Update: Fed Cuts Rates to 3.5%

Well, apparently Ben Bernanke is an avid reader of this blog because he read my post last night calling for an emergency rate cut and promptly cut rates 75 bps before the open of the market this morning. The move was welcomed by the street and the market reacted positively, rebounding from a miserable open that saw the Nasdaq down almost 5%.

When I step back and look at all this fear about a recession I can't help but smile. Whether or not we really end up having two consecutive quarters of negative GDP growth doesn't really matter. The point is that we had excesses during the up-cycle and a healthy down-cycle to remove those excesses is necessary and useful. With the Fed Funds rates at 3.5% a fiscal stimulus package on the way and an ongoing "pricing in" of the impending recession, one could make a reasonable argument that the second half of 2008 might not be as bad as we had originally thought. The best news for the market this year would be signs that the housing market is stabilizing. If we don't get that we are still not bullish.

*For growth oriented investors there was a sale on Google shares at the open this morning. After trading above $700 three times in 2007 and briefly touching $747 a share Google hit a low today around $561. This is the first time we have seen Google dip below its 200 day exponential moving average in 10 months. For long term buyers of Google today was a great accumulation day. Again, we are not saying that Google's shares won't trade lower. We actually wouldn't be surprised to see them dip back into the $400's as advertising budgets are slashed, but the fundamentals of Google's story are still strong.