Tom Keene Talks to Barclays's Larry Kantor
What is your GDP call for this quarter?
We’re looking for 2.5 percent, although we’re running a little bit under that right now. For the fourth quarter we haven’t actually gotten any data, but one of the bright spots is housing, the sector that’s held this economy back. Unfortunately, it’s happening quite late in the cycle, at a time when investment spending, which came in early, is now fading.
In a research note you advise clients to selectively take on more risk. Which risk do you take on?
Equities—and especially U.S. equities. Even though this is a very weak recovery, you’re not going back in a recession. You’ve got housing moving up and everybody—households, businesses—is super cautious. It’s a weak recovery, but not very vulnerable.
What about the central banks?
The big story is the central banks. The Fed is saying for the first time they’ve got quantitative easing that’s sort of open-ended. They’re going to keep pumping money until they see significant improvement.
How far can the Fed push unemployment down without triggering inflation?
The Fed thinks they’re going to keep pumping money until the unemployment rate goes to 5.5 percent. We think that would be very inflationary. Our estimate is that 7 percent is the unemployment rate that’s not inflationary.
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