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A Lot of Noise and No Information: Are We Tired of Reacting to the Fed Yet? By Dr. Duru written for One-Twenty May 2, 2006 I know I am just about the last one on the planet to comment on the latest Fed drama...I have a real job that sometimes keeps me up late at night. But you know me...when it comes to the Fed, I always have something to say, and this time is certainly no exception. TraderMike already did a great job summing up the reaction from around the web to Fed Chairman Ben Bernanke's misguided, off-hand response to Maria Bartiromo's (from CNBC) questioning about the Fed's interest rate position over the weekend at some cermonial dinner. The market quickly sold-off after Maria revealed the "news" that Bernanke told her that the Fed was not a dove and that the media (emphasis mine) should not have misinterpreted his statements as indicating that the Fed was almost finished tightening. The timing of the revelation was odd coming so late in the day, but I am not here to discuss the merits of yet another SEC investigation. Instead, I am here to proclaim a resounding "Well, no kidding"?!?! I have written here countless times how the media persists in interpreting the Fed incorrectly. I started the year off saying that you cannot believe the Fed is finished until they actually say they are finished. And what is Bernanke doing worrying about what the media says or thinks?! I am getting more than just a little annoyed now. There is all this chatter about what the Fed currently thinks, or what they might do, or who said what to whom and when. We constantly hear this pundit argue that we will get one more rate hike and that is all she wrote, and then another pundit will argue it will actually be two. Heck, make it four and call me in 2007. Enough already! The Fed has been as clear as can be about its current course! It's the data stupid. The data will determine the Fed's next steps. This means the Fed can choose to raise rates one meeting, do nothing another meeting, and, shoot, even lower rates if the mood so fits. That is it. End of story. You cannot countdown to any ending unless you have a crystal ball giving you the economic outlook for the next year. The market's willing gyrations at the next Fed utterance or willy-nilly interpretation of Fed-speak borders on sheer madness. Again, TraderMike has often reported on the churn of the markets. Even though the major indices have actually managed new multi-year highs recently, they have attained these levels mostly reluctantly and with lots of confusing chop and churn. The market needs a gameplan. It needs guidance. And Dr. Duru has the prescription. Take this step-by-step guide, and you can make us all rich...or fools for trying:
And be careful out there! Another gut-wrenching Fed extrvaganza is right around the corner! |