(Headlines - scroll down for full stories) 1. WSJ: Fed to Raise Rates Again 2. Soros: U.S., Global Slowdown in '07 3. OPEC Unlikely to Slash Oil Output?
1. WSJ: Fed to Raise Rates Again
The Wall Street Journal reported on its XM Satellite Radio show that the Federal Reserve would raise interest rates Tuesday by a quarter-point – to 4.50%.
It would be rate hike No. 14 for the Fed.
The WSJ says that the housing market is cooling off and energy prices are still on the rise – all of which has led to increased uncertainty regarding the U.S. economy.
"The stock market makes all its money on volatility, so traders should be happy, if nobody else," says The Journal.
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Meanwhile, tomorrow is Fed chairman Alan Greenspan's last day on the job.
At the Davos conference, Soros told Bloomberg that incoming Fed chief Ben Bernanke could be less practical than Greenspan. Some fear that he may not be flexible enough to apply the best solution to a given problem, regardless of his theoretical position.
"I'm a little bit worried because Bernanke is an academic," said Soros.
"(At least) Greenspan had the insight to be very pragmatic and look at everything and not be guided by any particular dogma."
Bloomberg notes that regardless, Bernanke will come out firing and that one of his first orders of business will be establishing a specific inflation goal for managing interest rates.
"Greenspan, whose 18-year term as Fed chairman ends on Jan. 31, has said he prefers the flexibility to manage risk, constantly adjusting policy to shocks and innovation transforming the U.S. economy," says Bloomberg.
That philosophy was music to Soros' ears. But the Bernanke rein may prove to be very different.
"He may carry the academic principles which are supposed to guide the Fed but actually don't," Soros said. "So he may be a little bit more theoretically ready to adopt doctrines with which I personally disagree."
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2. Soros: U.S., Global Slowdown in '07
At last week's World Economic Forum in Davos, Switzerland, billionaire financier George Soros was reflecting on the U.S. dollar and the future of the American economy, among other issues.
Bloomberg News was on the scene to snag a rare interview with Soros – and he didn't disappoint:
On the U.S. dollar: "The explanation is very simple. The U.S. economy was strong because of the housing market, which made up for the price of energy. Interest rates were rising so interest rate differentials were widening and they still look like widening further. When you reach the point where interest rates might be turning around, then the dollar might become more vulnerable."
On the U.S. and world economy: "As the housing boom cools off, the wealth effect wears off and the consumers are going to start saving a little more than they did in the past. And that will give you the slowdown in the U.S. economy, which I think will actually be transmitted to the rest of the economy so that's why I expect a global slowdown in '07."
On hedge funds growing bearish: "Hedge funds are in my view a superior form of managing money, but it has become generally recognized. When hedge funds become the dominant force in the market then they can't outperform the market. So it's kind of a self-correcting process. Hedge funds have become a little too popular. I think that a lot of hedge funds managed to tie up capital for quite some time, so it may be more difficult to set up a new hedge fund. And I think probably the fee structure will weaken."
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3. OPEC Unlikely to Slash Oil Output?
While the bigwigs rubbed shoulders with one another at Davos, the rest of the news was dominated by the tense diplomatic standoff between the U.S. and Iran over that nation's nuclear ambitions.
Amidst the fallout, world oil prices are back up again – over the $68 mark in early Monday trading.
Light, sweet crude for March delivery rose $0.53 to $68.29 a barrel on the New York Mercantile Exchange in Asian electronic trading. The contract on Friday jumped $1.50 to settle at $67.76 a barrel.
Heating oil rose $1.16 to $1.8185 a gallon while gasoline gained $0.02 to $1.7564 a gallon.
News reports indicate that OPEC is unlikely to cut production. The Associated Press cites Saudi oil minister Ali Naimi, one of OPEC's most influential voices, who said Sunday that the organization had no reason to cut its output at any point this year.
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