We are witnessing events in the credit markets that haven’t happened since the Great Depression of 1929.  Credit market failures like this are 100-year events and have produced such severe pricing dislocations in the markets that the Federal Reserve has intervened in a major way.

 

In its entire history, the Federal Reserve has never failed to achieve its objectives.  Recent Federal Reserve actions (seven interest rate reductions, massive loan collateralization and liberalization of discount window borrowing as well as direct intervention to stabilize markets) have historical precedent.  Such actions, along with legislated Economic Stimulus Packages, have without exception lead to higher stock market prices.

 

The most severely depressed sectors will be the ones that bounce back the most.