Well, this is the week that many investors have been waiting for. The Federal Reserve will meet this week, and raising short-term rates to 5.25% is a given. The wildcard out there is will the Fed pause after a .25bps move, wait until August to pause after raising rates another .25bps, or have the guts (or stupidity) to raise rates .50bps and stop.
The first scenario is a lock because market rates have already risen, and the Fed never fights market rates.
The economic numbers are mixed. Durable orders fell, but when you remove the volatile transportation component, there was still a healthy gain of .7%. Transportation accounted for the biggest decline in orders falling 18%.
The Leading Economic Indicator fell 0.6%, but housing starts rebounded for the first time this year.
The Economic Cycle Research Institute (ECRI), which designs indexes that help predict inflationary pressures in the economy, said that the future inflation gauge (FIG) for the U.S. fell slightly in May. The May reading came in at 121.8 down slightly from April痴 122.0 reading, but this number is significantly below the peak numbers of October.
That's enough of the economic "shell game". Now, let痴 get to the index that we all can relate to. The BAHI (Back At Home Index).
Of course I made this up, but there is no better indicator of future events than what is going on around you, and what other people are doing. This is my favorite index. This is how we were able to accurately predict the current inflation problem that many on the financial channels were saying didn't exist 6 months ago.
On Friday, at 6pm, some friends of ours asked us to meet them at "Carrabba's Italian Restaurant". Carrabba's is owned by Outback, and is one of my favorite places to eat. In our town, if you want to be seated in less than an hour, you must go during the middle of the week. On the weekend's, particularly Friday night, forget it. You may have to wait over an hour.
When our friends called and asked us to meet them at 7pm on a Friday night, I just rolled my eyes. I am never in the mood to wait over an hour for a table. To my surprise, we pulled into a parking lot that was half full. In the three years since Carrabba's has opened, rarely, if ever has parking been available at 7pm on a Friday.
We entered the restaurant, put our names on the list, and were seated 5 minutes later. I asked the server how business has been. She said they have been slow for about a month.
Now, you may have plenty of competition in your area for dining, but we don't. So, being able to get a seat quickly on a Friday night is very rare.
Restaurant's aside, our real estate market has come to a screeching halt. Unsold condos are piling up on the beaches, and the residential housing market has dried up. Home owners who were asking ridiculously high prices for their homes are now putting the words "reduced" on top of the "For Sale" signs.
So, what is a wise investor to do? Keep your powder dry, and consider shopping for bargains in the fall and into 2007. The BAHI (Back At Home Index) has been a very reliable indicator. It has never failed me before, and I don稚 expect this time to be any different.
