I’m very pleased with today Fed rate decision. Essentially it proves the theory that all previous rate decisions this year were made strictly based on credit conditions, where the best market-driven proxy is Libor.

But first please read this article:

Not only have risky investments been deliberately supported by government policy, but less risky paths have been infected by overspill from the risk-taking activities; worse yet, my very own government is treating me as a sucker. I mean openly, which is kind of new.

The increasing role of federal intervention in stimulating certain segments of the economy and bailing out risk-takers has made it increasingly clear that the choice to be a conservative investor was not only foolish, but is being deliberately singled out for punishment by our own government. The flogging of the prudent investor has moved from sublime to ridiculous, as government officials blatantly enter a mode of panicked bailout of preferred gamblers and spreading misinformation about the situation.

Very nice. And it’s totally clear that the last few days the market was betting on just that, that Bernanke is here to bail-out risk-takers. After all, all previous cuts were right in time to crush bears.

But apparently Bernanke has no intention to bail-out those who made a last week run in homebuilding and mortgage stocks. He is watching Libor and credit spreads, the timing of his previous actions to crush bears was purely coincident.

What Libor was doing last week? Slightly deteriorating. So well, you got the slight rate cut, probably just enough to fix Libor. Stocks got crushed, because they made that run based on false assumptions.

Couple of flying pigs fell down from the sky…

Update: I think I’ve cursed the Feds. They got spooky and announced some kind of new credit facility to support moral hazard. Ok, let them do what they want but yesterday I thought they know what they are doing. Apparently not, when they have to revert yesterday action I just doubt that they have enough brain for the job. Give me one more reason and my confidence in Bernanke will go

Update 2: I’ve changed my opinion once more. It seems that the measure announced today was planned for a while and has nothing to do with a quick patch after market reaction yesterday. Essentially it replaces the old discount window with a stigma by another anonymous discount window without a stigma. The currency swap with other banks proves that the credit crunch problem is global (see this previous post – “chill is coming from London“)