Going into Friday, I was feeling pretty happy we had raised cash positions for our clients. Over the past three weeks, many of our exchange traded fund (ETF) holdings hit their individual sell points by dropping 8% off their most recent highs or declined below their individual 200-day averages. Mutual fund guru, Dick Fabian, once told me, "The second greatest thrill in the world is to be out of the market and watch it go down." After Thursday’s market decline, I felt that way.
Then on Friday the Fed stepped in. After weeks of market volatility and after adding nearly $120 billion in liquidity into the banking system, it cut its discount rate to 5.75% from 6.25%.
I’m not sure if bailing out Wall Street now is the right idea. Allan Sloan at Forbes is strongly against it.
"Wall Street loves to talk about letting financial markets weed out the weak. But when the Street itself gets in trouble, it sticks out its little tin cup, asking for help. And gets it. The subprime-mortgage-market meltdown is a classic example of the way small fry get devoured, but the whales of Wall Street get rescued. Here’s the deal: People with crummy credit who took out mortgages are being allowed to fail in record numbers. The mortgage companies that made those loans are being allowed to fail."
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.