Gregory Spear could not disagree with you more.
Here is an excerpt from the Aug 16 Spear Report:
<<I believe that the Fed's move to raise interest rates
has nothing to do with inflation. Inflation just isn't there.
Several studies in recent years have thoroughly de-bunked
the old saw that high-growth rates in the economy
necessarily lead to inflation. It just ain't true.
The alleged threat of inflation is the excuse that
Greenspan is using to squash the growth in the stock
market. Greenspan believes the market is endangering
the economy by being so high that it creates the risk of a
major crash, which would wipe out billions of dollars in
capital overnight. He has said as much on several occasions,
but then goes on to cite the justification for raising
rates as the danger of inflation, which is entirely unsupported
by the evidence.
How far will he go to deflate the market and curtail
the risk of a crash?
Well, he is walking on very thin ice if he indeed
raises rates again in August, without at least moving to a
very solid neutral bias at the same time.
While an interest rate hike will take the market down,
thereby lessening the harshness of any correction that
may be coming from Y2K, the danger in another rate
hike, especially one that is perceived to be the second in
a series, is serious overkill.
Y2K will severely depress the markets in the fourth
quarter regardless of the interest rate environment. Then
in the next quarter, the sagging economies of the third
world, shaken badly by Y2K, will have their inevitable rip-ple
effect on U.S. multinational corporations, which will
slow capital spending, etc., etc. If Greenspan raises rates
again now, he risks the real possibility that he may be
moving to slow an economy that is about to tank anyway,
greatly exacerbating the inevitable difficulties in the two
quarters that lie ahead.
Whether he takes the chance will depend more on
the movement in the markets between now and the end
of August than on any exaggerated signs of inflation. It is
the market he's really after.>>
Tom D |
