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."