Weekend Cocktail Chatter
Before we get to this week's Cocktail Chatter, I have a correction to make.
In Tuesday's column about the Federal Reserve's use of symbolic action to guide
interest rates in the right direction, I wrote that the Fed's adoption of a
neutral bias was a shift from its earlier stance. In fact, the Fed had already
adopted a neutral bias at its previous meeting, shifting from a bias toward
tightening. What threw me was that it's relatively unusual for the Fed to raise
interest rates off a neutral bias, but that is in fact what happened this week.
The bond market, meanwhile, seemed so concerned about inflation that it felt as
if the Fed was leaning toward tightening. (Which it did do.) So when the Fed
announced that it was staying neutral, it felt like a change.
All of the above is true, but I still shouldn't have made the mistake.
Apologies.
In no small part because of that interest-rate hike, it was a roaring week
in the stock market. Before today's minor sell-off, the Dow had been up 3.3
percent in the previous seven trading days, while the Nasdaq was up an amazing
7 percent. It used to be that interest-rate hikes were automatic bad news for
stocks, since the idea behind the hike is that it will slow down the economy
and, presumably, profits. But this economy seems so strong that the danger of
having the boom killed by inflation--which would eventually lead to very sharp
interest-rate hikes-- feels more powerful than the danger of having the boom
killed by a slowdown. So as long as the interest-rate hikes remain manageable,
the stock market welcomes them. Who knows how long this will last, but right
now, investors seem to feel that if things are stable, the only answer is to
buy. You can't keep a buoyant market down. Which is, I suppose, why you would
call it "buoyant." Anyway, on to the Chatter.
1. "The International Monetary Fund admitted--well, I say 'admitted' because
it sounds more dramatic than 'said'--that it has no idea whether money it
loaned to Russia's central bank was improperly diverted by Russian banks
further down the line, because the IMF leaves the monitoring of disbursements
to central banks. Now, we're not asking the fund to hire someone named Vito to
go collect, but considering that it's now loaned Russia $20 billion with few
discernible results, maybe making one or two phone calls wouldn't be
unreasonable . You know, something like: 'So, how much of that $20 billion
is still around? Really? Well, a kickback here and a payoff there do add up.
No, I understand.'"
2. "As expected, Ecuador announced that it would miss a scheduled
$94 million interest payment on its Brady bonds but insisted that it was
not defaulting, just deferring to a later date. 'Does anybody really know what
time it is? Does anybody really care?' the finance minister reportedly
said."
3. "Daily Variety headline for an article on Virgin Records'
purchase of Immortal Film and Music : 'Virgin Picks Up Immortal.' So what
kind of line do you have to use to get Apollo to come home with you,
anyway?"
4. "Opening today in theaters everywhere is a film based on that great
'children's classic,' A Dog of Flanders . I'm sorry, but is there
anyone outside of Flanders who considers this a classic? Are there any American
children who have even heard of Flanders, let alone the dogs that come from
there?"
5. "Merrill Lynch's powerful media analyst Jessica Reif Cohen jolted Time
Warner's stock price Tuesday when she cut her earnings estimates for the
company, citing a disappointing performance by Time Warner's music
division. Oddly, though, what the cuts did was bring Cohen's estimates in line
with those of most other analysts who follow the company. The definition of
authority: You can agree with an already-existing consensus and still have it
make news."
6. "Richard Belluzzo resigned as chairman and CEO of Silicon
Graphics, after spending 19 months trying to turn around the company. He then
took a job with Microsoft , heading up all its Internet operations ...
Hey, wait a minute. Let me rephrase my opening sentence: The visionary Richard
Belluzzo resigned as chairman and CEO of Silicon Graphics, after dedicating 19
valiant months to turning around that company."
