A lot of news in NY about the demands of the MTA, Metropolitan Transit Authority, Unions' Contract demands. The MTA management is offering 12% over 3 years - 4% per year, the Unions are looking for 27% over 3 Years - 9% per year.This is what Greenspan was worried about when he looks at the tight labor markets. Assume the Unions will settle for around 15% in which case other Municipalities and Businesses will begin to see Wage spirals coming at Contract Expiration. I still expect the FOMC not to do anything further this year. Early next year will be another story. If there are additional substantive wage hikes, you will see equally substantive Rate hikes. He will not allow inflation to make a beachhead, even if it means crashing the Market. Short-term instruments would be the safest bet, MM Funds, as their rates of return will rise with the rest of the markets. Dividend stocks, such as Utilities, might take a beating. Companies with contracts expiring in 00 may also see some significant declines if the wage trend is pervasive.
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