Dan Weiss

Last Week Was Dow's Worst Ever

The dow actually had a larger weekly drop in 1913 so its actually #2 but painful nonetheless.

What about the Pocket Recessions?

Ponchovilla,

Despite what I have said about it being an environment of pocket recession there is no doubt in my mind that people are feeling pain across the board (it just doesnt quite reach at this point the likely definition of a recession as explained by the NBER). Now, we could all argue with the NBER on exactly what a recession is but at this time I consider the environment to be very slow growth with serious but pocket recessions

“A Whiff of Panic...”

Overall, you have made an interesting analysis. However, what the Fed is giving consumers is a sense that they will do what is needed to improve confidence. The subprime and CDO issues are serious issues but the reasons that consumers have cut back significantly in recent weeks is primarily due to a lack of confidence in future economic activity along with growing concerns about job safety. The Fed cut will likely act to improve overall confidence that the Federal Reserve will do what is needed to lower the odds of a long recession and will lower the cost of borrowing not only for consumers (I looked today and a 30 year mortgage can be had for 5 3/8% with no points for credit-worthy borrowers) but for businesses as well. The danger of the Fed is very active is that the Fed cuts too much and we either have inflationary pressures or we have a repeat of 03-06 and have a bunch of liquidity floating around and we once again have inflated asset prices in certain parts of the market (i.e. housing, emerging markets, commodities). To me I think the Fed made the correct move at this point of the cycle I would rather risk a small amount of inflation for an increased likelihood of having a much milder slowdown.