December 12, 2005

Look Out below for Stocks? Above for Interest Rates?

As I hopefully get better of this, I will do a better job of linking the proper people so they get the appropriate kudo's. Until than, enjoy the missives from Mr. Bill Cara - www.billcara.com - to read him all the time as I do.

Bill Cara writes this morning:

"Could it be that today’s hot market just might be ready to take a vacation? The rallying cry on Wall Street seems to be that the Fed is now going to ease up on the tightening process. LOL. I guess that means the Treasury Dept and the Fed have accepted a lower USD is in store for America, and those precious metals are really going to have a big run.

The one thing new to me is the realization that the Treasury has to print new money to meet the bills of government as they come due, and the Fed has no option but to talk down rates at the same time they increase them.

I say; leave the short rates where they are, and let the long rates rise. Then the mortgage holders can roll over in cheap short-term mortgages without having a housing market bust. The rising long-term rates are going to reflect a stronger economy and rising inflation, but what’s to worry. Corporations will return to capex programs by retaining the cash they are presently dividending out or using to buy back shares. And later if they need to raise more capital for capex, rather than borrow it from banks at high(er) rates, let them issue more shares, at higher stock prices.

I think it’s time to finish a program of adjusting global currencies, and get on with building wealth. There is nothing wrong with today’s inflation rates, or money supply growth rates, as long as real wealth is being created. There are plenty of opportunities to do that.

But we all have to stop saying there is no inflation, when there is. We have to stop saying that the jobs being created are terrific when engineers and well-educated graduating students cannot get career-type jobs.

We can start by letting the commodities markets go to where they will collapse from too much speculation. That will bring down all equity prices for a sharp pullback, which may slow economic growth somewhat, but it won’t stop it.

Worrying about hidden agendas in Washington and competing capitols will continue to hurt the economy, and the capital market. It’s time the capital markets and the global economy took precedence to political gamesmanship."



Bill Cara - All around good guy - Note - add that to my headline - now : "Putz, Yutz or all around good guy"

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