Nancy,
I'll take a shot at interpretation:
AG says that, at least until very recently, there is no US inflation or deflation, interest rates are pretty low, and stock prices were very high.
AG goes on to express that high equity prices are OK when things are this benign, but that this stability cannot be expected to last and by extension, the lofty values in stocks are therefore inherently unsustainable if either deflation or inflation kicks in.
IMO, he's talking the market down. He frames the issue this way because we are basically at the end of the benign disinflation period of the past several years. Now, we either maintain current policy and fall into deflation or begin easing and start another inflation cycle. He's saying stocks are at risk either way, but note that he doesn't indicate what direction he plans to pursue!
I'd wager no cut until we are well below his "irrational exuberance" speech levels. He won't be played the fool!
IMO, current Asian rebound = grasping at straws, manipulation, and/or some short covering as a result, unless they're all considering currency controls, which would basically simulate the 1930's Smoot-Hawley trade restrictions.
That would not be a good thing. |
