I'm moving back into the world of the living. When I get sick like this, I'm grateful to living in the age of antibiotics. Otherwise, I'd surely be dead by now. My flu went into a secondary sinus infection. I've only been fever free for a day or so. After 9 days, it does wring one out!

A dear friend called me during the Fed announcement. I didn't realize the time when I picked up the phone, but given the import of the call, I'm glad I didn't realized the time, for I may have elected to not pick up.

One position I've been in and out of is FMD. I wanted to share an update of the chart.


I consider FMD a well run and profitable company. It happens to make it's living in the the market's equivalent of a brothel (loan securitizations). You'll recall that I wrote about it here.
I was worried about $29.50 being support. As you can see from the above, it was not. In the financial services area, this is not an unusual chart.

I liquidated that position. I later re-entered at $16.37--doing a little dumpster diving. It went up in advance of the Fed decision, as did many other financial stocks. It was pummeled, and it closed below that price yesterday. My thesis is that student loans are not going to go away. In fact, when the economy slows down, many folks re-enter higher education. I would expect that FMD would be an attractive target for someone looking to add student loan capababilities (front end, securitization and servicing). I realize that I'm swimming upstream. I never expected to see FMD at these levels. Accordingly, I'm glad that I did not ride it down the $15.

I'm still of the mind that the Fed discount rate will help banks shore up there income statements by reducing increasing their net interest metrics, but I do NOT believe that it will increase liquidity overall for reasons that I've stated here before. Again, these are not the musings of an expert, but an ordinary investor. Nevertheless, common sense is always an good antidote for excessive analysis and irrelevant facts.

I've seen a couple of things bandied about regarding "what else" the Fed can do. One was to reduce the reserve requirements for banks. That certainly would add liquidity. Another was to extend the time frame for the repo agreements, as per the August 17 release:

"The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained."

I do tire of the Fed bashing. I think that John Hussman did a very good job of noting their irrelevance in his weekly article here. As I write, the Fed has made a statement about new swaps to provide permanent liquidity. The market loved it, and futures are up almost 200 pts.

I hope you have a good day today.