M. Stanley's Biggs Sees 'Scared' Fed, 'Serious' Recession
NEW YORK (Dow Jones)--Federal Reserve Chairman Alan Greenspan must be "scared to death," according to Barton Biggs, chief global strategist at Morgan Stanley Dean Witter.
Greenspan's 50-basis-point cut in the fed-funds target rate on Jan. 3 gave the markets the "most powerful stimulus" he could have given them, and the markets' positive reaction lasted what seemed like "two minutes," Biggs told CNBC in a Tuesday interview.
Now, he may be worried about what to do next, Biggs said. Early signals indicate Greenspan & Co. will cut the discount rate another 50 basis points at the Fed's next meeting at the end of January, Biggs said.
Markets are telling the Fed chief that he is "still behind the curve," and the U.S. economy is "weaker than the consensus expects," said Biggs.
Biggs said he thinks Greenspan would be wise to advise president-elect George W. Bush to implement a retroactive tax cut as soon as possible.
This being said, he noted that the markets appear to be setting up for a "significant rally," and said the U.S. could "easily have a 50% rally."
The Nasdaq could rally from depths around 2000 to the 3000 point range, he said.
{Editorial Note:The possibility of a 50% rally seems to be required when ever the boyz use the r word. Not to mention that at least today the NAZ closed at 2400. So I guess what he means is after we go to 2000 we will have a 50% retrace and then have the real TL & EV}
However, he said he doesn't think "the Fed has done enough yet," and authorities haven't recognized the economy is already in a "serious" recession.
Plus, the valuations of the "sacred cows in tech," while they have come down a bit, are still too high, he said.
-K. Maxwell Murphy; Dow Jones Newswires; 201-938-5173; maxwell.murphy@dowjones.com
01/09/2001
Dow Jones News Services
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