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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Bill Holtzman who wrote (30421)	10/5/1999 5:07:00 PM
From: Teflon	Read Replies (1) \| Respond to of 74651

Bill, how have you been? I trust all is well down in VA land :) Regarding the Fed's move, I think this change in bias was to be expected. The Fed really doesn't want to have to raise rates without some real deterioration in the CPI/PPI and further evidence of problems in the labor markets. The Fed just didn't have the goods to justify a rate hike this time around, but they didn't want to give the Markets a reason to rally as we turn towards the end of the year. The change in bias ultimately gives the Fed a few more days of worry in the Market over the near term, and gives the Market plenty to worry about as we head towards the November meeting. So in effect, AG accomplished their goal of potentially cooling off the Market while they wait out further economic indicators. The problem for the Fed now, however, is that there is only one bullet left in the gun. Their only option from here is to raise rates if there are problems in the economy, a move that I really don't think they want to have to employ. I just don't think the Fed want's to raise rates going into the end of the year unless they absolutely have to, yet they probably sensed the Market wanted to rally from these levels so they had to do something. It will be a chess match from here on out, with no easy predictions as to which way the Fed will go. If the Fed doesn't get the bad news they're looking for to raise rates in November, there's a good chance they could keep the bias towards tightening all the way through the end of the year. On the other hand, they will raise rates if inflation does undeniably present itself in the economy over the next month, and if they did they would change the bias back to neutral. Regardless of what happens, the Fed won't make it easy for the Market to take off over the next three months just because they're being held slightly hostage by Y2K fears. I hope this mumbo jumbo made some sense!!! Teflon