Is the Fed a Paper Tiger?

Yesterday, we listed 7 concerns with the Fed’s confusing emergency 75 bp rate cut. We said we detected a “A Whiff of Panic . . .”

Amongst the other issues, our biggest concerns were twofold: That the Feds’ independence will now be questioned, as they appeared to be responding to markets and not economic fundamentals. It is not now, nor has has it ever been, the Fed’s responsibility to prop up market prices. Yes, insue the markets were functioning properly — but not provide a put. That nonsense was supposed to have left with Easy Al. Unfortunately, Bernanke not only inherited Greenspan’s mess, he inherited his Put also.   

Even more concerning is the possibility that the Fed is "Pushing on a String." That may be starting to come true. As I type this at 6:54am, the Dow Futures are off nearly 200 points.

Does this mean we will get another 25bps cut? How about Thursday? Or is backstopping the markets a one shot deal? Thank goodness I have a lot of math, cause thru the clever use of differential equations, I can calculate that the Fed has only four more Shock and Awe 75 bps cuts, plus a Shock (but no Awe) 50 bp left.

The Fed wasted alot of ammo yesterday — and what looks like for naught… 

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