Jonathan S. Krasney is ample proof that you don’t have to be on Wall Street to be an avid watcher of Alan Greenspan’s latest moves. From his perch in suburban Brookside, New Jersey, where he runs Krasney Financial LLC, Krasney keeps a keen eye out for what the Federal Reserve may do next. Krasney, who manages $100 million in bonds and $60 million in other assets, shared his thoughts on interest rates and stocks recently with Editorial Director William Glasgall.
Greenspan has been taking a tougher tone on inflation lately. When he says, “Maybe I’ll be more vigilant,” what does that say to you? The bond market has accounted for 75 and possibly 100 basis points of tightening already. But if business remains robust and employment remains strong, is it possible that the Fed could raise [rates] 100 to 150 basis points in the next year? It could happen.
What does that mean for your investment strategy? If you go out four, five, or six years and interest rates tighten substantially, you’re going to have a negative total return. What’s the sense of that? I’m buying bonds due in 2005 and ’06. It’s a safe place to put money without worrying about the vagaries of the market. Shorter is better right now.