The Wall Street Casino

Gyrations on the New York Stock Market on Monday are another indication that this may be a more volatile year, economically.

No way to know for sure about that. The reporting road is littered with the professional reputation of bodies of journalists who try to do that.

But let's face the fact - because it is a fact - that it wouldn't take much volatility to make this year more economically volatile than the last several. With interest rates low and steady, for one thing, markets in this country generally have been up.

Part of what gave the New York Stock Exchange the heebie-jeebies Monday was a Wall Street Journal report that Federal Reserve policy-makers have agreed that they are more likely to raise rates this year than they are to hold them steady as they have been doing.

It was the Journal report that Federal Reserve policy-makers met March 3l, and agreed that their next step is more likely to raise rates. This is a pretty good story, if true - which we do not yet know for sure.

But even if it is true, you may want to note that nobody says interest rates are going up in the next few months. What the story says - and all it says - is that based on the Wall Street Journal's sources, interest rates are more likely to go up, at least a little, than anything else in the months ahead.

Let's face it: this is pretty thin stuff on which to make investment decisions, but such is the stuff of market volatility.

One way to look at the Federal Reserve and interest rates is this: The Fed has been the very essence of stability these past few years. It has not changed the basics of interest rates since March of last year. But this should not be seen as comfort by Federal Reserve leaders. Instead, note that since inflation has continued to decline in the last l2 months, the real effect has been to raise interest rates.

The real cost of borrowing has not been higher since the l990-9l recession. In this way, the Fed actually has been contributing to somewhat tighter money policy with its steadiness.

By any reasonable analysis, the booming U.S. economy continues to concern the Federal Reserve. If the boom doesn't begin slowing soon, and if the Fed may indeed lean toward overt, outright tightening by raising interest rates...at least a little.

And what that says is the basics of the U.S. economy remain strong. And the overview for the foreseeable future is: probably pretty good.

But don't bet money you can't afford to lose on that. Stocks have always been a gamble. And they still are.

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