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David J. Klein is a financial consultant with RBC Wealth Management in Vernon Hills
Lots of ups and downs last week. What caused the volatility?
"We had a variety of things happen last week. Certainly, there was the Fed announcement of a 75 basis point (interest rate) cut . And then, of course, the market had a great deal of volatility last week. When you look at the Dow over the last 10 trading sessions, the last two weeks, the Dow experienced seven, triple digit moves … And, of course, we had the fourth largest move on the market, of more than 400 points. But the major actions were the Fed action and the bailout of Bear Stearns."
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Is the Fed over-reaching, with its interest rate cuts and its backing of Bear Stearns debt after it sold to J.P. Morgan?
"The Fed is really walking a tightrope right now. On the one hand they are trying to rescue the housing market and the financial markets. If they do too little or too much, this has become a concern relative to the broad markets. Government intervention, right now, is becoming very controversial topic on Wall Street. Whether the Fed is fighting deflation or it is more concerned about inflation #8230; It seems to me that the market itself is in a bottoming process. And typically when you see more and more articles in the newspapers about recessions, typically that is the time to buy."
How did the markets react to the Fed backing the buyout of Bear Stearns for $2 a share?
"The market reacted positively to the Fed bailout and then the helping of Bear Stearns #8230; The market is seeing a very pro-active Fed #8230; To many it seemed like, what I'd call, a shotgun wedding over the weekend. And the Fed really did avert, what I call, a full-fledged financial crisis when it arranged the marriage between Bear Stearns and J.P. Morgan."
What did you think of the Visa initial public offering?
"It didn't surprise me that it did so well at the opening because the demand was so great #8230; The demand was very strong both from institutional and private equity investors."
What may move markets this week?
"I think we'll have a continuation of what we've been seeing. I really do feel we are in this transition period right now, in terms of government action and the market's reaction #8230; We'll get revised (gross domestic product) figures for the fourth quarter of last year #8230; But I think the markets will really be looking for corporate earnings season that will be approaching in April #8230; The hyper articles we are reading right now about recession means it is a time when investors should be looking for opportunities."