Fed Actions Will Only Delay The Inevitable

When we are no longer able to change a situation, we are challenged to change ourselves. ~Victor Frankl

I must admit that I am impressed with Dr. Ben Bernanke's and the Fed's creativity in addressing the current economic issues. They are using a larger set of tools than the changing the Fed funds rate. First, in August, 2007, the Fed lowered the Fed discount rate, a largely symbolic move to give investors confidence. Yesterday, the Fed announced the would lend up to $200 billion of treasuries in exchange for mortgage backed debt to increase liquidity and help credit markets. In each case, the Fed appears to be addressing a specific economic challenge, instead of using just fed fund interest rate cuts to address all economic issues. However, I believe the Fed actions are only delaying the inevitable.

As a result, I expect the stock market will continue to be in a downward trend for most of 2008. Of course, I wish the stock market would quickly resume its upward trend of the past five years:-) While the Fed moves have provided some confidence, the stock market rebounds have been relatively short lived. Thus, it seems to me that a recession is inevitable, if we aren't already in one. Despite the gallant Fed interventions, I believe revising our financial plans to protect our savings against a recession has been the right approach. The last plan element that I am still working is identifying individual stocks to short. I hope to have to have several possible candidates chosen in the next couple weeks to short during the next rally.

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This is not financial or investment advice. Please consult a professional advisor.

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