The Fed - oh yes I remember that

It seems odd to me that I haven't spent the last few weeks worrying by how much the Fed was likely to hike interest rates on Tuesday. It's been at the back of my mind, of course, but not in the pole position it would have been a few months ago - astonishing how events that were once so important can be almost ignored when there are other things on your plate.

But just because the Fed hasn't occupied my every waking moment hasn't meant that its actions haven't had profound effects on markets both in the US and in Europe over the past few weeks. Both bond and equity markets have been volatile as they assess the probability of a series of hikes from the Fed.

In fact the recent numbers from the US have been slightly more benign than some people had expected, (particularly with retail sales having fallen) but just because Americans haven't been hitting the malls with as much enthusiasm as before, you can't say that the economy has slowed down enough to keep Mr Greenspan and company happy.

The inflation data last Friday probably cheered him, but labour costs - 4 per cent higher over the past year - are still a worry and probably one of the biggest for the Fed. So the tide has certainly turned as far as the FOMC (Federal Open Market Committee) members are concerned and the markets will continue to trade with further rate hikes this year as a backdrop to investment decisions. It brings back a degree of reality to the professionals who have been forced over the past few months to buy things that they haven't been entirely comfortable with on the basis that they had to be in a rising market.

FOMC meetings must be a bit more interesting too these days. It must have been incredibly boring when everything was going according to plan and rates were being left unchanged. At least they have something to debate about now! There's nothing worse than sitting in on a meeting where there's general consensus. Everyone still feels as though they have to say something, but when it's the same as the last person boredom inevitably sets in. I have been at meetings where people have battled valiantly (and failed) against sleep when the US economic miracle was being discussed. (So much for the images of alert people screaming and shouting at each other all the time.)

Anyway, with a higher interest rate cycle in prospect for some time to come, the outlook is a little shakier for bond and equity markets in the immediate future. Naturally, with the Nasdaq down over 30 per cent since the middle of March, there are a lot of people who believe that it has bottomed out and it's only a matter of time before it bounces again. Back in February I was at a conference held by the Institute of Bankers at which almost all of us on the panel were wary of valuations but realised that we were out of fashion for thinking that way. Indeed, the very fact that there was a consensus of bearishness made us feel even more out of touch with what was really happening in markets. But you have to think people must realise that, even with some very substantial falls in the prices of certain stocks, many are still overvalued. In the past they've used these falls to increase their holdings, but if mortgages are on the way up and markets on the way down I'm not sure that many will find that particular trade as attractive as it once was. When companies don't pay dividends and the only way you make money out of them is to see their share price continue to rise, you soon get disillusioned when that doesn't happen. And if the predictions of many of my economist friends are correct and the Fed Funds rate ends up at around 7.5 per cent by the end of the year, money in the bank begins to have an allure that it hasn't had in a very long time!

Regretfully, pressure of time meant that I couldn't get to the First Active a.g.m. on Tuesday because I would have liked to have asked some questions about its plans for the future, particularly its possible merger with Anglo Irish Bank. I've yet to see two more different companies in terms of management and structure. I've always felt that First Active thought that, by demutualising, the company would automatically be able to access cheap funds from the money market and lend it out to the flood of willing borrowers at a neat margin. Yesterday's thinking. Just because it's an Irish financial share, it doesn't mean that Irish fund managers want to buy it. (Doesn't mean that anyone wants to buy it!) And just because it's a bank not a building society, doesn't mean that the market will automatically want to offer more funds at cheaper levels. Anglo Irish has been quite different as a very focused bank with a clear strategy as to its potential market and I was surprised to hear that the two of them might get together.

The possible link-up with a UK partner for First Active's UK mortgage business is interesting as it goes down the technology route. Maybe the company will be better at answering e-mails than snail mails. There are lots of good people in First Active (there always are lots of good people in struggling companies and they don't get six-figure compensation payoffs and pension top-ups when everything goes pear-shaped) but they're not great at answering letters, especially if you're querying something. I'm waiting for a reply to a letter since February.

Finally, this week, lulled by my favourable experiences of taxis and cabs in the UK and Spain and in a pathetic triumph of hope over experience, I threw myself on the mercy of the Dublin cab service again. Having booked a cab for a particular time on Saturday, I didn't panic when it was 15 minutes late. I did ring to see what had happened though. It was "on the way".

Another 15 minutes later when I called again I was told that it would be "15-20 minutes more". (Actually it was 45 minutes late in the end.) When I asked what the problem was I was told that the first cab had a puncture but they were now sending a different one. I remarked - mildly, I thought, but my friends tell me that acerbically is the right word - that it would have been nice if they had rung to let me know. The controller said that they couldn't make phone calls out.

In this age? When four-year-old children have their own phones? Where the bidding war for licences in the UK makes monopoly look like a game of Ludo?

When it's actually impossible to be out of touch with anyone anymore?

You'd imagine they'd have dragged their excuses into the 21st century by now.