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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: tradermike_1999 who wrote (1420)	12/14/2000 4:48:55 PM
From: tradermike_1999	Read Replies (1) \| Respond to of 74559

Bush and Greenspan: A tale of political temptation UPDATE 1-Bush and Greenspan: A tale of political temptation (Updates with Summers quote, para 14) By Knut Engelmann WASHINGTON, Dec 14 (Reuters) - Faced with a slowing economy just as he moves into the White House, President-elect George W. Bush could find it hard to resist the temptation to openly push the U.S. Federal Reserve for speedy interest rate cuts. Republican administrations have a long history of being at loggerheads with the powerful and fiercely-independent central bank. But beware: Political pressure on the Fed to play along with Bush's decidedly expansionist economic plans could backfire badly, just as it has in the past, analysts say. "The element of history that's repeating itself is that we have a new president arriving just when a long expansion may finally be running into some difficulties," said Lou Crandall, chief economist at R.H. Wrightson & Associates in New York. If Bush's family history is any guide, this coincidence may well make for a rocky relationship between a Republican White House and Fed Chairman Alan Greenspan -- ironically a Republican himself, first appointed by Ronald Reagan in 1987. Faced with an economic slowdown in 1991, Bush's father and his team pressed Greenspan -- just reappointed to a second term -- to ease off the brakes and give the economy some slack. When Greenspan was slow to respond, then-President Bush reportedly quipped: "I reappointed him and he disappointed me." Almost a decade later and with Bush senior's son avenging his father's defeat at the hands of the Democrats, the economy is once again facing a dramatic shift as slowing consumer and business spending presage a cooling of the once-steamy growth rate. The slowdown has substantially raised the odds of Fed rate cuts in the near future. But analysts warn that Bush's expansionist fiscal plans, which include a $1.3 trillion tax cut, may spell too much fiscal stimulus in an economy that still has some momentum left. That could complicate the Fed's monetary policy options. PLEADING AND PRODDING During his campaign, Bush junior has made much of the need to use rising government surpluses for radical across-the-board tax relief. More recently, Vice President-elect Dick Cheney has even warned of an impending recession, arguing such a threat would only strengthen the case for swift tax cuts. Despite repeated behind-the-scenes entreaties by Bush's campaign, Greenspan has resisted the pressure to throw his considerable weight behind Bush's fiscal ideas. Instead, he has insisted that the surplus should be used for paying down the debt first and said a tax cut was only a second-best option. Bush's point man on those issues has been economic adviser Lawrence Lindsey, himself a former Fed governor, who is expected to get a top economics job at the Bush White House. In that role, he would likely be the key liaison with the Fed. But Lindsey's propensity for partisan politics combined with what some say is a lack of political finesse could make it hard for him to see eye-to-eye with Greenspan, who is widely revered on both Wall Street and Main Street for his savvy handling of the more than $10-trillion U.S. economic giant. "There's a great distrust at the Fed of ideologues," said Greg Valliere, of Schwab Washington Research. "Fed officials really resent any kind of pressure from the outside." The outgoing administration of President Bill Clinton has prided itself on a policy of noninterference with the Fed. "Never make any comments on Federal Reserve monetary policy," Treasury Secretary Lawrence Summers said on Thursday. Spearheaded by his predecessor and former Wall Street wizard Robert Rubin, that strategy has fostered a degree of mutual trust rare in Washington's cut-throat world of power politics. Rubin and Greenspan's tradition of having a weekly chat over breakfast has been continued by Summers. TESTING THE LIMITS A more interventionist approach from the incoming administration could sorely test both sides' political skills -- and their patience with one another, analysts said. "If Bush is heavy-handed in using cyclical conditions to justify a tax cut, it's highly likely that Greenspan in turn would have the kinds of veiled public discourse that he has had with the previous Bush administration," said Crandall. A gridlocked Congress that some fear is unlikely to present much of an obstacle to fiscal profligacy could muddy the waters further. A Republican president bent on cutting taxes may find it necessary to grant Democratic wishes for increased spending just so he can get his policies through, some economists warn. "Greenspan wouldn't be a happy camper with that kind of thing going on," said David Jones, chief economist at Aubrey G. Lanston in New York. With financial markets already pricing in several interest rate cuts during 2001, analysts said Bush would be well-advised to just let the Fed get on with its job. Anything else may prompt Greenspan to make a display of his independence by holding off the very rate cuts Bush is hoping for. "I'm betting on three rate cuts next year, perhaps even four," said Jones. "But maybe Greenspan won't give us that last cut if that kind of fiscal love-fest goes on." ((Washington newsroom + 1 202 898-8310, fax 1 202 898-8383, washington.economic.newsroom@reuters.com)) REUTERS * end of story *

To: tradermike_1999 who wrote (1420)	12/14/2000 4:51:21 PM
From: Tommaso	Respond to of 74559

And MSFT is both in the Dow and the QQQ. 5% of the Dow. I have never before posted the words "heh heh" but I have been building a pretty large short position (for me) in DIA, thereby shorting the Dow.