Yes- the Fed gave into the pressure from Wall Street and gave them the rate cut that they wanted. I was against the 50 point cut the last time and this time it still makes me shake my head (even though I knew they were going to do it.)

Outside of the financials getting greedy and now getting stuck with mortgages they can’t sell (and taking massive losses)- something of which is no small issue- the rest of the economy is doing pretty well for itself. Believe it or not- American business is still thriving.

It’s the business of house flipping that is now dead (imagine that?). I’ve said before- that house buying was the most unproductive use of America’s time I’ve ever seen. 20-somethings were obsessed with buying real estate- instead of obsessing about how to make the next iPhone. Our competitors overseas, especially in Asia, weren’t wasting their time on these kinds of unproductive things.

Thankfully, the housing bubble is now going away and hopefully our best and brightest MBA’ers won’t go to work for a real estate developer- but will work for cutting edge companies that are the future of the country. Notice that the Apprentice is pretty much dead in the water now? Gee- maybe it’s not so glamorous to be going to work for The Donald now? Especially after he just announced that he would not be building two condo/hotel highrises in South Florida- one in Palm Beach and another in Fort Lauderdale. From the St. Petersburg Times:

Earlier this month, Trump announced he’d suspended work on Trump Las Olas Beach Resort, a 12-story condo-hotel planned for the strand of Fort Lauderdale.
“At this moment, to build in this market would be foolish,” Trump told the Miami Herald this month.

Now comes word that Trump Tower Palm Beach could meet the same fate. In a story in the Palm Beach Post, the developer said the 23-story beach front tower looked less promising.

“We won’t go forward unless we see a robust market,” Trump said. “We’ll make a decision over the next month or so. We could delay it a little while. … I don’t like going against the market.”

Remember The Donald indicator? It was flashing red months ago (as in “warning- the housing market is going to bust.”) Remember- I’ve said that every city where The Donald was building one of his signature highrises, that city was going to bust. I’ll have to do a follow-up post to see where we stand so far- but Fort Lauderdale and Miami seem to be busting pretty bad. In Chicago, he’s only sold 75% of Trump Tower Chicago- even though it’s being built. Stay tuned.

Again- not that there is anything wrong with real estate. We all need it. But it’s not going to help us beat the Chinese or the Japanese in the global economy. The Donald is not going to lead us into the future of the global economy (sorry Donald.)

This gets us back to the rest of the economy. It’s actually moving along at a very nice clip- despite the housing downturn and crude at record levels. The Fed cut rates simply to try and save the financials from further ruin.

Again, rightly so. We can’t have the financial institutions collapsing. But inflation and the dollar will be sacrificed to save Merrill Lynch.

And this upsets me (in a fairness kind of way.) Who saved Worldcom from Bernie Ebbers? No one. But Worldcom wasn’t controlling the money. Merrill and the others do.

American businesses are doing well. We’re not seeing a recession- yet. Will we? I don’t know. The housing bust should be enough to throw us into one. But American businesses are nothing if not resilient.

Now that the Fed has cut, there is nothing to do but watch and wait.

I’m sure you’ve heard the news by now that the Federal Reserve cut the Fed Fund rate by 50 basis points. The stock markets all rallied on the news, including the homebuilders.

The Fed cut does nothing to help the housing market. It’s not going to allow people who took out 4% teaser loans two years ago to refinance back into a 4% loan. The crisis has to do with credit tightening, not the cost of the mortgages. Unless the banks suddenly decide that people earning $50,000 a year can once again buy a $450,000 house, the mortgage crisis is not going to go away.

But, I digress.

If you own stocks, which I’m hoping everyone reading this does, today was a great day for you. Nearly everything went up, up, up.

Enjoy it.

At the same time, crude was hitting record highs and gold was at 27 year highs. These are two ominous indicators but as an investor you can take advantage of them.

Buy energy.

Buy natural resources.

Both are soaring and companies in both areas will make gobs of money off of this inflationary environment.

To say I’m disappointed in the Fed is an understatement. But as investors we can still make money off their crazy decision. The global economy is still strong. Employment, unless it is housing related, is still very strong (shortages of nurses, accountants and others still plague the US). Buy companies that will benefit.