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To: Didi who started this subject	11/18/2000 10:12:51 PM
From: Didi	of 1115

Commentary--Elaine Garzarelli for 11/17/00... garzarelli.com ----------------------------------------------------------------------------------------------------------------- Edited for emphasis and ease of reading. Stock market analysis for November 17 The FOMC met on Wednesday leaving the federal funds rate at the same six month level of 6.5% . Their main concern is inflation because of tight labor markets and higher oil prices. The Fed recognized, however, the correction in the stock markets recently has helped the economy slowdown. Truck sales are down 20% and steel scrap prices are at their lowest level since 1986. The next meeting is on December 19th, and we believe an EASING early next year is likely. An important inflation indicator we watch (and so does Greenspan) shows there are NO SIGNS of higher inflation. (This indicator is detailed in our newsletter). With a Fed tightening not a concern for the markets, earnings remain the factor that will drive the stock market. Earnings reports in general are likely to disappoint (Hewlett-Packard's profits were poor recently) because analysts must still revise their earnings estimates down in line with a slowing economy. As bottom-up analysts, they do not always factor the economy's growth enough into their equation -- but rather look at the company's projected growth rates. Until analysts come down from their robust earnings growth estimates, we should continue to see a volatile stock market. Our models show earnings growing a mere 7.5% next year for the S&P 500 versus analysts forecasts of double digits. Our 14-indicator composite remains in neutral territory, therefore we are not investing in the overall S&P 500, but rather in selected groups. ----------------------------------------------------------------------------------------------------------------- Interest rate/bond market analysis for November 17 With a continued budget surplus and no inflation in sight, the bond market rallied this week. We recommend bonds as part of one's asset allocation and we continue to predict the 10-year yield to decline to 5.3% to 5.4% by the end of next year. Currently the rate is 5.67%.<<<

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