Wall Street Greek: Today's Key Market News

Well, today seems like a good day to crash. Thanks for nothing Ben, please gather your things from your desk on your way out. The Fed's last minute action might save the day, or it may be too little too late. The time to act was on the FOMC meeting. We told you two days ago that Bernanke dropped the ball and we told you yesterday that global market correction was pending. This morning overseas boards are flooded with red. In Asia, the NIKKEI 225 dropped 2.4%, the Hang Seng slipped 2.9%, and even mainland China's CSI 300 fell 1.1%. South Korea's KOSPI tanked 4.2%, while India's BSE SENSEX 30 drifted 1.5%.

Things were no better in Europe this morning, where the DJ STOXX 50 is down 2.9%, the FTSE 100 is slipping 3.1% and the DAX is off 1.6%. Now listen carefully, things are going to get even worse. Yes, the Fed did the right thing this morning by buying $19 billion in subprime mortgage debt backed securities, but that is not going to help the people who are going to default on that debt. No, it only helps the banks and funds holding those mortgage backed investments. So, in the end, the Fed did come to the rescue of the rich hedge fund managers while leaving the mortgage holders out in the cold.

The reason things are going to get worse, after today's very possible market crash, is because of the weakened American consumer. The poor guy has been carrying too heavy a burden for too long. As if more expensive gasoline, bigger supermarket bills, adjusting higher mortgage payments and negative home equity weren't enough, now the poor guy has his credit cards calling him and raising his annual percentage rate on the slightest fault. Well, not all anyway. The smart creditors are helping borrowers through this period, because they recognize that receiving some money is better than a complete default.

Global correction is coming. We've been anticipating it here for a couple years now, even before we started writing. Our friends managing global funds know about are concerns. We've moved too much manufacturing to China, a country we do not get along with and one with whom we have fundamental values differences. This is a country we are going to end up in debates with over energy and food, and shots could be fired, and we've moved our manufacturing there? Country risk! I just wanted to remind you CFA folk out there of an old term that use to show up in textbooks. The key is this, when the American consumer stops spending, as confirmed again by yesterday's retail data, then layoffs are pending in retail and more poor folk are going to default on homes they should never have purchased. And spending will just get worse. That means global manufacturing economies like China will be impacted. Then, global stock markets, well inflated ones, will correct as well.

This Fed action and the willingness to act by foreign central banks shows the Fed will likely eventually go the next step in cutting rates, we hope. But when!?! In any event, Henry Paulson and Ben Bernanke have lost our confidence and should lose their jobs. We don't need cheerleaders and academics, we need honesty and action. Maybe now people will stop beating on the legendary record of Alan Greenspan and remember just how reliable he was, and how confident we were with him in charge.

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