The Kirk Report

Thoughts On The Fed

Whew! After dodging the Fed bullet (and being grateful as a result), it is fun to read the reactions of some following today's disappointment. Here are 10:

"Thinking as a trader, the most counter-intuitive outcome here would be a resumption of the Santa rally and run into year end. It's just become my favored scenario, because it seems so outlandish after the Fed news." - Alan Farley

"The assumption this afternoon is surely going to be that if the market falls so much on a day the Fed cut rates, then that has to be a bad sign going forward. I see the logic there, but logic usually doesn't have much place in the stock market. Going back to 1971, I checked for any time that the S&P dropped 1% or more on a day the Fed cut. There were only five instances that popped up, and the S&P formed at least a short-term low within two days four of those times. The best bet was had by waiting for an additional 1% - 2% of downside, then buying and holding for a few days or 2% - 5% upside." - Jason Goepfert

"Aside from the declines seen on the FOMC day on the first trading day following 9/11, this is the worst decline on a Fed day since 1990. We went back and found all FOMC days in which the S&P 500 fell by more than 1% to see how the market has performed going forward. The results are positive for tomorrow and the next week, but negative from now to the next Fed meeting on January 30th." - Bespoke

"I'll leave the berating of the Fed to others and will spend my energy trying to deal with this market. Things look very poor going forward. The technical conditions support further downside, and the Fed was really the only good positive catalyst we had going for us. Without that, we have some end-of-the-year seasonality that may help, but that is not a sure thing by any means." - Rev Shark

"Fed members are probably amazed at the market reaction, believing that they not only did what seemed right on a policy basis but something close to market expectations. Wordsmiths need to come up with synonymous phrases for "behind the curve." I am sick of it already!" - Jeff Miller

"With only a quarter-point cut, we will no longer be able to forestall the bankruptcies. Banks are holding on for dear life, homebuilders the same. But their lifeline just got choked and far fewer will live because of this. Lots of times people talk about stock traders being complacent. Lots of times you hear about bullish money managers that are way too excited about stocks. But I have never heard a statement from a more bullish group of people in my life. They genuinely think that inflation remains a big problem. I am aghast." - Jim Cramer

"The Fed blew it once again. They are still behind the curve. Expect the bears to enjoy the fruits of the Fed's whiff as the A.I.R. pauses. They should just let me make monetary policy. Like 2000, 2004, and 2006 when I had major disagreements with their policy, I expect they will come around too little too late." - Robert Marcin

"What is just breathtaking to me is that the Fed sees balanced risks between inflation and growth. I understand that the Fed is destined to be behind the curve (because it relies on past data to dictate policy that takes time to flow through the economy), but these guys are so behind the curve that they are getting lapped." - Dan Fitzpatrick

"Dollars to donuts, perhaps literally, the FOMC couldn't cut fitty without invoking the wrath of foreign holders of dollar denominated assets. As it is, we're in a pretty pinch." - Todd Harrison

"Boom Boom almost did the right thing. Had it spared us the pandering 1/4 point begged for by financial speculators, he would have finally shown the kind of stones that will be needed to guide us out of the current mess. Equities do not like it one bit, as well they shouldn't; the wimpy move is likely to worsen the credit environment and the financial markets as a whole could be in for a year-end pasting. So why do I suggest the Fed did the almost right thing? Because one cannot devalue its way out of a gigantic pile of debt. Companies, many companies, need to fail, go away forever, and allow those who have a business existing to once again prosper not on the back of borrowed money, but on the strength of real demand, rather than demand generated by a need to circulate make belief money. Had the Fed figured this out in 2001, by 2003 we would likely have forgotten the then recession. Instead it decided to try to fool everyone into believing that we could borrow our way into a permanent plateau of prosperity." - Fil Zucchi

Fed Cut: Only A Quarter!

Oh, boy. The Federal Open Market Committee decided today to lower its target for the federal funds rate only by 25 basis points to 4-1/4 percent. Here's the press release.

This is going to be interesting! Watch for some support to come in at S&P 1490.

Trade Like A Bookie

• Banking on the Fed

• Bernanke is under pressure to open up the monetary spigots

• Federal Reserve System 101

• The desire for government intervention to fix problems that grown adults have created for themselves is dangerous

• Falling into the liquidity trap

• There is still an abundance of modern-day economists who insist that a flawless financial model is still within their reach

• How misfiring quant funds are distorting the markets

• The Roller Coaster Stock Market of 2007

• The market is climbing the wall of ignorance

• Up the wall of worry

• "It's often said the market is a forward-looking mechanism. Perhaps - especially if "forward" means five minutes from now, or may be next week. People sell like they did in early August because they don't like the ways things look right now and they're not sure what's going to happen tomorrow. And they buy like the did in the aftermath because they think they're going to make money right now, credit crunch or no crunch." - Mark Etzkorn

• SIMFA predicts slow economic growth

• A boob job indicator?

• The Christmas Price Index hits a new 23rd year high

• January effect is alive and well

• Earnings Trends by Dirk Van Dijk

• We're facing a tsunami of earnings downgrades next year?

• The profit miracle is over

• Experts are wrong on economy. So go wild!

• Time for the year-end shuffle

• "We remain bullish into year-end, thinking the equity markets will work their way irregularly higher." - Jeffrey Saut

• No sign of sell on Wall Street as analysts say buy & hold

• 2008 forecasts all expect gains for the S&P 500 next year (around +5%)

• Major trends just keep going and going

• The top 10 worst business deals of 2007

• The current mortgage crisis rivals S&L meltdown

• Twisted ARMs & figures that lie

• 13 reasons Bush's bailout won't stop a recession

• Get used to it, America, it's a boomers' world after all

• The other market crisis - America has become less competitive

• But, foreign funds may invest in much more in U.S. firms

• Paying taxes 2008: the global picture

• India has one of the best potential for emerging growth over the next few decades

• Islamic finance spurs new risk management methodologies

• The Warren Buffet of Asia makes a prediction

• Waterworld!

• You'd think that Garmin's stock would be doing better amid all of the positive buzz

• Slot machines are set to get a makeover (and generate profits for IGT & BYI)

• Breakout for Intuitive Surgical

• Goldman Sachs enjoys bonus bonanza

• Cabot is a recent buy by Steven Cohen

• Massive insider buys boost McMoRan

• Toll Brothers scorched in Arizona

• The economy according to Overstock's CEO

• As Mac sales rise, so does Apple's risk

• Best Buy founder sells stock

• "There once was a company called Potash. Which made its investors lots o' cash. The stock was a riser. 'Cause all that fertilizer. Had margins that were totally kick-ash." - John Heinzl

• Sectors & their 50 Day MA

• The best & worst performers since the last rate cut

• Top Blackstone stocks

• Morningstar's all-star fund managers' picks

• John DeGulis finds relative bargains in tech, health care and media

• A few recommendations from a cheap investor

• Nice find: SuperInvestor insight

• Microcap insider buying

• Zack's recovery plays

• Nasdaq short-squeezers

• 11 stocks that pass Buffett's value criteria

• How to catch falling knifes: top tips for counter trend trading

• "There is nothing better as a trader than to see what you think is going to happen actually happen. The market is humbling, though. The worst results follow periods when I decide I'm really good at this and have figured out the markets." - Dan Allen

• One of the greatest problems for traders is that life situations contaminate trading decisions

• Time to turn off CNBC & ignore my link posts? According to a new study, individual investors can significantly reduce the volume of investment information sources in their investment decision-making process

• Information overload and the need for filters

• Never, ever, trade what you cannot afford to lose. Please learn from this example

• I wholeheartedly subscribe to the bucket strategy

• Is buying a stock on a split announcement a sound strategy?

• When does momentum investing work best?

• Confused by business/accounting/trading jargon? Give the BusinessDictionary a try

• Breaking down the income statement

• How to trade the Dow

• Backtesting is far from a perfect science

• Ben Stein shares some lessons learned

• Over $100 billion has flowed into ETFs this year

• Some interesting trends in personal finance

• Face-off: Mutual Funds vs ETFs

• Time to buy a COW?

• Does Vanguard have a hedge fund in the works?

• Individual-bond model portfolios seen as filling a niche

• Making the case for cheap closed-end funds

• The downside of fundamental indexing

• Develop a strategy for dividend-paying stocks

• Monthly dividends

• Beware of the Wal-Mart Supplier ETF

• The homebuilders ETF is tempting?

• 5 benefits of trusts

• These stories are far too common - one couples' descent into health-care hell

• An Excel workbook to help you create a budget

• Chuck Jaffe's annual lump of coal awards

• Thanks Harry for including The Kirk Report on your list of important new investing resources!

• A handy list of investing/personal finance podcasts

• IB's international trading calendar

• Need to make some fancy charts? Google can help

• 10 gifts that sort-of saves money

• Forbes' holiday gift list for the rich

• Tis the season for charitable donations. Here are some timely tips

• Giving to a favorite charity can be a wise tax move if you follow the rules

• Do you need hassled?

• Turkey gone wild!

• Please hold the ice!

• 7 ways to get what you want in 2008

• "Don't worry about being right. Just focus on making money and deal with being wrong. The purpose of trading is not being right; the purpose is to make money. Don't get hug up on your current positions." - Dan Allen

Fed Day

Good morning. Premarket futures are in positive territory as investors await the next interest rate cut at 2:15PM by the Federal Reserve. For the most part, the newswires are fairly quiet this morning with a smattering of corporate news and economist chatter.

Premarket gainers: GNSS, FCEL, TRID, CTIC, PRGO, AVNR, NUVO, MOGN, SMSI, PCTI, GTS, NFI, GY, SAI, TXN, GME, WCG, TELOZ, CELG, HOKU, SDTH, CPSL, TBSI, DSX, BX, MLNM, SOLF, BRCM, ETFC, and CSUN.

Premarket losers: WM, MEDX, NCS, HRB, JCDA, PANC, PLL, WM, ACGY, CRDC, QGEN, and SBUX.

Along with the Fed, we have a report on wholesale inventories at 10:AM and some weekly retail sales reports to look through. Fed days are notoriously difficult to trade and I don't plan to. Have a great Tuesday!