NEWEST WALL STREET MOTTO: “HEADS I WIN, TAILS, I GET BAILED OUT.”

Allen Sloan, Senior Editor-At-Large of Fortune magazine penned an interesting article, “Investors to Fed: Thanks for nothing: The reckless are getting relief from Bernanke while the prudent are paying the price.”

The point of the piece is that while the ½ point cut in the Fed rate on September 18th did give the stock market a boast, and halted the slide of Countrywide Mortgage, most other financial participants got “Shemped”.

However, if you look at the financial markets' overall reaction to the Fed move - not at just the stock market's reaction - you realize that as a result of the cut, those of us who keep score in dollars and didn't need to be bailed out are less wealthy than we were in terms of anything other than our home currency.

Why? Because the rate cut contributed heavily to the dollar's recent sharp drop in the currency markets - parity with the Canadian dollar, for God's sake! - and to the price spike in hard assets like gold, silver, copper, and oil. So our wealth, relative to these other things, has diminished. (AUTHOR’S NOTE: He is long foreign markets and oil services, so he avoided much of the collateral damage.)\


And wait, there's more. Even though the Fed has cut short-term rates, long-term rates, which it doesn't control, have risen in reaction to the cut. So whatever economic benefits may flow from lower short term rates will be partly offset by the rise in long rates, which are at least as important to the economy as short rates.

Finally, consider this. Even though Bernanke's cut may mean that some junk mortgages will reset at lower rates, the cost of large, high-quality fixed-rate mortgages, which are tied to long rates, will be higher than they'd otherwise be. (Yeah, penalize the people who are prudent - way to go!)

THE AUTHOR HAS ALSO SHARED HIS SUSPICIONS WITH HIS READERS.

In his post of September 20th, “Dollar Faces Flight in Wake of Fed Rate Cut” , the Author warned of short rates shrinking, long rates rising, and a flight from the dollar.

The dollar is at a record low against the Euro, .7006. And the Canadian Dollar, sometimes called the “Loonie” because of the Loon that appears on the dollar coin, is now worth MORE than the US Dollar, standing at 1.0056.

So the next time a vending machine bounces that Canadian Quarter you put in it, smile and waive good bye.

WE WILL STILL TAKE SHEMP OVER CURLEY JOE AND JOE DeRITA IN THE DESERT OF THE REAL!