Fed Raises Rate, Traders Lower Market

While we were not entirely surprised by the Fed's lack of originality, we did think the market might put in a little better performance since everybody was expecting rates to move a quarter point higher. That and the fact that today was the last day of the quarter, normally a strong time for the market. All of this is in addition to the normal strength of long holiday weekends.

As I'm sure you know by now, the Fed raised short term rates another quarter point today, the ninth such move in the last nine FOMC meetings. Does this mean that we are now in the ninth inning, or are we going into extra innings? Not that the bond market paid much attention to the Fed's potent (yes, I know, sarcasm again) 25 bps as it managed to rally strongly sending rates Lower on the day. Pretty soon we will have a flat yield curve with rates all across the Treasury curve being 3.5%, exactly the conundrum that Greenspan sees.

We think that the inflation numbers are not showing the true picture of the economy as yesterday's final first quarter GDP number was released showing 3.8% growth. Had inflation been higher, the GDP would have been lower, and what I am trying to say is that inflation was higher than reported. The GDP got a break from this and had a good showing.

The Dow dropped nearly 100 points today after the announcement and now sits under 10,300 again, its lowest close since May 16th. Right after the announcement the market did some minor volatility but then went down the rest of the day. But, of course, the over night markets are again showing strength. They may never learn but we can thank them because we get to sell to them.

The June numbers are in and they are like this:

Dow Down 192 (-1.8%)
SP500 Flat (0%)
NASDAQ Comp Down 11 (-0.5%)
NASDAQ 100 Down 49 (-3.1%)
HUI Up 15 (+8.5%)

Where did the Wednesday Update have you invested? Short the NASDAQ 100 and long the HUI, we all had a good month. We look forward to July.

Dow Industrials: 10,274.97 -99.51
BGEIX: 11.23

PS We did notice silver traded under $7 today.