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Morning News

Holland: Fed Won't Trigger Recession

Aired May 23, 2000 - 9:18 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

BILL HEMMER, CNN ANCHOR: Eleven minutes from now the stock market opens for trading on this Tuesday morning and analysts on Wall Street that tell us with those markets bull or bear they don't last forever. We know that, and this bear and bull has been around for years now, make that a bull.

For a read on where stocks may be headed today, up to New York to Michael Holland who advises investors on things like...

There's Michael, nice to see you again, good morning.

MICHAEL HOLLAND, HOLLAND AND COMPANY: Good morning, Bill.

HEMMER: Did you bring us a lifejacket this time? May need something to keep us floating. Let's see: Fed fears, earnings, warnings, valuation issues, what's an investor to do in these times?

HOLLAND: Well, I think yesterday was a microcosm, Bill, of what the individual investor has continued to do since the beginning of this bull market, which I think we are still in, since the early '90s. And that is: In the afternoon, people on the floor of the New York Stock Exchange said the institutional and professional investors stopped selling and the individual investor came in and bought bargains. That's happened ever since the beginning of this market. I think it's continuing,

I think the only thing in -- one caveat here is the first phrase that you used, first two words: Fed fears. I think they're real, I think there's a possibility of overkill. But the good news that's being talked about: Alan Greenspan knows the markets, and business people are worried about it. So I think it's not a likely circumstance, but it's there.

HEMMER: End of June, next meeting for the Fed. If there is a positive, you mentioned people going in and buying on the dips. That's what is preached anyway.

Look at the final two hours of trading yesterday. We pull up the chart, your first for the Dow Jones Industrial Average with yesterday's session. At one time the Dow was down over 200 points, it later finished -- we have that chart. There we go. It later finished down about 84 at the close.

But the Nasdaq chart is much more interesting. It dipped as low as 3172, which would be the low point for the year in 2000, go to the Nasdaq chart now. There we go, very nice. But it did bounce back and finished moderately down.

But what do you see in this? do you see a silver lining or do you see a short-lived rally?

HOLLAND: I absolutely see the silver lining. I think that we -- at the very least we have short-lived rally. But I think that the important thing is the date that you talked about and the comments that are made by the Federal Reserve governors between now and the end of June. I think there's a possibility, and I've been optimistic since the early '90s, I think there's a possibility that the Federal Reserve could screw this one up. I don't think they will. But if they do raise interest rates too much, then we will go into a recession and have a bear market.

I don't think that's a good bet. I think Alan Greenspan doesn't want to go down in history as having snatched defeat from the jaws of victory. I think long-term, most economists expect less than three percent inflation, therefore interest rates are already substantially high. So I think Alan Greenspan can say: job well done. I hope he doesn't overdo it. If he doesn't overdo it, which I think is the right bet, we have a continuing bull market. Because earnings are going to continue to be very good.

HEMMER: That's a great point, we're all learning as we go through this, aren't we?

HOLLAND: I hope including Alan Greenspan.

HEMMER: OK, Michael, thanks again, come back, OK?

HOLLAND: Thank you, Bill.

HEMMER: Michael Holland, up live in New York.

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