Wrong...

So the Fed cuts another half point - pretty unreal. Why the market doesn't take this as "holy crap! things are really bad!" is beyond me...

Wall Street extends gains on Fed rate cut
Wednesday January 30, 2:37 pm ET
NEW YORK (Reuters) - Stocks extended gains on Wednesday, sending indexes up more than 1 percent, after the Federal Reserve slashed interest rates by a half-percentage point, boosting hopes that the economy would avert a recession.
The Dow Jones industrial average (DJI:^DJI - News) was up 56.58 points, or 0.45 percent, at 12,536.88. The Standard & Poor's 500 Index (^SPX - News) was up 7.97 points, or 0.59 percent, at 1,370.27. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was up 11.28 points, or 0.48 percent, at 2,369.34.

I think that if the chips were on the table Citibank, Countrywide, maybe UBS, and others would probably be out of business. A real global financial disaster. So instead the Fed is going to keep spreading the cheap money around, keep propping these entities up, and hope that the country comes through it. Free markets - my ass.

Early morning/overnight news

Good morning. Since we are posting from Europe we can give you a round up of things from late yesterday and early this morning:

UBS: $14 Billion in Mortgage Write Downs That is a lot of money - and not the first write downs for UBS.

Bond Insurers Face Downgrade Despite Call for Delay This is not a good story. It probably has to happen - the house of cards must fall - but this will be a disaster.

F.B.I. Opens Subprime Inquiry Was there actual criminal activity in the whole subprime mess? Probably, but I think it will be a tough case for the FBI to prove.

The dollar was down a tenth of a penny in early morning trading.

A round up of business and finance headlines from the NY Times.

Fed cut

Well like I said on our first post - I am an amateur in economics. I have no formal training in the field, and just about everything I know I have learned from reading over the past ten or twelve years. What I am getting to is that there was no Fed action yesterday as I said there would be - it was just day one of the planned two day meeting. So today (Wed.) will be the announcement on interest rates. I am sticking with my call of a small cut - probably only a quarter point - which the market won't like.

Fed meeting today

Predictions are for fools - here's mine on today's interest rate decision from the Fed: they cut only a quarter point and the market sells off hard.

Anyway - the Fed is not supposed to be in the game of "saving" the market - whatever that means. Many people think that the recent inter-meeting three quarter cut was a mistake anyway, driven by world wide collapsing stock markets - that now in hindsight may have been partly caused by the Société Générale scandal (see this).

My idea of only a quarter point cut is not as solid as it was over the weekend- the terrible housing news from yesterday actually gave the stock market fuel (economy really bad, must cut rates more = (somehow!) good news for stocks). Of course it is only the traders that are going to profit from this - if we are in a recession, corporate earnings are going to continue to suffer and so will stock prices. Those who can move big or small piles around quickly (traders, both of the institutional and day variety) are probably the only ones that are going to profit from today's decision. An economy this weak (real or perceived) is not going to spring to life because cheaper money is floating around.