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Technology Stocks : All About Sun Microsystems
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To: Robert Scott who wrote (47242)2/5/2002 7:08:19 AM
From: Steve Lee  Read Replies (1) of 64865
 
I don't expect a Q4 downward revision of 1.5% either, so I agree when all the counting is finished Q4 will indeed be better than Q3 but this reflects consumer activity. This is consistent with my belief that the consumer is only just beginning the recession.

You say people have more assets and debt is more affordable. There is some truth in this as property prices are near peaks and interest rates are near lows. I don't see any major hikes in rates soon although of course it will happen within the lifetime of most of the recent refinancing - so any recovery, even in far out future will be damped by this debt.

Trouble is, unemployment is still rising. I looked at the govt numbers recently and the seasonally adjusted numbers were less than half the real numbers. Now you can say that is just normal seasonal patterns but it is the real numbers that decide wheether people can afford their repayments or not. As people downsize their homes or move to renting, there will be a real estate crash, and those that can afford their payments will have negative equity. This will dampen any recovery even in the far out future.

Your assets argument is hurt by stock market losses. Ten trillion dollars of market cap has been wiped out since April 2000. Some say no mattter, it is only recent winnings and people are back to where they were in 98. Trouble is since 98 people have been refinancing and chasing real estate prices up and taking on commitments for $30000+ vehicles based on those late 90's market gains. They didn't expect to give those gains up. But now they have. You see CEOs of WCOM and OCCF getting margin calls on massive personal loans. These people are having to sell assets. That is being replicated on a smaller scale with the man in the street and the process is only just beginning.

Removing ten trillion dollars of liquid assets from the economy in less than 2 years is something the Fed cannot fight. And the govt cannot fight it through tax cuts. Wall Street and corporate America has attempted to fight it through BS pro forma and off balance sheet accounting. Those last lines of defence are giving way.

Anyway, it's an interesting discussion. We have both placed our bets. Now let's see how it all turns out.
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