the current mess. Equities do not like it one bit, as well they shouldn't; the wimpy move is likely to worsen the credit environment and the financial markets as a whole could be in for a year-end pasting. So why do I suggest the Fed did the almost right thing? Because one cannot devalue its way out of a gigantic pile of debt. Companies, many companies, need to fail, go away forever, and allow those who have a business existing to once again prosper not on the back of borrowed money, but on the strength of real demand, rather than demand generated by a need to circulate make belief money. Had the Fed figured this out in 2001, by 2003 we would likely have forgotten the then recession. Instead it decided to try to fool everyone into believing that we could borrow our way into a permanent plateau of prosperity." - Fil Zucchi