Whenever there was a problem in the good old days the Fed was able to do one thing. Lower interest rates. Greenspan was a hero when he did it after the markets nose dived 22% in one October afternoon in 1987. As a matter of fact, the simple strategy worked so well it was used over and over for some 20 years. Unfortunately,  today it isn't that easy. Dropping rates can mean more downward pressure on a declining dollar and this is not a good for oil prices, imports of any kind, and it has inflationary implications. 

This appears to be the worst market I have seen since the calamity of the late 80's and in many respects it seems a lot worse. We simply have too many things stacking up against the economy and the markets and are not at all close to forecasting a solution. This includes the declining dollar, high oil prices, the sub prime mess, a declining real estate market and a cash strapped consumer...and they are all feeding on each other.

Some feel that this is a buying opportunity because we will eventually get out of this situation and move on. They are right. We will eventually get out. But at the moment  I feel the most important thing to do is to preserve as much principal as possible because we will experience a lot more pain before the markets bottom. I think the investors have been a bit complacent and there is a high probability that their complacency will turn to panic as they start to recognize that this isn't going to end quickly. I will say the Feds (Bernanke's) timing has been excellent this year in adverting a crisis.  But it seems like his options are thin. So we wait for a little breeze and the next rally.