Editor's note: This column, which reflects market activity from the day before, originally appeared June 25 on RealMoney.com. To sign up for RealMoney, where you can read Bill Fleckenstein's commentary every day, please
click here for a free trial. DeVoe's Divine Satire: In honor of the hoopla surrounding this extra-special Fed meeting, I thought I'd do today's Rap a little differently. To kick it off, I'd like to share a tongue-in-cheek proclamation hatched by Ray DeVoe, who writes The DeVoe Report. For those of you who don't know, Ray has been a brilliant, eloquent analyst/market observer for better than 30 years. He penned "'The Maestro' and Associates Issue a Proclamation" two weeks ago, and now, without further ado, here it is: "Since I, 'The Maestro,' and My Associates Have Tacitly Promised to Not Raise Interest Rates for an Indefinite Period to Prevent Deflation, Permission Has Been Granted for All to -- the Fed are arguing over whether to row single- or double-time to get away from it. The only agreement they have made so far is that they want to continue to row indefinitely. Yet any reasonable individual can see that their attempts are futile -- comical, almost. The disturbing part of the scene is that this is extreme sport. Clearly, those yahoos are no match for the tsunami, and ultimately the crew is gonna sink the boat. So 25 or 50 doesn't really get me too revved up, as they might just as well be using Q-tips instead of oars." Picture the waves in the movie The Perfect Storm, as Alan and crew paddle furiously with Q-tips...
Speculate (Stocks, Bonds, Houses, Commodities ... Whatever)"These Actions Are Not Only Permitted but Encouraged, Until Suitable Price Stability or Satisfactory Reflation (Whatever Those Are) Have Been Restored and Deflation Is No Longer a Threat. Any Messiness Associated with Essentially Free Money Will Be Dealt with at Some Future Point. My Associates and I Pledge to Implement Unorthodox and Unconventional Procedures to Attain Our Objectives." -- The Maestro" Joanie Christens the S.S. 'SOS!': The Maestro et al. was also the subject of a bit of humor this morning from Joanie, a friend who watches the markets very closely. She conjured such a priceless vision of the Fed and our current environment that I had to share this with readers as well: "There is a tsunami brewing. Those in the dinghy
Arbitrage Interest Rate Spreads
Reach, or Rather Grope Wildly, for Yield
Refinance Mortgages with Maximum Cash-Outs
Indulge in an Orgy of Consumption
Buy and Spend Before Prices Rise
Devalue the Dollar, Competitively
Balloon the Budget Deficit
|Semiconductor Index (SOX)||354.01||-1.71|
|Amex Gold Bugs Index||147.17||+1.30|
|10-year Treasury Bond||3.36%||+0.096|
Turning to other outside markets, gold and silver were up roughly 1%, but that action was meaningless, as the precious metals closed before the Fed "opened the envelope." The dollar had been quite weak across the board, but it bounced a bit after the Fed announcement. That said, the Canadian dollar ended up a full percent, with the euro up about 0.25%, and the yen down fractionally. Policymakers, Heartbreakers: Well, now that we're through the rate cut, it seems to me that the market will hold its breath for (a) quarter's end, to see if the boys and girls want to paint the tape, and (b) the next rate cut. I cannot understand why the Fed, after having embarked on the mission of stoking the stock/bond market, didn't give them what they wanted, in the form of 50 basis points. But then again, it's the same group of lunatics that got us into this mess in the first place. Mind you, I'm not disappointed that the Fed only cut 25. I am just somewhat surprised that they veered from the script they'd appeared to have set -- especially after all the hot air they've expended warning about the risks of "deflation." Obviously, Greenspan has raised the bar for himself, in terms of having to deliver on the economy. But then again, that had already been the case, whether folks wanted to come out and admit it or not.
Emerging-Market News: Meanwhile, turning back to the market's response, I don't put much "stock" in the market's action after an FOMC meeting. We've seen too many times in the past where whatever happened that day just turned out to be noise, and the real near-term direction only unfolded in the ensuing trading sessions. My suggestion is that we take all the market's action today with a little grain of salt and see what develops. I believe that the action in the next two days to a week and change will be very interesting in all the markets, and I intend to be on red alert.