Tuesday, March 11, 2008
Over at the WSJ MarketBeat blog, David Gaffen wonders what it would be like if this were all just a game and if the Fed's latest "Hallelujah Rally" will be just one more in a long string of moves that gets "steamrolled" by the markets.
If the major video game makers had gotten around to putting together some kind of game called “Economy,” where the player acts as the Federal Reserve, the gameplayer’s efforts to add liquidity during crises would probably include a chorus of “Hallelujah” and computer-generated dancing in the streets.Extrapolating from the pattern above, where the frequency continues to increase, look for twice-daily Fed moves starting sometime next month.
This euphoria would ultimately dissipate in the wake of dragons eating the townspeople or something.
But the market has seen this movie before, and so far, it hasn’t done the trick. Will this work? “If you define the problem as a purely irrational move in the credit markets, then you might think this is a panacea,” note analysts at Bianco Research.
However, they say, if housing prices — the underlying factor in this mess — continue to fall, this move may be yet another one that is steamrolled by the markets.
The first four moves were as such: