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Bill Greiner on Bloomberg Television's "In Focus."
May 10, 2006
| Time: | 12:00 PM - 12:30 PM |
| Station: | Bloomberg |
| Location: | Network |
| Program: | In Focus |
DEIRDRE BOLTON, host:
Investors are looking to see if there is any indication in
the statement today that the Fed will pause in June. If
the Fed does pause next month, what are the best places to
invest your money (sic)? And of course, we'll cover if
they don't pause.
Bill Greiner is the chief investment officer at UMB Asset
Management and he is joining us from Kansas City, Missouri.
Welcome to IN FOCUS, Bill. Thanks so much for joining us.
Mr. BILL GREINER (Chief Investment Officer, UMB Asset
Management): My pleasure.
BOLTON: So talk to us a little bit about what you expect
today from the Fed, and what you think that means to the
equity market.
Mr. GREINER: Well, we think that the Fed is going to
increase rates by 25 basis points; there is not real
surprise there. What we are looking at, though, are three
major factors that we've been monitoring for the last
number of months--we think are really drivers in parts of
the Fed's rate decisions.
And we feel that two of those drivers are indicating there
may be very close to an end in rate increases, those two
factors being employment trends; employment trends are a
little soft, have been for the last 30 to 60 days following
a very strong start at the first part of the year.
The other factor we feel is general economic activity.
First quarter GDP growth looks like it's going to come in
on a finalized basis right around 5 percent. Our
expectation for 2nd quarter GDP growth is something like
3.5 percent and maybe all the way down to 3.3 percent.
We feel the Fed is very aware that the economy's growth
rate is contracting, so we think those two factors may lead
the Fed to stop raising rates, or pause, as they say.
But the third factor--that kind of gives us reason for
thinking the Fed may continue the rate increase, has to do
with inflationary pressure. We believe that the personal
consumption deflator is really the Fed's key measure of
inflationary pressure. And that number is up about 2
percent over the last 12 months, which is the top end of
the Fed's desired band, so it's not a slam dunk that the
Fed is going to stop raising interest rates, consequently
the big debate right now on Wall Street.
BOLTON: So what do you think--let's say whether they pause
or not in June--I mean, are there fail-safe places for
equity investors to put their money, given this rate
environment, whether it becomes 5 percent, 5.25 percent,
5.5 percent by the end of the year?
Mr. GREINER: I think the real key has to do with the
Street's perception of the Fed's ability and willingness to
fight inflationary pressure. If indeed the Fed does stop
raising interest rates--this is the last time, if that does
happen. Then I think the focus of the Street going forward
over the next 30 to 60 day period of time is going to be
on key inflationary pressure indices.
If we start to see inflation heating up, then I think
long-term interest rates are going to go up, even though
the Fed is on neutral. At the same time, we may see a
renewed pressure on the downside in the value of the US
dollar.
Now, if that's the case, then we think companies that
really do a lot of export work--that sell product--not just
here in the United States, but also overseas--will be key
positive performers.
BOLTON: People should look to the multi-nationals?
Mr. GREINER: Exactly, large cap multi-nationals. We
think this summer have a very good possibility of
performing very well.
BOLTON: Bill, any names that you can name quickly? Are
you talking about GE? Are you talking about Coca Cola? I
mean, more consumer-oriented businesses that service other
businesses?
Mr. GREINER: Consumer oriented organizations--health care
companies, for example, large multi-cap--multi-national
health care companies that have been under tremendous
pressure--downside pressure in prices over the last two or
three years, we feel may see a bump on the upside as the
summer unfolds, just due to the fact that better than 50
percent of their revenue stream comes from overseas.
Others areas would include the continued move on the up
side of companies that are capital spending intensive. You
know, Caterpillar* tractor--and those kinds of names--we
feel will probably do relatively well in an environment
where the dollar continues to move on the downside.
BOLTON: OK, Bill, so we're gonna have you back at the end
of the summer to take a look at those picks. In the
meantime, our thanks goes to (sic) Bill Greiner.
Mr. GREINER: Great.
BOLTON: He is chief investment officer at UMB Asset
Management.
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