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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 166.81-4.1%3:59 PM EST
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To: waverider who wrote (95703)3/14/2001 11:22:41 AM
From: Keith Feral  Read Replies (2) of 152472
 
Thoughts on the FED meeting - why would the FED not cut by 75 basis points on Tuesday? FED funds are currently 20 basis points higher than the 30 yr., 50 basis points higher than the 10 year, and 100 basis points higher than the 2 year Treasury bonds.

One comment this morning suggested that the FED needs to take action based on real time data, i. e. the bond market. With the exception of the FED funds rate, the yield curve has a positive slope.

Money flow into bonds as a safe haven is going to end once the yields on cash and equivalents fall after the excess yields on short term money go away. With 3 trading days before the Fed's meeting next Tuesday, the FED could make an aggressive policy decision that would restore the imbalance in the interest rate environment. The precipitous drop in the 30 year bond seems to indicate that a more aggressive policy is in order.

The real problem about investing in a falling interest rate environment is that a recession implies lower EPS's. However, lower interest rates have always led stock prices higher.

The FED had to take aggressive action to curb the insatiable appetite for stocks last year as investment exceeded savings. The inverse is true today.
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