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The Fed comes and goes…again
Author: Bob Lang (info)
Website: http://trade-mentor.com
Posted: December 13th, 2006 at 12:38 am EST
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It’s fascinating how the Fed has tried to manage the markets…equity and bond markets. With a continued bias toward tightening (yes, tightening…that’s what they tell us), their myopic sense of price stability does not seem to jive with what the economy is saying. Slowing growth seems all too obvious, and the risk is high that the economy will grow below trend or possibly slip into a recession. Fed Funds continue to predict at least three rate cuts by this time next year. In fact, some bond players insist a 3-handle on the ten year is a lock in late 2007! Imagine that…another 50+ bps drop in yield…talk about a bond market rally….get out your party hats! The yield curve is still inverted…has been for awhile.  I continue to believe the Fed will have to get off the sidelines sooner rather than later…or risk some damage to the economy and their credibility. I also believe a big beneficiary of lower rates will be homebuiliders and mortgage firms. We’ll see what the data says over the coming weeks, but it could be ominous unless the Fed gets in gear.
As a side note…my last entry included some words about Fred Goodman and his site www.marketmonograph.com. There has been an overwhelming response to view his site. I do encourage you to take a test drive here, see what he’s all about and most importantly…learn learn learn! You can sign up for a free trial or monitor the information with a seven day lag, your choice. Once you try it out and see how accurate and timely the information is, you will find the updated information most relevant. Great stuff chock full of information.
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Bob Lang, Stock Market
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