Nothing New - The Fed News Is No News

By Dr. Duru written for One-Twenty

March 29, 2006

I have been buried in work from my real job for the past two weeks and have been dealing with the passing of my cherished grandmother, and I have not been able to dazzle you as much as usual with my wonderful insights into the financial markets. It looks like I am back to a more normal life, and I look forward to getting back to business.

I have a LOT of ideas and opinions swimming in my head right now, but I will start with the latest news. Or in this case, the latest no news. The Federal Reserve hiked interest rates yet again by 25 basis points. The accompanying statement simply repeated everything we already know and should already have come to expect from the Fed. Even I have written over and over again that we have no evidence that the Fed is done hiking rates, that the Fed is no longer our friend, etc... so I continue to be surprised at the amount of ink being spilled over the latest Fed step along this steady drumbeat of rate hikes. Everyone continues to try to guess how many more hikes are left even as the Fed keeps telling us that they will base future action on developing economic conditions. I say, stop the guessing game and look at what is right in front of ya. The market has stubbornly continued to go up, cyclical companies (and their stocks) like Caterpillar (CAT) and Cummins (CMI) continue to soar as if the economy is in high-gear, and even many financial stocks are hanging right in there as if to ask "higher rates? What higher rates?" Just check out the NYSE Financial Index or the Philadelphia Bank Index which made all-time highs just two weeks ago. All of this is happening even as the bond market is FINALLY sending long-term rates appreciably higher and many commodities are stubbornly hanging around near recent highs. (Speaking of which, what in the world has happened in the past two weeks to push gasoline prices back to "high" levels? Do you feel the pressure that I feel pushing oil and related stocks upward right past resistance levels?). In other words, even if the Fed continues to raise rates all year, the stock market is behaving as if everything is OK - not great, but not bad either. Until further notice, we should expect more of the same from all parties concerned. No new news to report here!

As always, be careful out there!

DrDuru, 2006