Look out Below!

With the DOW down below 10K, and just about everything I'm long on down double digits, I'm thinking maybe I'm not such a good value investor. Also, here's news from Bloomberg that doesn't give me a lot of confidence:

Implementing part of last week's emergency legislation to shore up the financial industry, the Fed said today it will begin paying interest on the cash reserves banks hold at the central bank. The step should give Fed officials greater power to inject cash into banks without interfering with their benchmark interest rate, which stands at 2 percent.

This is very bad news. Banks will hoard cash at the Fed, rather than lending it out to companies or consumers or each other. I believe that the Fed knows this. Then why would they do it anyway? Because they must think that the banks are so undercapitalized that this is the only way to recapitalize them. But it won't work. Collateral values are based on the availability of credit, and the lack of credit will impair collateral values far faster than it will improve banks' balance sheets.

I'm thinking that I want to take some profits. DUG is up to $52. However, I will then be unhedged, and have too much long exposure on my portfolio. Studies have been done on trading psychology, and it appears that people usually tend to take profits too quickly, and hold losses too long. I don't want to make both mistakes, so if I take a profit on DUG, I think I'll have to take my licks on probably both ACI and CLF. As I write, the DOW is now down 541.