Merrill Lynch’s David Rosenberg thinks it would make sense for the Fed to go for a double-bagger next week, raising administered rates by 50 basis points rather than the expected 25. I’d need three-to-one odds to take his side of the bet, but not because the idea itself sounds implausible. Actually, Rosenberg makes a pretty good case. He thinks it would be a good way for the Fed to clear the air, signaling an end to tightening and setting the stage for…another cycle of easing. He points out that the last three tightening periods have ended with 50-basis-point hikes and that this would be a good time to follow precedent. A 50-point hike is already priced into August debt paper, says Rosenberg, so why not just get it over with? If the central bank delays a final rate hike till August, he argues, it risks tightening at a time when the U.S. economy will be too weak to shrug it off, as it probably could now.

Given the economic deceleration that is already occurring in the housing sector, Rosenberg, Merrill’s chief North American economist, is probably right. But are the guys at the Fed as smart as he is? Helicopter Ben and his colleagues seem to think the economy is going gangbusters. But that’s because they apparently believe all of the phony statistics that they themselves gin up every month. Rosenberg, on the other hand, probably talks to his neighbors and understands, as few economists seem to understand, that the picture of a supposedly strong economy is as phony as a $4 bill. With an imploding housing bubble threatening to trigger a deflation in the U.S., and with some real estate loans now running above 9%, we need a few more rounds of tightening about as much as a guy with a neck wound needs a tourniquet.  If Rosenberg is right, contrarians are going to go wild on the day of the announcement. If a 50-basis-point hike doesn’t send the Dow up at least 250 points that day, I’d be plenty surprised.

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NYC Seminar Sold Out

As of last week, seats for the Hidden Pivot Seminar in New York City on October 14-15 were sold out. There undoubtedly will be a few drop-offs, so if you’re still thinking about coming you should contact me by e-mail asap to get on the waiting list. All those who have written me to express their interest in coming are assured of a place.

Dates are not yet firm for seminars to be held in San Francisco and Sydney, Australia, but it looks like they will take place either in November 2006 or February 2007. Both are filling up, so let me know soon if you’re planning to attend. In addition, a subscriber from Vancouver has offered to produce a seminar there. If so, it will probably be held on the last weekend in October. This is the first time I’ve mentioned a possible class in Canada, so if you’re interested and would like further details please let me know via e-mail.

The seminar is geared to teaching traders of all skill levels the rudiments of my proprietary Hidden Pivot System. Post-grad mentoring in a chat-room is included so that students can master the techniques learned in the classroom in a real-time setting.