Rates Cut, So What!?

October 29th, 2008
1300 - 1700 hrs

In less than 75 minutes, the US Federal Reserve is likely to cut
rates by 50-75 basis points, perhaps more. Its not going to make a
difference. I'm just not trading these days because I find it almost
impossible to make money consistently....in fact, I've found new and
novel ways to lose money so I've once again moved back into cash
after getting slapped around.

- This upcoming Fed rate cut - its not going to make a difference
because we are hiding the truth and not forcing it out into the open
for everyone to see. What the United States is now doing is sort of
similar to what the Bank of Japan did in the 90s. The Nikkei was
40,000 in 1990 and hence has never been above 20,000 and is
currently around 10,000. Thank the Japanese government in hiding
excessive credit in Japan during the roaring 80s. The BOJ (Bank
of Japan) has never been able to create any meaningful inflationary
measures and are still stuck in a deflationary monetary environment.

- Credit excesses have not been wrung out of the system. All we've
done by the machinations of the TAF, PDCF, TSLF, CPFF, MMIFF,
ABCPMMMFLF....er, Yes, I mean the "TAF, PDCF, TSLF, CPFF,
MMIFF, ABCPMMMFLF" is to shift the problems onto the public
balance sheets by risking taxpayer money. These stunts will sooner or
later lead to a revolt in the fixed income markets and will likely lead
to a currency devaluation. We will be a banana republic.

- If you listen to the talking heads on CNBC that call bottoms and
such realize that there is a linkage between the stock market and
the real economy and we are just beginning to see the deterioration
in the real economy. If you think we have already hit bottom (whatever
people mean by that) then you have to believe that this economy will
rebound by great leaps and bounds by June-August of next year.
Think about that happening.

- In 2000-2003, the US equity markets was accompanied only by a
recession on the corporate side. At no time was there a decline in
consumer spending. This time IT IS different and ALL consumer led
recessions had been protracted ones.

- Today and Yesterday saw some absolutely ridiculous moves in the
Foreign Exchange markets. The Yen has never had such a big move
since 1985. Perhaps, there was massive intervention? Yesterday also
saw a huge rise in the US equity markets. Perhaps, trying to mark up
books into the end of the quarter or a big common rebalance of
portfolios?

- As expected, banks have taken in money and are not lending. You
and I will pay for all this. Dearly. Welcome to the S**T SHOW!

- aLV