Mike, I am of the "general" opinion that big ships do not turn on a dime. When they do, they can cause unexpected market dislocations. Initially, the Feds signaled that they will move gradually from a restrictive stance to an easing stance (which in view of the restrictive fiscal policy, is, IMHO, the correct stance), now they have suddenly signaled an "urgency" in the turn. That will cause many participants not ready to adjust that rapidly and thus, while the urgency might have been to alleviate some problems with over extended lenders (and thus reluctancy to further lend?), the sudden change will not allow for gradual change in positions (which can be absorbed by the markets) but sudden dumping of securities on the wrong side. That would be the "miscalculation", instead of stabilizing the markets, it might actually amplify the "misjudgments" of some of the lenders.
Zeev |
