The latest Fed rally today has legs! The Dow closed today higher by more than 400 points, and continues even higher in after-hours futures trading! This one may be just the ticket to put in a firm bottom on the stock market and provide the boost necessary to ensure that the United States economy is able to begin a well-anchored recovery. I am being told by some of my insider friends that by allowing investment bankers to borrow against some of their questionable derivatives and exchanging them for U.S. Treasuries at 28-day intervals, this latest Fed move may be able to provide liquidity to the financial markets without igniting more inflation. This action would provide short-term relief to Wall Street without huge new injections of additional money (emphasis on the word additional). If this move forestalls deeper Fed rate cuts next week, it might work. We shall see!I'm not that easily convinced. But the rally today in stocks suggests that the financial markets are seeing optimism and a possible end to the quagmire! The charts seem to reflect the stock market optimism today. The only thing that worries me is the possibility that while this action might not increase the money supply, much of that additional liquidity will end up in the commodities markets, kindling still higher prices in energy, metals, and agricultural products and igniting yet higher inflation. Fed Chairmen have admitted that while they can pour money into the markets in an attempt to grease the economic engine, they can't control where that money will go. Again, we shall see!
One thing is for sure:
This was an undeniable stock stampede today!
