Serials From Kellogg

So yesterday was the Fed's day-the day the Federal Reserve Bank Board's Open Market Committee sets interest rates, or so we were told repeatedly throughout the day.

But wait a minute. They actually set only one interest rate-their own. The Federal Reserve Discount Rate is the rate they charge federal banks to borrow directly from the Federal Reserve District Banks. So what's that got to do with a market plunge?

Well, it's the "Silly" people. They talk themselves into wanting something, it really doesn't matter what, so long as it sounds more important than whether the bug on the wall will fly to the left or right to settle a bet-it's the Fed game.

One by one the player pundits place their bets on what the market wants-a quarter-point, a half-point, to the left, whatever.

Once the decision was announced yesterday, a visitor to our offices complained, "They should have cut it more to stimulate the economy." So I asked, "Why?" I wasn't being flippant. I really wanted to know if I missed something.

Actually, the Fed tends to follow, not lead, market interest rates-look at the charts, you'll see. The "Silly" people do look at charts but it doesn't matter, since it's the adrenaline rush, you know.

After the "Silly" people have had their romp, the adults will come in to clean up. Some of them, like those of us at IFM, grew up with the adage: "It's an unwise lion who hunts in a stampede not of his own doing." So they are patient and wait, just like you.

Has anyone counted trucks on I-24 lately? Periods of slow business are a fact of life but, let a pundit place a bet on it, then that's trouble in River City. Remember investing is all about time and perception.

The economy is NOT as bad as some want you to believe; nor is it without problems-it's life and the river flows.

Our Ouija board tells us we still have a few weeks left before the markets can get back into a positive tack; however, the worst should be over as it coils up to strike out in a new direction-up.

Failure for the S&P 500 Index to get above 1215 by the end of September will signal more trouble ahead which, on a really bad day, could be down to 1100 from yesterday's 1157 close. We could already have seen the highs for the year, give or take a few disappointed day traders.

By the way, for those of you concerned about such things: it's chicken entrails for the economy and Ouija boards for market technical analysis.

To be continued...