FSU Editorial: "Thoughts on FOMC Meeting-Outlook" by Stephen Tetreault 03/20/2007

THOUGHTS ON THE FOMC MEETING-OUTLOOK
by Stephen Tetreault
March 20, 2007

I have received several emails about my thoughts on the FOMC meeting kicking off tomorrow, here is my take�.sorry I forgot to write about it in tonight�s recap-outlook

The Fed-heads will have the markets walking a tight rope on Wednesday�.and one false step and down they go�.I believe the markets are way to euphoric about a goldilocks scenario and subsequent dovish statement from the FOMC�I believe they will be significantly disappointed, and as such if we continue to rally into the FOMC meeting and upto the bias statement then I will be dead-short!!!

Way to many folks are hoping/praying that FOMC at their meeting this week will throw the markets a life preserver�in the form of easy money and a bias statement leaning toward a looming rate cut�.this is a ridiculous premise folks in my opinion, but I have read this premise on various analytical and financial media�despite the fact that financial markets have been whipsawing around lately due to increased volatility and the subsequent sub-prime contagions during the past three weeks�.I believe that the inflation data is forcing the fed-heads to lean the other way�however from the price action it is apparent that some market participants are believing in helicopter Bernanke's ability to be the market's fairy godmother. Despite the fact that the Fed-heads are not suppose to be talking or trying to influence the stock markets through their respective jawboning of the markets (not their mission or area to be involved in at all) they are however highly expected to give reassuring words and hope to market participants�

I find this hard to fathom, but nonetheless I want to give you both sides of the argument�.I would find it highly irresponsible on their part in light of the recent inflationary data to change in the statement to be released on Wednesday to reflect a more dovish tone as they have to remain diligent in warning about upside risks to inflation and the potential need to hike rates�..however in January, the Fed-heads stated that they saw "somewhat firmer economic growth" and this lifted the markets�.the markets are pricing in a softer more gentle FOMC (no one expects that after 6-meetings that they will raise or cut rates, they are on hold) but if they start to snuggle up to the markets with a softer tone then we could see a spike up over the next few hours/days after the release until the markets sniff out a rotten-rat. Hell I remember when these nuts in their January statement, stated that they saw "some tentative signs of stabilization have appeared in the housing market" they were dead-ass wrong but it helped to move the home-builders and indexes (I guess these egg-heads failed to really sniff out the sun-prime contagion.

I say that the fed-heads would be highly irresponsible if that happens but, I would never rule it out�..I totally believe that the fed-heads are going to feel very constrained (some may need air) from making any reversal signals in light of the most recent hotter than expected inflationary data, which has shown inflation well above the their bank's perceived and constantly hyped "comfort zone" this recent inflation data should keep them on the proverbial edge. As so far core retail-level inflation, up 2.7% in the 12 months running through February, which according to their own rhetoric is still too high, for them to think about lowering rates�in the near future. Also I would be very surprised if the fed-heads **who are responsible for this blow-up** mentions the subprime mortgage market contagion in their bias statement; if they do it could create more harm than good as it could spook the markets, that now believe that the storm has passed (I thinks its just beginning�.and will only get worse).

Contact Information
Stephen Tetreault
T-Waves
Southern Maine, USA
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