There is a comment by Dave Davenport regarding media that is more than just a little bit interesting. Go here, hit comment, and I think it's the fifth one down. Really good.

As long as I mentioned Dave's comment which has to do with stock guru's bailing out on Tribune companies, owner of the LA Times (markets actually work?), I post this for those of you wondering about the Fed and interest rates.

It's very simple, if you have a chance to borrow money at 2% and immediately lend it out at 4% you do it. The banks have been able to borrow short term at 2%, lend it out longer term at 4% and make a legit score. Problem now is that short term rates are 3% but the Long Rate is barely above 4%. This is of huge importance to the Ph.D crowd on Wall Street because it cuts into a sure source of profits AND it means that what is known as the yield curve is "flattening." This means if you plot the two interest rates on a graph the difference, or the lines they draw, get closer together. This means, according to them, BIG TROUBLE. Every time (false) the yield curve flattens we have a recession. Using this thesis, Greenspan caused Bush I to lose because of Greenspan's interest rate caused recession; Clinton was also the recipient of same, although his recession was exacerbated by the Dot Com Bubble. So Bush II steps in and Greenspan is dropping rates like crazy in order to restart the economy---and steepening the yield curve. It worked. Now he's raising them again and the fear is real that he will shut down the economy, as he did twice before.

Greenspan is not the God the media has made him into. He did a first rate job after the '87 crash when he immediately lowered the broker loan rate to zero, an act that allowed an immediate bounce back in the stock market. He also reacted immediately after 9/11 making some rates near zero so companies could re-locate immediately using free money.

Lots of people are very nervous right now. But lots of people are NOT. They make the point that we have had positive booms when the yield curve was near flat. BTW the best and by far the most sophisticated financial blog anywhere is right here. It's strictly for traders, not investors. Very sophisticated and not for the casual student.