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Today’s March 18 minutes from the FOMC meeting, which already gave us a rate cut and comments about a weak economy, included comments that fed governors were more worried than they led on. 

The minutes noted what anyone with a brain would have deduced.  Growth in consumer spending slowed, labor markets softened, financial markets remain under considerable stress, and tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth "over the next few quarters."  Most Fed officials saw inflation moderating in late 2008 or 2009, although Joe Public better be convinced by now that the FOMC has zero foresight into prices of oil, food, and other raw materials.

The full version of the minutes does not include the word "recession" once throughout.  Not even in context.  The fact is that even though this is a much more cautious Fed, it feels like watching the turtle on the Comcast commercial say, "And/or, Duh!" 

Part of the Fed’s job is not too be too negative at the onslaught oftrouble.  That keeps the public from feeling bad and that in turn keepsthings from getting worse than would normally get.  When times aregood, they can’t just talk "up and up and away, forever" either, andthey even have to warn about thing such as "irrational exuberance" and"cupidity" to keep things from getting out of hand.

The truth is that the public just has to get used to negativestatements, negative news, negative sentiment, and news that is worsethan would have been hoped for.  That is this part of the cycle.  Inshort, this is a "four letter word" sandwich, and that isn’t the "Beef"or "Pork" variety.  Everyone is still tightening up their belts andthere is still a lot de-leveraging and bad news we just have to workthrough.

There is actually good news here.  Go back to 30 and 60 days ago andthink about the situation that was bad and getting far worse.  Thingslook much "LESS-BAD" than it would have seemed.  If that continues thenthis will just be a garden variety recession instead of a financialmeltdown.

Jon C. Ogg
April 8, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at [email protected] and he does not own securities in the companies he covers.