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Wall Street doubts merits of stimulus |
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By Ian Swanson
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Posted: 01/06/09 08:28 PM [ET] |
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Not everyone on Wall Street thinks the stimulus package Congress and President-elect Obama are constructing will solve the economy’s ills.
While many think a combination of tax cuts and spending will spur the economy at a time when consumers and businesses are keeping a tight grip on their cash, others are preparing for another plunge in markets.
“I think there’s still a big split here,” said Brian Gardner, a former aide on Capitol Hill who now offers analysis at Keefe, Bruyette & Woods. Some investors think “the stimulus package is not getting at the fundamental problems of the economy,” Gardner said, particularly the housing problem at the center of the crisis.
Axle Merk, the portfolio manager of Merk Investments, sees Federal Reserve actions to keep interest rates low as “propping up a broken system” and questions the wisdom of providing incentives for consumers to spend on mortgages and cars when they should be saving.
“I think as this thing progresses, they’re going to get frustrated,” he said of Washington policymakers. “Nothing will work out as planned.”
Douglas Roberts, the founder and chief investment strategist at ChannelCapitalResearch, said talk of a 6,000 Dow Jones average has been bandied about among some bears. He expects market rallies as Obama enjoys a honeymoon with Congress and Wall Street, but says all honeymoons end.
Gardner emphasized it’s a minority view that things will get that bearish.
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