Citi

Don’t Fight the Fed!

I know that we've mentioned this a time or three over the past decade, but one of the oldest clichés on Wall Street is "Don’t fight the Fed." The thinking is that if the FOMC is in the process of either deflating or reflating the economy, it is best to get out of their way because, in short, these guys control the money supply. This phrase may be appropriate again right now because after yesterday’s Fed meeting, it is clear that Mr. Bernanke & Co. are on the warpath and won’t rest until mortgage rates fall, lending picks up, and the economy improves.

The bears have argued that the downward spiral in the economy is unlikely to be halted any time soon because after the Fed cut rates to 0%, they ran out of ammunition. However, Mr. Ben Bernanke is proving that he may indeed be ...

Reassurance Received

It isn't often we can label an across the board decline of -1% in the stock market as a good thing, but after yesterday morning’s flirtation with disaster, that’s exactly what we’re going to call it. Stocks initially opened lower on the back of yet another disappointing report on the housing market and the usual chatter about bank nationalization. However, once Ben Bernanke started talking again, things turned around.

In his second day of Congressional testimony, the Fed Chairman first reiterated his view that the economy should recover in 2010 if things go according to plan. Then after that, he cemented the idea that nationalization of the banks was off the table with the statement that the government does not plan "anything like" nationalization, which would wipe out the shareholders. Bernanke went on to suggest that there may also be some benefit to reviving the uptick rule.

So ...