The Five Dumbest Things on Wall Street This Week

4. Unreserved Fed Heads

The bulls reasserted themselves midweek, but the wheels appeared to be coming off the proverbial bus early in the week. Headliners included Citigroup (C Quote) going hat-in-hand to Abu Dhabi, Freddie Mac slashing its dividend, and MBIA (MBI Quote) and HSBC (HBC Quote) taking SIV-related hits.

Treasury yields plummeted in a flight-to-safety trade Monday as major stock proxies tumbled into full-blown "correction" territory for the first time in over four years. Adding to the early-week anxiety was a worse-than-expected consumer confidence report, presaging a slew of punk data.

But "weaker numbers will not lead me to revise my outlook," Philadelphia Fed President Charles Plosser deadpanned Tuesday, adding that "the Fed must be very vigilant" against inflationary pressures. "In the current environment, providing insurance through a reduction in the fed funds rate creates its own set of additional risks."

On the same day at a different venue, Chicago Fed President Charles Evans said, "I feel that the stance of monetary policy is consistent with achieving our dual mandate objectives and will help promote well-functioning financial markets."

Not to be outdone, the next day Dallas Fed President Richard Fisher said he's "very concerned" about inflation. Fisher also had the temerity to say "we have been enjoying a robust economy" -- the same day economists fretted over dismal reports on durable goods and existing homes, as well as the Fed's own beige book survey.

Curiously, Fisher did say "the Fed will take into account the signals that we're getting from markets," Bloomberg reported, although the news service didn't specify if that included a two-year Treasury note yielding more than 125 basis points below the 4.50% fed funds rate -- an unusually wide spread that suggests the market is screaming for a rate cut (or three).

Best known for erroneously declaring in June 2005 that the Fed was in the "eighth inning" of what proved be an extra-inning tightening cycle, Fisher's would-be bombshells were snuffed out by Fed Vice Chairman Donald Kohn's more accommodating commentary and the market's renewed fervor.

The comments from Plosser, Evans and Fisher, a.k.a. "the tougher-than-thou vs. inflation trio," were also inconsistent with the Fed's action this week; they made liquidity injections via repurchase agreements of both longer-than-normal duration and specifically targeted mortgage-backed securities. If nothing else, this week's Fedspeak helps explain the ongoing popularity of Ron Paul's candidacy.

Dumb-o-meter score: 79: Speaking on Tuesday's The Real Story podcast, Miller Tabak's Tony Crescenzi said the Fed's apparent mixed messages are designed to help the central bank maintain flexibility and the element of surprise. Maybe so, but the machinations are enough to make a person jump up and down and scream like a madman.