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Soros nixes U.S. rate fears
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January 30, 2000: 12:58 p.m. ET
Financier expects gradual market increase, but calls stocks overvalued
By Staff Writer Rod Cant
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DAVOS, Switzerland (CNNfn) - George Soros Sunday waved away fears of a sharp rise in U.S. interest rates that have undercut Wall Street in recent days, although he stuck to his belief that the U.S. stock market is significantly overvalued.
In an interview with CNNfn at the World Economic Forum in Davos, the billionaire financier predicted a gradual rise in U.S. borrowing rates rather than any rapid shifts, as some investors have feared.
"If you listen to [Federal Reserve Chairman] Greenspan you know the Fed will not move aggressively, it will move gradually in response to market conditions...it's most likely to raise rates in a quarter of a percentage point installments," he said.
Despite his lack of concern about rapid rise in interest rates, Soros continued to warn that he believes the U.S. markets are looking very expensive.
"The question is which part of the [boom/bust] curve we are on?" he said, "We are past the moment of truth where everybody knows certain segments of the market are overvalued."
However, he said that though stocks appear expensive, a decline might not be imminent.
"This segment has considerable momentum and people are not ready to jump ship as long as prices are rising," Soros said. He added that investors have become unaffected by short-term blips in the market and have learned to buy on these dips, which have previously been followed by market rebounds.
It's only when the decline in stock prices appears to have taken a firm hold that Soros expects significant selling to commence. He would not comment on how he close he thinks the market is to breaking.
Excerpts from Soros's interview with John Defterios will appear on CNN's Moneyline News Hour at 6:30 pm ET on Monday.
Soros also spoke to CNNfn on one of his favorite themes: how best to aid the developing world. He said he recognized the difficulty in marrying the aims of free trade with developing countries' wish to industrialize as fast as possible.
"We are on a kind of collision course, and occasionally we collide, as in Seattle," he said, referring to the street battles which accompanied the November meeting of the World Trade Organization.
Soros put little stock in President Clinton's speech urging a closer dialogue between business and social organizations, believing the U.S. has other priorities. He also had harsh words for the non-government organizations (NGOs) which have been so critical of the government-sponsored move toward free trade.
"The NGOs are very good at protesting, they're not very good at finding a constructive solution," he said.
Soros said the clear aim of President Clinton's last year in power is to get China into the WTO, "Clinton has a concrete goal of getting China into the WTO, his near-term agenda is to get China in." 
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World Economic Forum
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