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Bernanke Speech: Bulls and Bears Argue

The bulls and the bears are still slugging it out over the speech Tuesday by U.S. Federal Reserve Chief Ben Bernanke--and if he was right about the economy. Stephen Stanley of RBS Greenwich Capital is positive on the speech. Joel Naroff of Commerce Bank was not. Both appear on "Morning Call."

Naroff doesn’t see any sectors where growth is possible. He says Bernanke underestimates the influence that the lagging housing and autos sectors have on the economy as a whole.

He also doubts that consumers will be running out to spend any more money – especially because they’ve spent the last year and a half drawing down their accounts. He says that if Bernanke’s 2% to 3% growth prediction comes true, the Fed most likely won’t make a move through 2007. His own predictions see a necessary rate ease by early summer.

Stanley agrees that consumer spending may drop a bit – but he sees income gains as pivotal in keeping the money flowing. More importantly, he says, is that housing’s drag on the economy will wane. We’re going through the worst of it now. Expect things to stabilize. Six months out he sees a good economy – though inflation could be a bit high and the labor markets tight. A Fed tightening – if at all – is a ways off.