Here’s a real conundrum for ya: Who do you fight, the Tape or the Fed?
That’s my takeaway from an interesting WSJ discussion earlier this week: "As the Federal Reserve prepares to raise short-term interest rates again next week, officials there increasingly believe the bond market, which sets long-term rates, is diluting their efforts to tighten credit and contain inflation.
The result: The longer the bond market keeps long-term rates unusually low, the further the Fed is likely to raise the short-term rates it controls in an effort to keep the economy from overheating. Conversely, sharply higher bond yields would encourage the Fed to stop raising short-term rates."
Graphic courtesy of WSJ
I do not believe bonds to be overvalued, as the Chairman implied in a recent speech. Low yields are consistent with my expectations for modest economic growth next year –especially if the Fed keeps tightening.
Ultimately, I think the Bond market is more powerful than the Fed, at least over the long run. Thus, you watch the Fed (closely), but you don’t fight the tape.
Fed Sees Bond Market Hampering Its Steps to Keep Inflation in Check
The Wall Street Journal, August 3, 2005; Page A2
One of the more interesting items we’ve discussed has been the different pricing strategies that studios use with DVDs versus what the labels do with CDs.
The studios, to their credit, use a form of dynamic pricing — they intelligently recognize that a content item’s value is highest when first released, and then subsequently fades. That’s why DVD prices come down over time, to capture those marginal buyers. The consumers who will not pay $49.99 for Seinfeld Season 1 & 2, might pay $29.99.
The labels have mostly avoided this strategy — but perhaps that’s changing. I had just finished reading a post about Amazon’s conference call, and on it Amazon’s management discussed their Long Tail strategy. I went over to the site, and thru some random clicking and scrolling, noticed this little tidbit: a long list of interesting CDs for sale on Amazon for between $6 and $10:
Here’s my short list of favorite moderate priced CDs off of the Amazon sale:
Jack Johnson : Brushfire Fairytales – another great one — grab it.
Stripped — an under appreciated stone album
Tattoo You the same — kicked off the modern Stones, and it rocks
It’s Only Rock N Roll classic
James Brown – 20 All-Time Greatest Hits! If you you don’t have the 4 CD set, go with this
Bruce Springsteen – Greatest Hits I prefer the individual CDs, but if you want a full dose of Bruce in one shot, this is it.
Wish You Were Here I have the full box set, but after Dark Side of the Moon, this is it.
Motown an interesting twist on Motown
Fashion Nugget Killer album that introduced me to the band:
"He’s going the Distance, he’s going for speed . . ."
We have been watching, with no small degree of skepticism, a stream of improving Macro-economic data. Color us unconvinced. Many of the key releases have been fraught with misleading headlines obscuring much weaker data beneath, and last month was no different. From Inflation to Federal Deficit to Unemployment Rates to Industrial Output to recent GDP…Read More