FOMC Policy Statement - Greek Says Buy Stocks!

(Stocks in this article: Nasdaq: FSLR, Nasdaq: JASO, NYSE: LDK, NYSE: STP, NYSE: TSL, Nasdaq: ESLR, NYSE: MER, NYSE: GS, NYSE: LEH, NYSE: BSC, NYSE: BCS, NYSE: JPM, NYSE: MS, NYSE: C, AMEX: XLF, Nasdaq: WOOF, Nasdaq: SEIC, NYSE: MON)

Go! Stop reading this article, and go and buy stocks. While the market may take a short while to digest the impact of Fed and federal government action, we view the recent moves as significant catalysts that will help ease the pain of recession in this very dynamic market. So, The Greek, often labeled a permabear because of past prescient calls on the short side, has turned bullish. What say ye now... Beware short investors, you could get gored. We say long-term investors can buy stocks now where value exists.

You're still here? You need more convincing eh? Read the FOMC Policy Statement below, and after that we have offered some specific advice. We're recommending you close your solar short play at this point and we have given the "all clear" to buy Goldman Sachs now (NYSE: GS).

FOMC Policy Statement

Release Date: January 30, 2008

For immediate release

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.

Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred no change in the target for the federal funds rate at this meeting.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 3-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, Kansas City, and San Francisco.

The Greek's Take

So, according to Wall Street Greek's earlier article, the Fed has officially proven itself Wall Street's tool. Well, thank God for that, but I think I would rather have a chicken with a head in control over there in Washington. Considering the group didn't cut 125 BPS last week with a statement saying no more for now, it seems today's GDP number got their panties all bunched up. I mean, it's either that or this is a weak group of spineless jellyfish...

But, let's focus on what this means for us rather than why (Bush and the Dems in Congress had a gun to his head) Ben did this. And, we'll pretend not to notice that William Poole's name was not on the statement at all. I expect him to write a book sometime soon, and that should be real interesting reading. In the future, when we forecast Fed action, rather than going by silly things like official Fed statements and other logical factors, we'll just go by market expectations, since the Fed seems to do this also.

What's this mean for you....
Well, first off, reverse the curse. Remember that great recommendation we made on January 9th (actually in mid-December but the market was so drunk over solar plays, we could not even sell the article to any financial publisher). We said you should consider shorting solar stocks, and we're now recommending the closing of that trade. These stocks are reporting results and some of them actually make money and could do well and take away that paper gain we have. Secondly, the Fed and government have taken aggressive action to preserve the economy. So, oil prices gain a little support from this. Since we are sure alternative energy shares are positively correlated to the movement of oil prices, and to an exaggerated extent, especially the expensive themes like solar, their stocks now gain some support. Make no mistake, the economy and the damaged outlook for oil, along with the huge paper profits that were tied into these shares (and the turn of the tax year) is why solar sold off. We are proud that we were one of few to recognize this.

Also, I can now give the "all clear" buy call on Goldman Sachs (NYSE: GS). Remember, previously, in my article "Potter is Buying Investment Banks," I said I like them all now, but am weary about Goldman due to its outlier status and profits that might be taken in early '08 as a result. The Greek said this while Goldman was king of the Street, and full of admirers. GS has since given back those profits while most of the rest of the group has moved higher. In other words, they've followed The Greek's charted course. To the skeptics: You know, we Greeks invented navigation and are pretty damned good sailors. Also, Christopher Columbus spent his teens living in my island ancestors' home town, just a short walk from my home...

We've already cleared Citigroup (NYSE: C) for purchase post the dividend cut etc. (see the article). The rest were recommended in the article on January 10th, and we still like them up to the targets we outlined previously.

We told you yesterday this speed bump looks easily surmountable. It's time to roll and buy stocks, and buy heavy! Look to those pillars of strength to regain that strength now. I'm talking about Monsanto (NYSE: MON) and my old small cap favorites VCA Antech (Nasdaq: WOOF) and SEI Investments (Nasdaq: SEIC) (this one reports earnings Thursday, so maybe not for the faint of heart). I also like recent victims like Intel (Nasdaq: INTC), Apple (Nasdaq: AAPL) and even Yahoo! (Nasdaq: YHOO). In fact, YHOO is probably my favorite of this group. Generally, however, you want to stick with winners that still have positive news momentum, which were taken down recently by indiscriminate selling, and that would point away from the last three names I mentioned. Growth stocks should lead us up, especially when early signs of economic recovery show. But, many small cap value names have been beaten down into super value buy territory as well, and the bargain hunter in me can't ignore that, despite momentum.

Regarding sector weights:

We're going neutral energy from our underweight call to start the year, and we're turning overweight technology, but you might have to be a little patient early on. We're still overweight financials, and like the ETF (AMEX: XLF). Healthcare should give back some gains now and we are underweight that group, especially once Hillary or Obama wins the nomination and focus turns toward the general election. For this reason, we recommend a long-term underweight in the sector, and for capital flow reasons now, we look for the sector to move lower in the short term as well.

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