While massive risk looms, the bulls have reasons to hope

Discussion in 'Trading' started by ASusilovic, May 14, 2008.

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    Tainted love

    Treasury Secretary HankPaulson and Federal Reserve Chief Ben Bernanke have a clear mandate. They're willing to mortgage our future with hopes that a legitimate economic recovery takes root. We've seen this movie before (on the back of the tech bubble) but memories are short given our immediate gratification societal mindset.

    They've got deep pockets. Interest rate cuts, Auction Facilities, discount windows, shifting collateral parameters, Working Groups on Financial Markets, interest on bank reserves, rebate checks, open-market operations and repurchase agreements are all at their disposal.

    And if those don't work, they seem intent on inventing intervention that does.

    We've written extensively about financial engineering and the inherent dangers thereof. The Federal Reserve balance sheet continues to drain as they attempt to fund the banking system. There are only so many bullets left in the gun and the last one will likely be pointed inward.

    Still, we must respect the claws of a cornered animal. We've passed the point of no return and the government will do everything within (and potentially beyond) its power to ensure the finance-based global balls remain in the air. You don't have to agree with it, you simply have to respect it.