Weekend Report: Summers to Stick With Strong Dollar Policy

Also, a merger announcement from Global Crossing and US West might help the market ignore its interest-rate tensions, for a while.
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The secretary is moving back to New York. Long live the secretary.

One of the hallmarks of

Robert Rubin's

career as secretary of the

Treasury

was his strong dollar policy. Not long into his tenure in 1995, he was instrumental in an intervention on behalf of a beleaguered greenback by the central banks of the U.S., Japan and Germany. It marked the end of a decade-long decline in the dollar and, because currency strength is a natural inflation fighter, allowed the

Federal Reserve

to let the economy perk along without raising rates too often.

Back when he was an academic, deputy Treasury secretary

Larry Summers

sometimes argued that what the U.S. needed was a weaker dollar. It's been a long time since he's said such things, and speaking to reporters at the meeting of finance ministers at the

Asia-Pacific Economic Cooperation

forum on Sunday, he made it clear that when he takes over the reigns from Rubin this July, the strong dollar policy will continue. "Secretary Rubin and I have seen this in the same way for many years," he said. "A strong dollar is very much in America's interest."

Meanwhile, Rubin, speaking on

ABC's

"This Week" on Sunday, said he believes the U.S.' strong-growth, low-inflation environment will continue -- easing some of the fears created by Friday's unexpectedly strong

consumer price index

. Of course the real thing people want to know is if Rubin's weekly breakfast partner,

Alan Greenspan

, shares those views.

Rubin also sounded one of his perennial themes -- that budget reduction, not a hefty tax cut, is what the U.S. economy needs to remain strong. Here we know that his breakfast partner is in complete accord. In closing, when asked what his plans were for when he returned to New York, Rubin said he was going fly fishing.

On the corporate front this weekend, there were a number of reports essentially confirming what

CNBC

told viewers on Friday -- that

Global Crossing

(GBLX)

and

US West

(USW)

are talking merger.

The combined company would be something of a rival for giants

MCI WorldCom

(WCOM)

and

AT&T

(T) - Get Report

. Any merger announcement Monday might help the market ignore all its interest-rate tensions. But with the

Federal Open Market Committee

meeting on Tuesday, any such distraction probably won't be very long-lasting.

General Electric's

(GE) - Get Report

GE Capital

unit said that it will buy the $11 billion U.S. commercial loan portfolio of failed Japanese bank

Long-Term Credit Bank

. GE chairman Jack Welch has often said he sees good bargains in Japan. With GE Capital continuing to snap up Japanese assets, it's apparent Welch's money is where his mouth is.

In international news, Russian president

Boris Yeltsin

managed to prolong his tenure a bit longer. Though Yeltsin has few friends anymore, the

Duma's

vote to impeach came to naught Saturday. With voting either for or against impeachment both carrying great risks, many in the legislature stayed away. Others turned in blank or defaced ballots.

Meanwhile,

International Monetary Fund

head

Michel Camdessus

said he is ready to work with the new Russian parliament.

In Japan,

Taichi Sakaiya

, the unusually forthright head of the

Economic Planning Agency

, said he suspects the economy contracted again in the June-March period. That would be the sixth-straight quarter of negative growth.

In The Papers

Barron's

takes the time to chat with

Salomon Smith Barney

drug stock analyst Jason Kolbert, who thinks that drug stocks have been beaten down a bit much lately. With the Baby Boomers getting older, Kolbert sees the drug makers continuing to mint profits.

The funny thing is, Salomon Smith Barney equity strategist John Manley, who was early to call the cyclical rally, has lately been negative on drug stocks, believing that they will continue to underperform value stocks for some time.

Also in

Barron's

, Alan Abelson waxes on an on about Rubin's departure. There's nothing investable here. But then he sings the praises of a hedge fund manager

Tony Pace

. Pace has a couple of stock picks --

Fusion Medical Technologies

(FSON)

and

Identix

(IDX) - Get Report

. Both are small caps. Identix has a price-to-earnings ratio of 491. Fusion doesn't have a P/E ratio -- because there's no E.

When little stocks like this get hyped like this, it's no surprise that they usually shoot higher. It is surprising to see Abelson doing the hyping, though.