Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: smolejv@gmx.net who wrote (22486)	8/10/2002 6:25:06 PM
From: Mark Adams	Read Replies (3) of 74559

DJ, The cost of capital is rising (higher corporate bond spreads) while excess capacity (US and Global) seems to remain. I think ML is looking at the (US) PC refresh cycle starting to kick in, supporting some rise in investment, albeit at a much slower pace than pre Y2K. A more positive note, apparently productivity gains have helped lower the cost of labor 2.2%. This may help offset higher capital costs, leaving overall profitability unchanged. It truly is an uncertain landscape out there. I'm trying to determine if both the ML opinion and that expressed here Message 17861558 can be correct at the same time. What say you? Can both views be correct? I suspect that the complaints expressed about the quality (or lack thereof) of statistical data on the US economy might be a source of the current fog of uncertainty on the near term US and Global economic future. I think it's important to get a working thesis in place, quickly. I think one thing that really stood out in the ML article, is the adjustment of the consumer debt burden for a higher level of credit card transactions. This is the first I've seen of that, and not an easy piece of info to come by. Consumer debt burdens have been a key foundation stone for the secular bear case. It appears that ML has found a way to determine how much additional credit card debt is transitional, ie balances paid off monthly, where credit card debt used for convenience or to collect reward points. The adjusted numbers tell quite a different story from the unadjusted. So Corp Capex may remain in the toilet near term, but the consumer may not be in as desperate straits as previously thought. WDIK?

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