James, I appreciate your contributions to this thread. There are many excellent posters on this thread and you are certainly one of them.
I was thinking about buying some this morning, but the action is all wrong in my opinion. A rational market would be expressing some worry about the meeting tomorrow, but instead is more than discounting the most favorable of news, namely, that the Fed does only a 1/4 point increase, leaves the discount rate unchanged, and announces a no tightening bias policy. If I were running the Fed, I would take today's market runup as a slap in the face and an opportunity to sock it to the market. The Fed may, of necessity, have to buy into a soft landing for the market, since a rapid decline could take the whole economy with it. But this is ridiculous.
Thus, I am hereby announcing the actions that the Fed should take tomorrow: 1/2 point increase in both the federal funds rate and the discount rate, and announce a tightening bias. Strength in the economy and in the markets and weakness in the dollar justify such action. It is in the Feds interest not to be predictable by the markets, so this might well be a strategy for them to pursue at this time. Also, it is a good time for Greenspan to retire. Like a president, he is concerned about his place in history and Greeny certainly doesn't want to go down as the instigator of this bubble. He could leave now and let someone else be blamed for it.
Also justifying the proposed action, the next FOMC is not until October, so the Fed has little opportunity to tighten the reins, at least in so public a manner, as it has right now. A tightening bias now would give the Fed some lattitude to loosen up in case Y2K problems materialize.
I don't necessarily think that it is off to the races if the market gets all that it wants from the Fed tomorrow. We've already had a considerable upturn from the recent lows. It may be time to sell the news anyway.
BWDIK |
