Credit vs Credibility

Lots of people are wondering if Monday was the low point for the markets, especially after witnessing yesterdays Fed Liquidity-injection induced, 400-point rally on the Dow.
Plenty of folks are hoping that's so.
Not so fast.

Don’t forget the essential principals of what I call Newtonian Economics: That which goes up will come down, and generally at an equal velocity.
It would be great to see the markets hang on at this altitude, but I don’t see it.
Frankly, no one knows for sure.

But there are some fundamental forces yet to be reckoned with before Wall Street feels really secure at a elevated levels: There are another 18-months of ARM inventory to slog through; the price of energy is going to be a bigger and bigger factor going forward.

You like $3.50/gal gasonline?
You’re going to love $4/gas, and perhaps $5/gasoline.

Finally, there is nothing the Fed can really do to manage us out of this recession. The economy must correct itself out of inflated home prices in deflated housing markets. Treasury Secretary Henry Paulson will give a speech on financial markets in Washington tomorrow at the National Press Club …can't wait to hear the spin.

You cannot tweak interest rates enough--not that there's much more room to go…you cannot flood the economy with enough dollars. The fundamental issue is trust and credibility, not credit and liquidity.

I don’t care how cheap you make money, or how low you lower rates: If no one’s buying and no one’s selling, the machine grinds to a halt.

By the way, what do you think is going to happen to the value of the dollar with an extra $200-billion floating around the economy?