Peter,
I agree with you and McTeer: something is wrong here. But it isn't really surprising, we've just had an orge of investment, both in equities and equipment. Between Y2K and the building of Internet in, essentially, just 5 or 6 intense years (it's just incredible if you actually think about it and have any time perspective on it that the internet basically didn't exist less than 10 years ago), demand for investment went through the roof, and overshot a high roof. So, of course there will be a hangover. And of course most of us in the market got just as enthusiastic as the CEOs who were overordering and overbuilding, and are feeling a lot poorer today than we did three years ago.
Steinberg seems goofy to me. He is either continuing to hold his nose while spouting a line favorable to his company or he is an idiot. Sec of T. Paul O'Neill said recently that he thought 4Q growth would be 3-3.5%. Where are they getting these numbers from? Every CEO other than DELL says business is frozen, visibility blurry or bleak, and who knows when the fog will lift. Dell says they'll have $200m more in revenue than expected, and, WOW, man, it's recovery time! What nonsense. But it's also nonsense to say that what will end of this recession is a tax cut for the rich, as Bush does. That is the last thing we need, with overcapacity all around us. We need a tax cut for people who will spend the money, not the rich who already have too much money to know where to spend it all.
On inflation: two personal anecdotal tales: (1) just got my home insurance notice from State Farm. They raised our premium by 40%. I got it lowered to about 10% by increasing the deductible and decreasing the amount of coverage slightly, but still... They claimed it was because of increased claims and reduced stock market returns. (2) This is a small town with only two real supermarkets, Krogers and Big Bear, with a decent sized IGA outlet as well. The former is the pricing leader, and has raised prices by between 10 and 50% over the past two years. The other chains just follow them, often pricing their goods 5-20 cents higher than Kroger. It would be interesting to know if this is happening in other localities as well, or is this just a local phenomenon. It certainly doesn't show up in the CPI stats.
Personally, I don't believe the stats. I think the govt just learned that they can save a lot of money by rigging them, and so they did.
Anyway, I'm not buying this rally, even if there is a little Dell followthrough today. Still sitting on cash.
Sam |
