Where We Are Today (Part II in a Series)
Thursday, November 25th, 2004
By Michael Lombardi, MBA for Profit Confidential
On Monday, I talked about a hypothetical situation where President Bush knew the tech-bubble burst just before he started his first term, and how he met with Greenspan in order to discuss avoiding a severe recession in the post tech-bubble environment.
My conclusion, and this is just my belief, is that Greenspan convinced President Bush that the only way to avoid a severe recession, and to not repeat the Japanese economic catastrophe, was to lower interest rates to the lowest they have been in a half-century. Here’s the continuation of my make-believe Greenspan/Bush discussion, after rates hit a 46- year low:
Bush to Greenspan: “Alan, my friends in Texas and New York tell me they’re making big money selling their properties. Those low interest rates sure did get consumers spending like you said they would.”
Greenspan to Bush: “Mr. President, it’s about time we started moving interest rates higher, even if it’s before the election, so we can cool the housing market and show everyone the economy is doing so well that we can even raise rates.”
Bush to Greenspan: “Good idea. You better do it before you have a housing bubble.”
And that’s where we are today. The Fed has raised the Federal Funds rate to 2% from its 46-year low of 1%, and the majority of economists believe that another quarter-point hike will come in December. Most analysts are calling for a Federal Funds rate of 3% by the end of 2005.
Greenspan and the President are happy because the stock market keeps moving higher, real estate has not crashed, and the economy looks good for now. Tomorrow, I will share with you my opinion on how this cozy situation will end.
Next Post: Where We’re Going (Part III in a Series)Previous Post: How It All Started (Part I in a Series)
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
