Two points of view. First from Comstock (da' Bears)
>>Some Straws In The Wind
Just when the majority of business economists has decided that the economy has begun to recover, some straws in the wind are appearing that indicate conditions are not that rosy. The University of Michigan confidence index turned down last week and is back under its August level. Weekly initial unemployment claims ticked up indicating that all is not well with the labor market while hordes of unemployed workers will be running out of eligibility over the next few months with little likelihood of finding jobs. The weekly ECRI leading indicators, which had been hinting at signs of recovery, has now dropped for the last two weeks. Although the semiconductor industry book-to-bill ratio climbed to 0.81, the rise resulted from shipments getting worse rather than orders getting much better. In addition, as long as the ratio remains below one, it means that company orders are less than shipments. Overseas, French fourth quarter GDP declined and British retail sales, which had been holding up well, turned downward. In its current issue Business Week pointed out that a large number of zero-coupon convertible bonds are due to become putable soon, and are not likely to be converted to stock in the currently beat-up market. This means that a large number of hard-pressed companies will have to come up the funds to pay off these securities at a time when their balance sheets are already stretched. With overall manufacturing capacity already excessive, this is another bad omen for upcoming capital spending. Moreover the problems with accounting are far from over as new revelations come out of the woodwork every day. Already, a large number of companies are having trouble using the commercial paper market and are being forced to use their bank credit lines. All in all it is certainly no mystery why the market has made no progress since early November despite the reports that the economy is presumably bottoming. < |
