The FRB Treads Like A Timid Mouse

I miss the old muscle bound Fed churning like McChesney Martin who readily took away the punch bowl. Then, there was Paul Volcker who flogged interest rates up to 15%. Later on, Alan Greenspan who loved publicity, changed the prime ratio over 20 times in his reign. 

I hated all of ‘em because they got in my way. As a pon boy, I tapped margin credit to its maximum continuously. However, could you wax rich except with other people’s money. Deal wrong was costing me 9% which was its peak back in the early seventies. 

Forget what Wall Street craves. The bulls are forever insatiable. They crave easy access to capital with a low cost attached to it. Everyone wants to see strong consumer spending, easy access capital for houses and big ticket items like new cars. Spending for new plants and equipment should be orderly and follow demand, not lead it. 

I remember how the head of the Treasury Secretary would upbraid the captains of industry for their foolish anticipation of business recovery by overspending for plant and equipment. Themely this accentuated the scope of his business cycle, both on the upside and downside. 

Andrew Mellon, the outspoken Secretary of the Treasury would upbraid business leaders then for their foolishness in creating business cycles, spending when they shoulda been conserving their capital base. Mellon, a great collector of Old Master’s,  outtraded the Russians who needed cash after the 1917 ousting of Czar Nicholas. The Mellon in our Capital harbors one of the world's great collections of Old Mastery. 

Net, Net, currently our economy lumbers along, slightly below long term GDP growth numbers. There’s plenty of capital available for financing housing.  Capital spending isn’t excessive. In sum, our economic setting is a touch wishy washy in terms of end product demand. 

When you look at a long term chart on the course of yields in Treasury banks today we come out clearly on the low side, very low. For many years, the country dealt with T-bank at 10%, even higher. 

Nobody today refers to the historical highs. Treasury bond rates. It’s not in the financial press which is just dealing today with the issue of a quarter point of easement on top. The market would be foolish to celebrate such meager succor, but it will surely do so. 

If anything GDP stocks should react better to FRB largesse. They are not so overpriced as growthies,. I’ve concentrated on bank stocks as a cheap call on heightened business activity. 

Commodity stocks, including energy, seem too rich. Fundamentally the S&P 500 should outperform growth indices like NASDAQ. High powered financials like Goldman Sachs I am overweighted. 

In short, The Fed is a lost soldier not a boots leader. I feel like Eva Peron singing “Don’t Cry For Me Argentina” The Fed won’t hurt us nor help us.