My end of quarter pontification piece.. 4/7/01 (gg)
"Jack Welch sees layoffs on the horizon at the corporate giant, and warned that the weakening economy has yet to be hit by the recent wave of job cuts, he said in a television interview that aired on Friday."
One thing nice about retiring generals is that they get more candid in their commentary. Of particular note I find the ".. economy has yet to be hit by the recent wave of job cuts" important.
If GDP is running flat now, its certainly going south into recession acknowledgement. Rate cuts, I'd wager two more before the middle of summer. The federal debt picture is sure to change with less revenue, while Congress and Bush are competing over its use.
When an asset (US Money Supply Capitalization) is doubly drawn on while its recovery feed (taxes) are shrinking, there's trouble on the horizon.
If the Fed debt expands it will impact the dollar which is now at all time highs relative to the Yen and Euro. If it begins slipping two things will happen. There will be the threat of repatriation of foreign investments in our treasury and some pressure to increase lowered Fed rates to stem that pressure, AND with the money supply pumped up to defend the stock markets and recession... monetary inflation, which will seek investment in energy, commodities, and other items which impact the cost of living. Wages will be under pressure so long as job losses remain high, technology and world trade undermine pricing leverage.
So.. two cuts by summer, monetary inflation with a weakening dollar, higher unemployment, less revenue to cover Gov spending and debt payoff. Late this year into 2002 increasing confliction between keeping rates low, commodity inflation and dollar defense.
Longer term investing potential in technology.. The pace of invention won't slow. Current infrastructure will become legacy infrastructure, opening competitive advantages to purchasing and upgrading telco, wireless, satellite and the ever popular PC that's evolving to include other appliance tasks.
At some point this cycle will again ignite investor imaginations.. not as much as the 90's but a good return on investment for those who catch the winners early in the cycle. More on that when there's more visibility but my guess is we'll see some hints of that soon enough after consolidations and debt are restructured to regenerate capital spending.. it might be a surprize who the next winners are..
Jim |
