Where is the Fed?

Let's look at reality:

• US Housing is in a deep recession.
• Commercial real estate is heading into a recession.
• If we marked to market the assets that banks have on and off their balance sheets to the prices that the market is currently quoting them, then by that definition, much of the banking system would be technically insolvent.
• HSBC put $45 billion of SIV assets on their balance sheet, and the two bank sponsored SIV are where Fidelity has invested a billion of customer's money market funds.
• CFC has used the FHLB of Atlanta for $51 billion of funding, and now BofA's $2 billion preferred investment at $18, is worth a billion less if converted into stock, and that Treasury was instrumental in originally putting this deal together.
• The Fed is tweaking percentages and adjusting size and terms for money market operations.
• Fannie and Freddie have fallen off a cliff.
• The LIBOR rate won't stay down.
• No-one wants to price anything asset backed.
• No-one even wants to look at the derivatives market!
• Citigroup is trading as though their CDO's are as transparent as their dealing of structured products was to Japan's wealthy!

And Bernanke is tweaking?

Well, let him tweak some more. The collateral damage of his tweaking is wrecking havoc on the markets. The bonds are already telling us we need a Fed funds rate 200 basis points lower than it is now, and Bernanke's "rough patch" is decidedly different than Greenspan's "soft patch."

At least his tweaking is getting us where we need to go, and in a hurry!

So why be bullish?

Because eventually, Bernanke and his minions will get it.