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two well-known colleagues who believe mr. straszheim was right the first time are david <unk> jr. and a. gary <unk> both of whom run their own new york research firms |
mr. <unk> said in august that his <unk> index signaled recession |
mr. <unk> who was merrill lynch 's chief economist from N to N has <unk> a recession for months |
my own personal opinion is that don threw in the towel just about the time he should have doubled his bet he says |
now a rocky stock market and weak corporate profits may further threaten the economy |
and mr. straszheim conceded after a recent drop in manufacturing jobs that it may prove to be the case that we got <unk> that we pulled the recession forecast at just the wrong time |
he adds that 's the forecasting business |
however risky the business it 's brisk these days |
<unk> by bosses brokers clients and media people and pushed by their own <unk> wall street economists are forecasting about everything from broad economic trends to the <unk> monthly indicator |
but the surprisingly durable seven-year economic expansion has made <unk> of more than one forecast |
this is n't the quiet economic science practiced in the universities |
this is the commercial version |
carrying the new message on the road mr. straszheim meets confrontation that often occurs in <unk> proportion to the size of the client |
no sophisticated professional expects economists to be right all the time |
some smaller clients do n't seem to notice his switch |
but with some clients the talk can heat up a bit |
dennis o'brien the treasurer of commonwealth edison co. in chicago <unk> a <unk> approach waiting for an opportunity to ask about the forecast |
a good half-hour into breakfast at the palmer house mr. o'brien looks up from his plate after mr. straszheim says something about people who believe interest rates are about to <unk> |
i 'm one of them who hope they will with $ N billion in debt on the books |
is that the forecast mr. o'brien asks trying to <unk> down the economist |
he does n't fully succeed although mr. straszheim lists an array of interest-rate scenarios |
in a <unk> conference room at alliance capital management in minneapolis in contrast the firm 's money managers seem ready to <unk> mr. straszheim to the wall |
alfred harrison the manager <unk> mr. straszheim 's <unk> back at him do we want to go through this |
or can we ask you why you changed your forecast just when it 's about to be right |
<unk> in his chair mr. straszheim replies that the new outlook though still weak does n't justify calling a recession right now |
it 's all in this <unk> you do n't want to look at |
we could still have a recession at some point |
one of mr. straszheim 's <unk> themes is that the state of the economy is n't a simple black or white |
sometimes like now it 's gray |
this <unk> assessment moves one alliance portfolio manager to ask so what is this a <unk> recession |
another challenges merrill lynch 's bond recommendation last year |
we 're not running that ad campaign any more mr. straszheim <unk> in a rare show of <unk> |
he adds i think it was a fairly decent call |
explaining his change of mind mr. straszheim says later it 's hard to <unk> this on one factor |
he says the economy and especially the employment numbers look much better than he expected interest rates have generally declined inflation has n't run <unk> |
our business is constantly looking at all these things he says |
his new forecast calls for a soft landing |
and it may be right judging from last week 's report that inflation-adjusted gross national product rose at a N N annual rate in the third quarter |
mr. <unk> understands mr. straszheim 's problems |
there 's <unk> pressure on economists to forecast these numbers he says |
you make a forecast and then you become its prisoner |
it is indeed hard to back away from a widely publicized forecast and mr. straszheim is <unk> with the <unk> on this trip |
his approach to the <unk> is direct but <unk> |
for some time we had forecast negative third and fourth-quarter growth |
we pulled that forecast he begins <unk> in a meeting with <unk> <unk> & <unk> inc. officials in minneapolis the first stop |
crane co. said it holds an N N stake in milton roy corp. an <unk> maker and may seek control of the company |
crane a maker of engineered products for aerospace construction defense and other uses made the disclosure in a securities and exchange commission filing |
in the filing crane said that in the past it considered seeking control of milton roy of st. <unk> fla. through a merger or tender offer and that it expects to continue to evaluate an acquisition from time to time |
crane officials did n't return phone calls seeking comment |
crane holds N milton roy shares including N bought from sept. N to thursday for $ N to $ N each |
in new york stock exchange composite trading friday milton roy shares leaped $ N to $ N each while crane sank $ N to $ N a share |
john m. <unk> chief financial officer of milton roy said the company has no comment on crane 's filing |
milton roy recently <unk> off unsolicited <unk> from <unk> <unk> corp. a <unk> mass. maker of <unk> products |
milton roy disclosed in may that it was approached for a possible acquisition by <unk> <unk> which agreed to purchase milton roy 's <unk> line for $ N million in february |
<unk> <unk> acquired some N N of milton roy 's common stock before throwing in the towel and reducing its stake in early september |
<unk> group began raising its milton roy stake in july and holds N N according to a recent sec filing |
it has n't made merger <unk> to the board |
earlier this month milton roy signed a letter of intent to acquire automated custom systems inc. orange calif. and its sister operation environmental testing co. in <unk> <unk> |
the companies are <unk> concerns |
under the terms milton roy will pay an initial $ N million for the operations and additional payments during the next four years based on the earnings performance of the businesses |
in the nine months milton roy earned $ N million or $ N a share on sales of $ N million |
last week the british displayed unusual political <unk> |
the chancellor of the exchequer nigel lawson resigned because prime minister thatcher would not fire her trusted adviser sir alan walters |
the opposition labor party leader neil <unk> in a display of the male <unk> typical of the british lower class denounced mrs. thatcher for having an independent mind and refusing to <unk> the men in her cabinet |
the british press making a mountain out of a <unk> <unk> an unnecessary economic crisis by portraying mrs. thatcher as an <unk> who had thrown economic policy into confusion by driving a respected figure from her government |
behind the silly <unk> lies a real dispute |
mr. lawson and his <unk> colleagues want the british pound formally tied to the west german mark |
sir alan considers this an <unk> and costly policy |
as there is an effort to <unk> the dollar either to gold or other currencies the dispute is worth <unk> |
until his resignation mr. lawson had been conducting british monetary policy as if the pound were tied to the mark |
when mrs. thatcher cut the top tax rate to N N mr. lawson flooded the country with money to prevent the pound from rising against the mark |
as a result he <unk> the inflation that mrs. thatcher through a long and costly effort had subdued |
with inflation surging the pound began falling against the mark |
to keep the exchange rate pegged mr. lawson tightened monetary policy and pushed interest rates up to N N |
this doubled the mortgage interest rates of the many new homeowners that mrs. thatcher 's policies had created producing widespread <unk> and pushing labor ahead in the polls |
instead of <unk> his mistake in letting the exchange rate dominate both british economic policy and mrs. thatcher 's political fortune mr. lawson pushed for <unk> the pound formally to the mark by entering the european monetary system which subordinates all member currencies to german monetary policy |
this put mrs. thatcher in a <unk> |
the concept of european integration is one of those grand schemes that appeal to intellectuals the media and the <unk> but are full of practical <unk> |
if the pound had been tied to the mark the british would have been unable to cut their <unk> tax rates |
the reason is simple |
when a country cuts tax rates it makes itself more attractive to investors and drives up the value of its currency |
it was fear of disturbing ems exchange-rate relationships that caused the <unk> government in france to be <unk> about cutting tax rates |
<unk> <unk> the finance minister at the time was sold on the <unk> policy but was concerned that his government would be criticized as <unk> for disturbing the linked european currency relationship |
the price of attracting capital whether one 's own or that of foreigners is a trade deficit |
to avoid this deficit mr. lawson inflated the pound in order to prevent its rise |
this <unk> policy could not prevent a british trade deficit |
consequently mr. lawson <unk> mrs. thatcher with a record trade deficit renewed inflation and high interest rates three political failures in a row |
little wonder that mrs. thatcher 's opponents were so anxious to keep mr. lawson in office |
it is extraordinary that the british treasury thought it could prevent a trade deficit by <unk> the pound |
the british <unk> statistics show that after the top tax rate was cut to N N the flow abroad of british capital slowed to N billion pounds $ N billion at the current rate in N from N billion pounds in N |
this change in the british capital account required an offsetting change in the trade account a change that could not be prevented by <unk> the currency |
nigel lawson was a victim of the <unk> confusion in thought that has been characteristic of western financial circles during the 1980s |
the most important governments have ignored the role of low tax rates in attracting real capital investment instead <unk> financial flows in response to high interest rates |
this has led them in a <unk> and <unk> policy circle |
first comes monetary expansion to drive down the currency 's value that was pushed up by <unk> reduction |
then when the currency falls interest rates are raised to attract financial flows in order to stabilize the exchange rate |
this policy is totally <unk> and sir alan is correct to point out its deficiencies |
britain and all of europe need to reconsider the prospects for european integration in light of the possible reunification and <unk> of germany |
a unified germany that remained within the western alliance would give germany such an <unk> position that all other members of a unified europe would become <unk> of the german state |
unless the soviet union <unk> german reunification is likely to require germany 's <unk> |
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