Just when I thought my job was in danger, I find out our client has essentially guaranteed my group's work for some time to come. And just when I thought the Fed was following a methodical approach to helping the economy, it jumps off the wagon and starts blazing away at interest rates again! Aaah, life sure can feel good so quickly.

I don't have much time to launch into one of my longer missives, but I did want to send out a note to everyone acknowledging that the Fed's surprise rate cut today effectively has changed the rules of the game. Just as the markets and financial community had given up (the bond market even had priced in a 0% chance of a surprise cut), the Fed slashed and burned rates again before its regularly scheduled meeting. However, realize that the Fed earlier claimed that they prefer NOT to cut between meetings, so this drastic move means they recognize some fundamental problems in the economy.

It is important in times like this to keep a steady head and follow a steady-headed investment strategy. Do not chase the markets, but do not fight them either. I say this particularly because I am afraid that optimism will run too high when we never fully max'ed out on negativity. All my earlier concerns still apply, but the Fed's ultra-aggressive moves are now worrying me even more. The chance of stoking inflation by the end of the year (or earlier) is VERY real. Do not be surprised if the Fed finds itself swinging to an inflation-fighting stance at the end of 2001 and early 2002. Remember that despite all the problems our economy has right now, consumers have been happier and spending more than in a typical recession. Also remember, our energy infrastructure is seriously pressed right now. If economic activity roars ahead it will put even more strain on this system and will drive energy prices through the roof this summer. If energy prices take off, the multiplier effect will ripple through most of the goods we buy. Finally, do not be surprised if the Fed does NOT cut rates further at its regular meeting in May.

I am hoping, but it is still a stretch hope, that the Fed has put an effective and real floor on just how low the markets will go when we get the next waves of sell-offs.

Never fear, I will have MUCH more to say at a later time. This crazy Fed and this crazy economy leaves little time for rest for the interested observer!

Be careful out there!