The bear market rally continued today, this time thanks to never before seen moves by the US Federal Reserve. They not only dropped the Fed Funds rate by .50%, but also made it very clear in their forward looking comments that they would provide record amounts of liquidity to the markets going forward and that they would purchase "large quantities of agency debt and mortgage-backed securities," adding that "it stands ready to expand its purchases."

This is Fed speak for “get ready folks…you think we’ve thrown a lot of money at the problem so far? You ain’t seen nothing yet!”

The dollar sold off hard on the news and prompted another $20 move higher in gold and a similar move in silver. The message from the government is clear; they will do whatever we need to do to stop the economy from deflating, damn the long term consequences. This is especially true when it comes to interest rates on mortgages, and with this move today they are targeting an interest rate move to below 4%...