"I think people will be shocked at the amount of tax receipts that pours in to the Treasury in the next few days, which should act favorably on interest rates. I know I just mailed a pretty big check, and I doubt I'm alone. Plus, oil prices should be declining, lowering inflation. Even the Fed will have trouble raising interest rates if commodity prices are falling, making inflation nonexistent, and if the government pays down significant debt with its unexpected cash (making Treasuries scarcer, and hence more valuable, thus implying a lower interest rate)."
I wholeheartedly agree with your analysis. We will soon start seeing reports stating that the government has receive more money in April 2000 than any other month in U.S. history. And the number of economists that think the Fed will do nothing in May will start increasing. It makes no sense to raise interest rates while the government is flush with money and is buying back T-bills. It is also an election year, if the Fed doesn't raise interest rates in May, we are not going to see any raise thereafter either because the Fed doesn't want to be seen as involving itself in politics. That is its great strength, right or wrong, it is viewed as outside the political arena. This weekend's Barons should have another article on valuations, but this time how cheap some stocks have become. |
