The Fed would like to address the looming slowdown by cutting Fed Funds, but can't.
Gold prices are rising, and bond prices falling, both potential signs of growing inflation.
STOCK MARKET WARNING
The danger here is for investors to shun the stock market.
First, new money will go into short-term debt instruments, not stocks.
Second, speculative long positions will be closed out.
Third, if prices drop below the big volume days around Feb 27th this will be a major sign of weakness and new short postitions will be established.
TACTICS
No new long term assets unless matched by liabilities with a good spread.
Expand money market arbitrage.
Lengthen liabilities on major weakness.
STRATEGY
Warn senior management and the Board of the potential for continued high short-term interest rates.
Consider buying puts or establishing short postitions in the futures market.
