How Now Brown Cow?

The Fed cuts its discount rate and the US Stocks Soars.

Over at FSO market wrap, Mr. Brian Pretti wrote the following:

• At the end of March of this year, I penned a discussion entitled, “It’s Delightful, It’s Delovely, It’s Deleverage!." If you don’t mind, just a quick snippet from the final paragraph of that piece to set the tone, if you will.
  
  “It's clear that market participants of today are wildly complacent about, or simply do not understand, the potential for risk in structured finance vehicles and the layering of levered investment, especially in the hedge community. The fact that a number of hedge funds were "surprised" to find they had sub prime exposure in their CDO investments simply tells us that even the masters of the universe do not have all of their hands around the question of investment risk. In straight up markets, there are few questions. But in the current environment, there will also be very few questions asked if meaningful downside is to unfold. Rather, those being hurt by leverage in what could become a punishing market environment will shoot first and save the questions for later. The double edge sword of leverage tends to evoke those types of responses. Little time for philosophical debate when one is losing money. Funny how that works.”
  
  So, about four and one half months after this was written, here we now stand today in full view of “the other side” of many a levered investment strategy...

Do give the rest or the article a read: Stress Management