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2HRS2GO: Who''s afraid of the big, bad Fed?

3 min read

It's a funny little game Wall Street plays whenever the Federal Reserve Board meets to discuss the possibility of raising interest rates. If you didn't know better, you'd swear Wednesday's announcement will make or break the world's economy for the next six months.

Like some self-fulfilling prophecy dictates that another quarter-point hike necessarily means that the Intels, Ciscos and Sun Microsystems of the world will suddenly forget how to execute.

Or that leaving rates unchanged will sudden make its products more appealing.

Nothing could be more ridiculous.

But pundits and media types burn a lot of energy speculating about what the Fed may or may not do each time it meets.

This phenomenon doesn't just occur in the hours or days leading up to the meeting. These days the hand wringing begins the minute after the latest decision is rendered and continues right through the next.

There's no lull in between meetings. Even when some piece of good economic news trickles out, the "experts" are quick to caution that this doesn't guarantee the Fed will stand pat the next time around.

Investors barely had to time to nurse their hangovers from the half-point bump Greenspan & Co. delivered in May before they were mulling over the ramifications of another increase this month.

So instead of the special coverage CNBC and other media outlets devote to the "Fed Watch" each and every damn time, why don't we stop pretending and start measuring it on a daily basis like the myriad of other statistics investors hold so dear?

Right under the Dow and Nasdaq results for the day there should be a Fed-o-Meter that tracks the interest-rate angst index. Instead of telling viewers about corn and pork belly futures, tell them the general "vibe" on interest rates each and everyday.

You may laugh but we're already at that point.

Obviously, higher interest rates aren't a good thing in virtually every circumstance. Higher prices generally mean less consumer spending, less borrowing to buy capital equipment and lower profit margins for the pistons of industry.

And with six rate hikes in the past year and a half, the Fed's done its best to curtail what was a raging bull market. It's still a bull market, but during the slow summer months investors need a little extra push to call their brokers.

All this worrying despite the fact that all recent economic data, especially the employment figures, suggest the economy is slowly winding down. In fact, there's considerable concern that another rate increase could cause more trouble than it's worth.

It's almost comical to listen to the analysts drone on and on about the inevitable.

"The market lost a little bit of steam," said Alan Ackerman, market strategist at Fahnestock & Co. "Consensus is that the Fed will keep rates flat. But I think people are concerned with whether there will be a warning that they are not finished raising rates."

Sure they're concerned. When can they not be concerned?

"We are getting some of the last-minute nail-biting over what the Fed is going to do," said Arnold Berman, technology strategist at Wit SoundView.

How can everyone be biting their nails when everyone's so certain the Fed will leave rates unchanged.

"The markets don't like uncertainty, and today the Fed has a chance to eliminate that veil of secrecy, to a certain extent," said Paul Cherney, market analyst at S&P Marketscope.

Yeah, until the next meeting.

Regardless of whatever happens Wednesday, you can bet Thursday's focus will be on the next Fed meeting.

Meanwhile, leading technology companies, particularly chip and PC makers, continue to spend billions to ramp up production to meet surging demand. Their stocks will continue to appreciate accordingly.

Investors should be grateful that these companies have more important matters to concern themselves with while the rest of the world is fixated on a decision that's already been factored into the market.