I'm sure you've heard about the guy who repeatedly beat his head with a hammer because it felt so good when he stopped. After 13 consecutive interest rate increases, investors turned euphoric given the prospect of an end to the Fed's rate increases. But it isn't the first time they have undergone this experience.

Last June, Mr. Richard W. Fisher, a recently appointed President of the Federal Reserve Bank of Dallas, appeared on CNBC and said the Fed was in the "eighth inning" as far as interest rate hikes were concerned. Of course, the market rallied on the comment. In October, when the market was struggling, he said inflation was near the "upper end" of the Fed's comfort zone and the Fed can't "let the inflation virus infect the blood supply and poison the system." These remarks killed a nice rally and triggered a costly sell-off. Of course, Mr. Fisher's comments don't carry the same weight as the minutes of a Federal Open Market Committee, FOMC, meeting, but any news of the Fed's intentions sends the market a fluttering. When the minutes said the Fed was less worried about higher inflation and it thought the number of additional tightening "probably would not be large," the bulls stampeded.

Most analysts say that another rate increase of 25 basis points at the January 31st FOMC meeting is a slam-dunk. Futures contracts on the federal-funds rate put the odds on another rate increase at the March 28, 2006 FOMC meeting at 50%. The new Chairman of the Federal Reserve Board, Dr. Ben Bernanke, will run that meeting since Dr. Greenspan's tenure as Chairman will end on January 21, 2006. The big question is whether he will follow in Dr. Greenspan's footsteps or set out on a path of his own.

I happen to believe it is of the utmost importance that any Fed Chairman establish his or her credentials as an inflation fighter right from the get go. Therefore, I would be quite surprised if Dr. Bernanke did not do pretty much what Dr. Greenspan has done in the past. In other words, he will error on the side of raising interest rates in lieu of letting inflation run out of control. This means he will raise rates until he sees signs of a weakening economy. By then, as we know, it will be too late to prevent a recession. This is not what investors want to have happen, but it has happened more often than not.

Investors want to see a return to a Case 2, Goldi-Locks scenario of rising earnings and falling inflation and interest rates. I'm not saying it can't happen, but it's a highly unlikely occurrence. It won't make me mad, however, if it does happen and stock prices continue to go much higher. In fact the rally will keep running and we all will be Feeling Good.