Wednesday Outlook: Rumors A-Plenty

The Fed did nothing on interest rates yesterday and their statement was unrevealing and perhaps was meant to demonstrate that they’re cool.

However, they caught bears flat-footed with a subsequent report/rumor of an AIG (AIG) bridge loan [see late-breaking news below].

The Fed has also injected $140 billion in the past 24 hours. I don’t know if that includes $87 billion to JPMorgan (JPM) who are being reimbursed for an advance to Lehman (LEH) to settle trades. A lot of this money goes to trading desks and you can connect the dots.

Some say the Fed itself is the source of rumors and that’s part of their micromanaging strategy. But this line from Cool Hand Luke comes to mind: “Yeah, well, sometimes nothin’ can be a real cool hand.”

Some say the Fed must save AIG since its collapse may take the entire financial system down. You must wonder why the government chooses to help one company and not another. With AIG, the “too big to fail” mantra must be so.

What’s left in the Fed’s wallet? Are they broke yet?

All that said, stocks rallied since trading desks were loaded with all that Fed money to play with and with AIG hopes buoying bulls. It’s reported that 58% of volume on the NYSE was AIG. Nevertheless, volume was very heavy but breadth was unimpressive, negative for the most part, despite the “feel good” headline rally.






























































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