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Another Fine Conundrum

Aug. 31, 2005 11:51 PM ET
Greg Newton profile picture
Greg Newton

The bond market spoke today, declaring that the Fed will raise interest rates just once, or at most twice, this year, writes Greg Newton, investor and ex-President of Metal Bulletin Holdings Corp. The stock market spoke, spiking basic materials, energy, equipment builders, and various other impending beneficiaries of the Katrina cataclysm, not to mention the homebuilders, recovering some of their recent losses on the decline in interest rates.

With the Plunge Protection Team in full window-dressing mode – check your calendar for at least one reason for today’s moves – a big bet went down on the out-going Fed chairman’s propensity for stimulation in the face of economic trauma – the Greenspan put – trumping his - and the Fed's, for that matter - record of tightening once too often when they tighten.

That's a brave bet.

The more so in light of Greenspan’s cautionary words last week, spoken as the infant Category 1 hurricane was finishing with southern Florida, about history’s unkind dealings with the aftermath of protracted periods of low risk premiums. Even more so in light of today’s speech by Anthony M. Santomero, President of the Philly Fed, in which he said his “sense is that the policy path upon which we embarked just over a year ago — a movement toward neutrality at a measured pace — will continue to be appropriate.

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Greg Newton profile picture
The Seeking Alpha community mourns the tragic and premature death of longtime SA contributor Greg Newton. Dave Fry sadly reported that Greg suffered a fatal heart attack April 2, 2009 while driving to meet his fiancee in Florida. On his blog, Naked Shorts, and on the pages of SA, Greg's witty and biting critique of hedge fund industry hubris proved altogether prescient. Our thoughts are with Greg's loved ones at this time. May he rest in peace. --------------------------- Greg Newton was a veteran financial journalist who from 1988-2004 was President of The Metal Bulletin Holdings Corp of New York. His blog NakedShorts (http://nakedshorts.typepad.com/) took a witty and insightful angle on market developments, with a special focus on hedge funds and commodities.

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