Another Bad Week Jude Wanniski May 26, 2000

If there were no hope at all of breaking out of the morass Wall Street has been caught in since mid-March, I would be the first to tell you about it. I've been bullish since May 1974, when I figured out what was wrong with the demand model -- with the help of Bob Mundell and Art Laffer. There is now a bearish interlude only because there is no political leadership in Washington or among the presidential candidates willing to point out the weaknesses in the Federal Reserve's ferocious stance on "wage inflation." That sounds ugly, but it really would not take much to break out of this swamp. A few kind words from Alan Greenspan and we would be back into bluewater, out of the rapids. This could come as a result of Greenspan himself figuring there is enough blood on Wall Street to discourage another spiral of exuberance. Or, intellectual leadership could come from sources outside government, pushing a similar consensus that allows Greenspan to calm things down. I've been bearish before in these last 26 years, because of even worse situations. This "fever" could break at any moment. Perhaps next week or the week after. But don't expect a crazy rally. When it resumes, as I believe it will in this presidential election year, it will be at a measured pace. Remember I reported two months ago that the China PNTR was "in the bag," when I saw the Political Establishment made up its mind to pay any price to get it. It came through much more easily than even I imagined it might. A consensus along those lines is ripening over Fed policy, I think. So forget the bad week and have a nice Memorial Day holiday.