While you were sleeping, the government saved your ass.

First off, I just saw that the chief meteorologist at Fox32 in Chicago is named Amy Freeze. C'mon, even I can't make this shit up.

The government, more accurately the Fed, stepped in early this morning and cut the Fed funds rate by 3/4% from 4.25% to 3.5%. In addition to being unexpected, it was a huge cut. It's the first time that I remember the Fed meeting outside of the normal quarterly meeting to cut rates.....and they did it over the phone.....on MLK Day!! Very unusual to say the least.

The market opened down something like 450 points, or about 4%, but recovered quickly (supposedly due to the rate cut previously mentioned) and ended up down "only" about 128 points or 1.1%. So did the Fed save you while you were sleeping? Well, it's tough to deny that the move did limit the damage today or at least enhanced the recovery after the initial sell off. That said, do we really want the government to be this reactionary? It seems to me that the last time they were reactionary, we lost 3,000 soldiers in Iraq. No, I'm more for measured, well thought out, decisive and timely action from my government. I know we can't get that all the time, but in the financial world, you'd think it would be achievable.

So while the Fed saved you (or at least your retirement funds), it's only a short term blip. The market could deteriorate further this week and it wouldn't be unexpected at all. Just remember the long term. In times like these, think to yourself "Will the market be at this point in 5 years?" "How about 10 years?" It's really not likely. So sleep well and try not to panic. Keep on your investing regime.

That was the end of my entry and then I read the following in Newsweek online. If you read it and think about what it's saying, it should make sense even to those non-financial types out there:
Still, Bernanke's gamble isn't guaranteed to succeed. Since World War II the Fed's greatest blunder was to unleash double-digit inflation. In 1960 consumer prices rose 1.4 percent; in 1979 the increase was 13.3 percent. With hindsight it's clear that Fed policies were too loose, creating too much money chasing too few goods. But that was not so apparent at the time, when the Fed responded to public pressure to minimize recessions and keep unemployment down. It loosened money and credit, and the effects on inflation showed up a couple of years later. There was a steady upward creep; that is the risk Bernanke is now running.

Similarly, we have too few goods in the form of scarce commodities. Corn is short. Oil and refined gas are not keeping up with demand. Copper has gone up 420% over the last three years. It's the same story for almost all building supplies and most commodities. India. China. The entire world is competing now for resources. It's part of the reason why the dollar is crap now. Hopefully Bernanke is not repeating the mistakes of the past.