re: the Fed:
I'd guess, through 2001, the odds of Fed action are:
raising 10%
lowering 20%
doing nothing 70%
The Fed can only lower rates, for the foreseable future, if we have evidence for an impending Hard Landing, and no evidence of wage/commodity inflation. The other scenario for lowering would be an Exogenous Shock (one of the 4 Horseman ride). This, of course, is impossible to anticipate, so we might as well forget about it, until we feel the Horse's hooves on our necks. Low odds.
The Fed can only raise rates if they see an acceleration in the economy, and/or a spurt of inflation. The evidence for a slowing economy is robust. Lots of data, from a variety of sources, indicate we are just past the inflection point, on the economy's speed. The Fed has indicated they see and believe this data. So, lowest odds for raising.
That means, as far as Market Direction, we can safely stop talking about the Fed for a while. For my money, the relevant topics are now:
1. Profits (where, and how much)
2. money flows (How long can we enjoy our Max-Consumption Lifestyle, which is based on buying everything the world makes, and paying for it with our overvalued stocks?)
3. Exogenous Shocks (I can't help thinking about it, even if I'm wasting my time. I'd say a Khomeini in Saudi Arabia, or a messy collapse in N. Korea, are the most likely.) |
