Fed's decision....

Its starting to take effect... Again, this process can be quick
and nasty, or it might take its time in stages.
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http://cbs.marketwatch.com/news/print_story.asp?print=1&guid={7C8B860F-E6C2-40BF-93F9-B40F65653DDA}&siteid=mktw

Tokyo stocks slide after Fed decision
Asian chip stocks tumble on weak sales for Taiwan firms

By Allen Wan, CBS.MarketWatch.com
Last Update: 10:22 PM ET Dec. 9, 2003


TOKYO (CBS.MW) -- Tokyo's key stock benchmark tumbled over 2 percent to below the 10,000 level by midday Wednesday as technology issues and exporters got hammered on dollar weakness and Wall Street's losses following the Federal Reserve's decision to keep rates steady.


The Nikkei Average fell 222 points, or 2.2 percent, to 9,901.62, while the broader Topix shed 12 points to 984. Elsewhere in Asia, Seoul, Singapore, Sydney and Taipei, hurt by losses for semiconductor stocks following lukewarm sales data for Taiwan's top chip companies.

On Wall Street, stocks slid after the Fed kept rates at historic lows and suggested that they would stay that way for longer than the markets anticipate. The Dow hit the 10,000 level at one point but couldn't hold on to gains and ended down 0.4 percent. The Nasdaq, meanwhile, tumbled 2.1 percent.

Analysts had expected the Fed to maintain rates at current levels but were hoping for more clues on when the central bank might raise rates in a preemptive strike against inflation given the strengthening U.S. economy. The Fed said that it would keep rates at these levels for a "considerable period," implying no change at least until March. The other key item that the Fed mentioned was that risks from both inflation and deflation were equally balanced.

Japan is also facing the prospect of higher rates as its economy continues to strengthen though the Bank of Japan has maintained it would keep its easy monetary policy for a while. On Tuesday, the government also released revised GDP data showing that the economy didn't grow as strongly as initially thought in the July-September quarter. Following strong machinery orders data Tuesday, the next key test will come Friday, when the Bank of Japan will release its key quarterly survey of corporate sentiment.

Sheesh. Doesn't anyone realize there's an election coming up?

That said, even though partisanship is probably part of Greenspan's holding rates low, it's not as if the economy is doing well enough to actually produce jobs yet.

Initial market reactions were mixed. Stocks tanked, which is highly unusual. Stocks almost always rally on the pronoucements of the Greenman. (The announcement itself was beyond absurd.) Bonds tanked, as well they should have but again, the usual thing is for them to rally on the words of The Lizard King. The dollar popped overnight. Slightly perverse I guess but they were certainly due a bounce and the chances of it sticking are very very low.

Bonds and stocks falling togther is the key thing. That rarely happens anymore. They have been locked in an inverse dance for two years, which is ahistorical. In general they move up and down together. (Bonds move inversely to interest rates. Their prices fall when rates rise) IF they strart going down togther watch out.

The habit of stocks and bonds moving inversely is I think due to the pushing the jellow around the plate syndrome. That being players buy one and sell the other, and vice versa. In todays world nobody sees any alternative to financial assets. It is a false conception as we are likely to see soon. Anyway when both fall together think on thing, the destruction of wealth, as measured by computer blips. Gone, dissapeared, lost.