DON’T FIGHT THE FED

There is an old line on Wall Street: “Don’t fight the Fed.” Meaning that, if the Federal Reserve (or in this case the entire Federal Government) is determined to make something happen, you’d best not bet against it.

That seemed to be the case yesterday – gloriously – and it may mark the beginning of a virtuous cycle . . . tentative and halting at first, but then perhaps gaining momentum as people gain confidence the world will not end and that houses (and mortgage rates) this cheap are too good not to snap up, and the same with stocks.

Or not.

Lots of “old Wall Street lines” work wonderfully except when they don’t, and it’s the “or not” aspect of this that is likely to make the virtuous cycle tentative and halting at first, or possibly abort it altogether.

I don’t know.

But I do know it won’t go back to being “like it was.” If we are to succeed, it will be with some wrenching dislocations as we become a nation slightly less of shopkeepers and real estate agents – wonderful as shopkeepers and real estate agents are – and slightly more a nation of infrastructure strengtheners and medical records digitizers. A nation of somewhat smaller homes and cars and cheeseburgers – wonderful as big homes and cars and Big Macs are – and slightly more a nation that consumes less than it produces instead of more, saving, rather than borrowing, the difference.

I also know we have a tremendously talented leader, with an awful lot of talent right beneath him (and off to the side, over at the Fed), and quite a cadre of leaders in the G20, meeting in London April 2, who also have reason to try to get the world through this.

So there’s reason for hope, reason for caution, reason to throw your support behind the President (take the pledge!), and reason to stick to all the basics of living beneath your means, saving for the future, and diversifying that always make sense.

Note: For details on all the initiatives rolled out in the last few weeks – a truly impressive arsenal when you see them all on a single page – click here. Yesterday’s stands a good chance of applying the skills and competitive juices of the private market to valuing frozen assets and unfreezing the system. Yes, Wall Street stands to make a lot of money from taking these risks (or to lose it all, which is what sharpens their minds to the task); but so does the taxpayer, who will be investing alongside Wall Street.

FROM THE MIND OF MAN . . .

But only if you have two minutes you can truly afford to lose.

Tomorrow: From the Mind of Less

 

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