The Feds movement over the last 110 days…
Wow, did anyone notice that “streak of light” strike force the other night. Two weeks ago, the world’s economic “picture” was shrouded in black. Economic Armageddon was within view and then BAM! 
In In completely unexpected moves the FED, backed by allies in the Treasury Department, the bank regulator brazenly tossed aside decades of precedent and law and proceeded to wrest control of the brokerage industry from its usual overseers at the Securities and Exchange Commission and forced the reckless directors of Bear Stearns into a shotgun marriage with JPMorgan Chase that appears to have prevented disaster. Fed Chief Ben Bernanke and the head of the New York Federal Reserve Bank, Tim Geithner, displayed “economic” cunning, combined with precise and direct action, and the world’s equity and debt markets were “knock on their strategic laden heels.” Are we out of danger, no, but have we emerged into a different “era:” yes. Large mortgage write-offs and a slight slowing of the economy during the 1st and 2nd quarters of 2008 still loom in front of us. Nevertheless, the Federal Reserve's outside-the-box decision should be applauded and given time to take affect. Dropping the Federal Funding Rate 2.25% in 110 days and in fluxing $200,000,000 of cash into the “market and the economy” have shown the world that the US will not sit still and slowly go into a prolonged recession. So what are the prospects now? The floods in the mid-west will subside as will this economic “deluge.” Rain on our parade will occur, at times, but the time of torrential downpours has passed. Indeed, we could be coming into one of the most ideal periods for long-term investors, for all investments always start to levitate off lows when a recession is halfway complete. We can see past the 2nd quarter of 2008, and the light at the end of the tunnel does not appear to be a train. Though difficult, shares of transportation and retail companies, known as "early cyclicals" in the market; those whose fundamentals look abysmal today and are expected to be lousy for at least the next three to six months, have begun to rebound. Home investor’s have been bottom fishing for 60 days, and now even they have begun to understand that the buy and flip mechanisms of the past have evolved into a buy now and sell in 2-3 years mentality. The funny thing is that taking advantage of today’s pricing in real estate offers a much greater potential for “profit” than has existed since 2000. Home pricing will appreciate, just not at the “angle of increase” of 2004-2005. It will take time to absorb the overabundance of available homes, but prices will increase modestly, slowly. Remember, pigs get fed, hogs get slaughtered.
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