DOES THE FEDERAL RESERVE seem to have too much power over your finances lately?  You're not imagining this.  In fact, if you've plowed your assets into stocks the past few years, you're just the one- along with your stock-obsessed friends- who has vested the Fed with so much power.

     Seventeen years into this amazing bull market, about half of U.S. households own stocks directly or through mutual funds, more than twice the level a decade ago.  Consumers now rely on stock appreciation in lieu of saving out of current income; they have simply stopped saving.  Don't forget that consumer spending (including housing construction) accounts for almost three-fourths of GDP.  Upshot: The economy is now exquisitely sensitive to stock prices.

        This is what Alan Greenspan means when he says he will "increasingly focus on changes in asset values" to gauge inflationary pressures.  This is why his talk about "irrational exuberance" on Wall Street cannot be brushed aside as just another bad market call.

        Stocks have always been responsive to Fed actions, but the Fed's influence is multiplied now because of the explosion of Internet and other high-tech stocks.  With most, if not all, of their earnings just a distant promise, these equities are very much affected by interest rates, the discounting factors that convert future earnings to current value.

        Add in today's record-high stock prices (measured by price/earnings) and general investor nervousness, and interest rates may already be high enough to precipitate a significant bear market.

        The Fed's recent tightening is the start of a campaign that, if history holds, won't stop until something nasty happens- an outside event like a Latin American financial crisis or Chinese currency devaluation, or a stock selloff severe enough to kill consumer confidence and spending, with recession to follow.

        Fed-induced downturns are nothing new, but the investment implications of the next one will differ from those of its postwar predecessors.  Residential and commercial construction will, as usual, be hurt by rising interest rates.  But with broader consumer spending decimated, other sectors will also be slammed.  When consumers retrench, cars sit on dealer lots and airline seats (and hotel rooms) go empty.  Restaurants fold.  Old household appliances don't get replaced and remodeling projects are cancelled.  And, yes, even stockbrokers, money managers and investment banks are in the Fed storm path.

        As always, the pain, will create winners, relatively speaking.  As the Fed flicks its finger to knock down stock prices, banks and other spread lenders may be less squeezed than during past tightenings.  Insurance companies and other long-term bond investors may do pretty well.  But it is a sure bet that most stocks, and certainly Internet companies selling at ten times sales, will be hurt badly.