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Your investments and the economy What happened to the narrow trading zone of recent weeks? "This (last week's market jolts) certainly put into question the (Federal Reserve Board's) credibility. If you remember, a couple weeks ago (Fed Chairman Alan) Greenspan was telling us that weak June figures were just a speed bump to recovery." Has the Fed been too optimistic? "Recently, the Fed was estimating (gross domestic product) growth of 4.5 percent for the rest of the year, which is a full percentage point higher than most economists thought. Clearly, the Fed was looking for an uptick for the rest of the year. This calls into question the strategy of raising interest rates and the prospects for the year." "My sense is they will continue to raise interest rates because we still have a very, very low level of interest rates. They'll want some leeway for lowering rates in the future. I think, ideally, the Fed would like to see (the Federal Funds Rates) at 2 to 3 percent (up from current rate of 1.25 percent). What do you make of the 32,000 jobs created in June? "The 32,000 figure was very discouraging. The employment reports are now probably the most important economic barometer we have. I know, most people call the (economy) of 1991 the jobless recovery. But, clearly, we are having top line economic growth without an improved job picture. (President George) Bush will preside over a 1.1 million loss in jobs during his administration and that hasn't occurred since (President Herbert) Hoover. How are rising oil prices affecting inflation and the economy? "Oil is a double-edged sword. A key element of the economy is the production of goods and services, which is affected by inflation. But, also, oil prices are a kind of tax, funneling money away from retail and other areas and putting it into gas pumps. Oil prices are having a bigger affect on the economy than on inflation." Do you have any hot investment tips? "The only real underlying theme on the ( Standard & Poor's 500 index) is the fact that dividend stocks are doing better. The equity market doesn't carry many risks right now -- the valuation of the market isn't extreme by any measure … They (stocks issuing dividends) are starting to recover and outpace the market."
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