We think that they will cut by 50 basis points.  The federal reserve is supposed to be basing their decisions on sound economic modeling.  If the model of the economy required a 75 basis point cut at an emergency meeting, then a further easing of 50 basis points is consistent.  Of course, 25 basis points could justify a swing to a policy of being finished with cuts.  The stock markets will also start to look for the federal reserve to mark a resounding:  "WE ARE DONE" so there is not continued second guessing of the federal reserve, and a continued nervous market.

In other news, Home prices have declined 11 straight months through November, 2007, -8.4% according to the S&P/Shiller Index.  The most interesting thing is that supply is continuing to increase with demand decreasing.  This is a formula for further declines.  We think we have not found bottom yet in the housing market, and it will continue to fall this quarter, maybe next.

This is why we are treading so carefully with releasing new stock picks.  If things get worse in the housing market, which it could if lending availibility gets worse, then we are going to re-test the lows.  In fact, the housing market and credit worries do not have to get worse to test the lows, this may happen anyway.  Be prepared.  We are keeping our portfolio in 50%+ cash right now.