The Fed Cut: A View from Davos

The appeal of Davos for financiers and businesspeople is to get away from the world of SEC filings, subprime write-downs, and EBITDA, and a chance to indulge the inner wonk/public intellectual. It takes some doing. There's the eight-hour flight to Zurich followed by another couple of hours in a car, bus or train, chugging slowly up a narrow snowscape, through stands of 200-foot pines. But it's worth the trip. Instead of sitting through sales meetings, placating investors, or scanning bar charts, they can ponder the implications of the human genome project for cancer research, or listen to Tony Blair, or sit in on a panel discussion with food pioneer Alice Waters.

The early buzz at Davos this year was about the megatrends transforming the global political economy. Anticipated sessions included breakfast with Pakistan Prime Minister Pervez Musharraf (get there early for security clearance and buffet), sovereign wealth funds, and, naturally, conversation about sustainability, China, energy and the promise of medical technology (a topic of increasing salience to Davos's aging baby boomer stalwarts). This being the World Economic Forum, economics were issues of paramount interest. But the predominant feeling was that while the United States is slowing, and may be in for a rough time, the rest of the world is doing quite well. The United States has clearly sneezed, but the rest of the world has yet to catch cold.

But in the last few days, as conference-goers packed their boots and business cards, Atchoo! Inspired by continuing troubles in the United States, and concerns over the stability of the new financial architecture built up in recent years, global markets have cratered.

And the whiff of panic is palpable, even high up here in the Alps. When I alit from the train in the Davos Platz, jostled by young Swiss headed for a day on the slopes, my primary concerns dealt with croissants and chocolate, and whether the Jakobshornbahn lift led to easy slopes. But my travelling companion, a fellow financial columnist, quickly put the kibosh on my schussing plans. Whipping out his blackberry, he noted: "They're talking about a coordinated rate cut." In the press center, one of the Swiss army of greeters asked excitedly if I had heard the news? No, not Condi Rice's impending address. The Dow looked as if it was going to open 500 points down, and the Fed was cutting interest rates another 75 basis points.

The conference hasn't formally started, but as I attempt to take the temperature at Davos (cold and snowy), one thing is evident. Usually, the world (or at least a well-heeled, nicely dressed chunk of it) comes to Davos every January. This year, the world is intruding on Davos. With global markets falling in concert and an unease penetrating the rarefied air here, all those banking executives, finance ministers, portfolio managers and private equity grandees won't find it so easy to focus on their presentations and break-out sessions.

At the Knowledge Concierge, (basically laptops provided by PricewaterhouseCoopers) where I'm sitting, enjoying the third espresso of the day, an American investor is furiously multi-tasking: chatting with a broker on the phone, checking e-mails, reviewing his portfolio. I ask if he's worried that the market turmoil will ruin his Davos. "Not really, this is mostly technical." Meanwhile, it looks as if the Federal Reserve has saved the day-again. As night fell in Switzerland, the Dow was down only about one percent. At the computer next to me, 10 minutes before the opening reception is set to start, my fellow Web-surfer in the Knowledge Center is still looking at stock charts.

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