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Cavuto on Business

Posted By Barry Ritholtz On July 3, 2004 @ 10:00 am In Media | Comments Disabled

Cavuto.bmp [1]

Here’s an outline of what we will be talking about on Cavuto on Business [1] this morning @ 10:30am EST:

Question: Would hiking rates sooner be better for market and economy than a bunch of 1/4 point hikes spread out over the next year? Why?

My Answer: The Fed is trying to make up for “bungling” the rate tightening cycle of 1999-2000. Last time, they failed to communicate their intentions clearly: they raised from a neutral bias, they cut rates from a tightening bias, they went a 1/4 point one meeting, a 1/2 the next – it was just a mess. And, it roiled the markets, exacerbating the 2000 crash.

This time, the Fed very specifically telegraphed their intentions: Sure, they could have – and probably should have — hiked rates sooner.

Greenspan is a wiley politician — he’s very conscious of the last time there was a President named Bush in the White House: He cut rates too slowly, and then got blamed for Bush (41) Senior’s defeat — the last thing he wants to do in this election year is get blamed for the defeat of another President named Bush.

So yes, he probably erred on the side of waiting too long; He should have done the first 1/4 point raise two meetings ago . . .

ON THE SPOT: Name a trend you think will have an impact on the markets or economy going forward

My Prediction: In the 4th Q of this year, Honda will introduce the 2005 Accord hybrid — the first full size, 5 passenger hybrid to hit the US market.

I’m a muscle car fan, and I look at hybrids like the Toyota Prius or even the Honda Impulse as small niche toys for “Greens” — not real transportation.

This car changes all that, and Honda’s approach is brilliant: They are positioning this mainstream 5 passenger sedan hybrid as a premium option –like leather seats. But its not about good gas mileage (31 city, and 38-40 highway) it actually has MORE HORSEPOWER and BETTER PERFORMANCE than the regular Accord V-6.

Honda has figured out how to mass produced this technology and make it invisible — no trunk full of batteries or loss of usable space.

While Hydrogen is still decades away, this is going “mainstream” — Detroit is 2 years behind Honda, and this will drag them kicking and screaming into hybrid technology.

AND, anything that lessens our dependence on Middle Eastern oil is good for national security.

Toyota’s Volta — a concept sports car with 400 HP, 0-60 in 4 seconds — is something else we may see down the road. Hybrid technology has ben banned from F1 racing.

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