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Strategy Update

To Our Clients:

We hope you have just received our latest strategy piece, “Dodging Bullets”. As soon as that piece was in the mail, the New York Federal Reserve Board (Fed) announced that it would intervene in the beleaguered commercial paper market to lend money against collateral-backed obligations. This announcement came at 3:30 p.m. EST, and was the reason for the closing market strength on Friday.

What this latest move tells us is that the crisis is serious enough for the Fed to take another unprecedented step—this time in the commercial paper market. Additionally, the Fed is telling us that it will resort to any method in order to stop a financial market correction. Over the longer term, this action will likely promote even greater risk-taking in the financial markets because participants know they will be bailed out if things go wrong. Over the shorter term, however, the Fed has, in effect, put a floor under markets. We have therefore become a little more constructive in our near-term outlook.

We will continue to keep you informed of the rapidly changing fundamentals as they occur. One would expect increased volatility as this saga unfolds…

About the Author


Harlan J. Cadinha
Founder, Chairman and Chief Strategist
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