I should have checked my calendar more closely. I didn't realize this was "Market goes insane week."
Here are a few quick thoughts on the market's activities of the last couple days.
- The stock market is trying to price in a recession. The credit market had already priced this in, and now it seems as though the credit market stands more to gain from here than stocks. Consider that credit benefits more directly from Fed cuts, which will help many firms sell new debt and survive. Stocks need profit growth.
- Why did the Fed cut 75bps on Tuesday, but only 25bps at the last regular meeting? I know every one is asking the same question, but let me send out a big WTF to Ben Bernanke and Co. on this move. It seems clear to me the reason was in reaction to the severe sell-off in Europe and Asia on Monday. So now the Fed is directly targeting the stock market? I mean, that's how it comes off. The perception would have been different had they cut 50bps at the last regular meeting, and then did a inter-meeting 50bps on Tuesday.
- Bail-out for ABK and MBI? Sounds more and more likely something is going to happen. The story from the WSJ makes it sound similar to the LTCM bailout, where a group of parties interested in seeing the bond insurers survive provide the capital, not as a strategic investment, but to protect themselves from bigger losses. I've said before that I don't like a government bailout, but if a group of banks/brokers have essentially bet too heavily on bond insurers surviving, then they should pay the price when the insurers need more capital. Nothing wrong with that.
More on the markets when I get back in front of a Bloomberg on Monday.