Helicopter Ben is flying

The past day and change has been incredible. Yesterday the global markets lost between 5% - 8%. The S&P 500 futures were down about 5% since the markets were closed for MLK day.

Today, the Fed FINALLY reacts: at 8:20 AM they announced an emergency rate cut of 75 bps. This is the first inter-meeting cut since Sept 17, 2001, and the first 75 bps cut since October 1984. We had a jerk reaction with a nice 40-point move on the S&P but a quick sell off. The attached chart indicates this.

So, what the heck is going on? As the Jayhawk's Nest has been saying, the Fed has been slow to react. They have been "behind the curve" so to speak. What's more shocking about the latest cut is that William Poole of St. Louis Fed voted against the Fed. That's right, Bill Poole voted against the cut! He needs to joint he ranks of Kaptur. I'm going to create a special club for these people called the "Block Head Club."

Anyway, this is not the end. The Fed is finally where it should have been 3 - 6 months ago. Now, that it has caught up with reality, i.e. Jan 22, 2008, we can focus on the meeting next week and beyond.

I maintain that the damage done over the past few weeks is so large that we still need another 75 bps in the next few weeks.

For now, Helicopter Ben is flying. I hope he doesn't crash. Would you ride with him?