Fed Cuts Again:
Here's What's Really Going On

The Federal Reserve cut interest rates by a half-percent last week. This came on the heels of an emergency three-quarter-point cut the week before. That's a whopping 1.25% in one week!

Gold immediately gained on the news, which is NOT a good sign at all. (See Why We're Not Celebrating Gold's Record High.)

If you're confused about all of this, we don't blame you! After all, if the economy is still okay, as Washington and Wall Street keep telling us, why then did the Fed cut interest rates again?

Time for a little Dolan straight talk on what the heck is really going on here.

While we weren't at all surprised by the second rate cut, there are only two reasons that we can find for this latest move:

1. Washington and Wall Street are lying about the economy, and
2. The Fed is trying to boost stock prices to stem the growing chorus of voices saying we're heading for big trouble. By lowering interest rates, bonds become less desirable and stocks usually become more so. The Fed discovered that lower interest rates didn't help the popped housing bubble, so it's hoping lower interest rates will be able to re-inflate stock prices.

If you're a Dolans.com member, you know that we don't expect things to turn around right away. We laid it all out in Our Roadmap for a Profitable 2008. In fact, we believe the recession is already here and that the Fed's recent moves will only make it deeper and longer; inflation will price more staples beyond some families' budgets and the U.S. dollar will be worth less than ever before. (Read our 4 Ways to Profit from a Weak Dollar.)

Here's the good news: As a member, you also know what you should be doing right now to both survive and prosper in these uncertain times. The 3-Step Action Plan we laid out for you in our last alert still contains the smartest moves you can make with your money now. (If you haven't read it or need a refresher, click here to read it now.)

The market's initial reaction to this latest cut may have been favorable, but you can be sure that the volatility will continue. And remember, we'll be here to help you through the coming weeks and months. In fact, we are currently working on a series of articles to get you on a safe and prosperous path in spite of these bone-headed moves.

Hang in there! And don't forget to visit us regularly at Dolans.com for our very latest advice.