Welcome to the Blue Money Report

The Dow finished above 9000, specifically 9062, but that was far from where the real action was. Overall, investor sentiment has become as speculative as in year's past with buyers of biotech, telecommunication services and information technology charging forward, buying companies without profits or any hopes of them in the near term. The reasons for this three month upswing are varied. It could be because of the end of the war. It could be because of the lack of visible terrorist activity on our home soil. It could be the tax cuts. My hunch the underlying run-up is due to the historically low interest rates.

Alan Greenspan spoke to a group of middle school kids in Washington D.C., many of whom feigned interest for both television cameras or their teachers. One ninth grade student, at the prompting of an unidentified adult asked the Federal Reserve Chairman whether he would cut interest rates further or leave them where they were. He gave a grandfatherly smile and answered yes. Interest rates are beginning to look like the only stimulus this economy is going to need,. Add in the chance that they may be headed lower, and Alan would be performing yet another of his legendary magic. With a gradually improving economy as a safety net, the Chairman has little to worry about if he decides leaves rates where they are or cut them another 25 basis points. Stocks love the idea it seems.

The President's tax cut, failing to reach the millions of people who would channel it directly into consumer goods as the IRS website suggests, will not be as effective as another interest rate cut. The Fed's timing has been impeccable as always. I am a long time fan of the "slow as you go" philosophy believing that speed will win foot races but tenacity will win marathons. That it seems is what we are experiencing right now. I have never run a marathon but I know that there are some inherent pains involved in a foot race over great and varied distances. Mr. Greenspan I believe understands this far better and to his credit, has been key in orchestrating the markets brief three month revival.

Mr. Greenspan understands the exhaustion principle. If the markets move too quickly energized by unfounded enthusiasm, the proper course should be to help those less attractive companies whose business is rock solid but incredibly lean. Any sudden spike in demand would find many of these companies short of cash in the short term. Mr. Greenspan understands that it isn't until business people begin to spend on their enterprises, the no-job recovery will be short-lived and hollow.

Jobs are at the core of the President's tax cut. Since he began his deficit building, the economy has shed 2.7 million additional jobs. In order for the economy to show any real turnaround, six million jobs would need to be created. With the target of 1 million new jobs as the reason for lining the well-to-do pockets of the upper end tax payer, it will fall far short of the growth in jobs necessary to really sustain a good GDP growth of 2.7% or better.

Investors have had a long rejuvenating run downhill.

Unfortunately, college grads have a problem of their own. With unemployment rates among high school dropouts running over 10% and high school grads posting numbers matching the national average, college graduates still are better employed that those who don't attend a school of higher education. The unemployment rate among college graduates is around 3%.

This week I expect a breather. The markets need a plateau from which to make another run and this seems like a comfortable resting place to let these companies catch up with the enthusiasm that they have admitted they just don't see yet.

The Week Ahead in Bonds

But Mr. Greenspan's idea is even better. Cheaper money lets those sideline players, the ones who were hurt the worst first, borrow at rates that are favorable to growth. In the face of an improved economic situation, jobless or not, lowering interest rates or at least hinting at a move is just excellent stewardship of this marketplace. he has made it clear that he does not intend to let deflation take hold. He even has gone so far as to voice his inexperience with the phenomenon and would just as soon do something now as to waiting for its arrival.