Gottfried, Thanks, for your excellent post in the following.
If I recall correctly, CEO Morgan, stressed, paraphrasing, "way Japan goes the way that Asia and AMAT goes since 50% of AMAT is outside the US." I checking the DW bpasia, bpeuro (Europe) and bplati (Latin American) charts. It looks as though Asia and Latin America have already recovered. It appears to me that with these two countries already rebounding that the cost of American goods from these countries must go up and consequently the cost to consumer and potential price increases, unless the US companies absorb the cost or wages and prices are held in check through increased productivity and mergers. Naturally, this may mean more employees may be laid off due to maximizing cost controls like Boeing, and other corporations.
With these uncertainties can Alan Greenspand, and the FED take the increased risk to increase interest rates now and negatively impact the US economy. IMO, I do not think he can. But Tuesday, we will know. Without a FED increase I believe that AMAT and the Corporations and the Market will continue to be in a BULL market the next 2-3 months.
IMO, this is good for AMAT. Follow the FED and do not fight the tape is alway my motto along with buy low and sell high.
Reactions to Gottried's following post, anyone?
Just my $.02
lp-llc.com
Time To Buy Bonds
By Kathy Jones, Economist,
Prudential Securities
The bond market was under heavy selling pressure during
the past week as concerns about a revival in the global
economy and the possibility of Fed tightening weighed on
the market. Yields on the long bond shot up to the highest
level in a year at 5.80% before a modest rebound on Friday.
THE GLOBAL RECOVERY: V OR W?
The biggest fear in the market is the prospect of a global
recovery. Weakness in the global economy outside North
America has helped to keep inflation down in the U.S.
Falling import prices and huge excess capacity abroad
coupled with weak demand all have contributed to the
declining trend in U.S. inflation in the past two years. The
possibility of these conditions reversing has weighed heavily
on the bond market, particularly given the strong pace of
domestic demand.
However, we consider these concerns to be over done. The
recovery in the global economy is proceeding at a very
slow pace. In Asia, there is improvement evident in
Thailand, Korea and Malaysia but there continues to be
ample excess capacity and weak domestic demand in these
countries. The rebound in industrial production has been
driven by re-stocking inventories but this is just feeding into
more production. In the case of these countries, they are still
investing in the "old industries" where competition is fierce
and excess capacity is huge. Meanwhile, Japan and China,
the two biggest economies in Asia are struggling. Japan
may have hit bottom, but domestic demand is still falling
steeply as unemployment climbs to record levels. The
banking system is not yet back on its feet and although the
government continues to throw money into the economy,
stability is about all that can be hoped for. China's problem
is the banking sector as well. Non performing loans are
estimated at 20% of GDP. China's government is using
fiscal stimulus as well to offset declining domestic demand,
but this is going to be difficult to sustain in the face of the
bad loan problem. The upshot is that although Asia may be
past the worst, expectations for the pace of recovery are
probably much too optimistic.
The same problems are just now rotating to Latin America.
Although the region avoided the contagion effect of Brazil's
devaluation, it won't be able to avoid the economic effects.
Industrial production is falling as well as domestic demand.
Exports should continue to hold up, but the competition in
prices will continue to be intense. Up until late last year,
Latin America was a source of strong demand for U.S.
goods. Now the trade balance has flipped from a U.S.
surplus to a deficit. Even exports to Mexico are slowing
despite its relatively buoyant economic condition and the
strength of their currency relative to the dollar.
Finally, Europe is probably best characterized as bumping
along the bottom. The two biggest economies in Europe,
Germany and Italy, are still experiencing deterioration in
industrial demand. In fact, it would not be surprising to see
Germany print another quarter of negative GDP growth in
Q1 1999. Domestic demand is soft in most of Europe as
well as unemployment remains stuck at 10.4%. The recent
interest rate cut from the European Central Bank should
help over time, but as they continue to point out, Europe's
problems are structural and not related to interest rates.
There should be some quickening in the pace of global
growth later this year simply because last year was so
disastrous and central banks around the world have
responded by cutting interest rates very sharply. However,
there is a risk that the recovery will be W-shaped rather
than V-shaped. Moreover, with huge output gaps in every
region outside North America, it is difficult to make the case
that growth is going to pick up enough to boost commodity
prices and threaten inflation. Certainly American farmers,
miners and exporters would like to believe that there is
pricing power in their industries, but for the time being, it
doesn't appear likely. It won't happen if interest rates rise
sharply around the globe.
DOMESTIC DEMAND: SOME MODERATION IN SIGHT
The domestic economic data released last week hinted at a
slight moderation in the pace of growth. Although the U.S.
economy remains strong, there are some hints that it is
cooling off. Personal income and consumption are still
growing at healthy rate, but came off the extraordinary
gains of late last year. Income growth at a 5% pace is
consistent with the recent trend while spending has edged
off its highest levels. In addition, the chain store sales figures
suggest that spending in April was subdued relative to the
pace of the first quarter. We continue to believe that there
will be some slowdown in the pace of consumer spending
simply because the pace has exceeded income growth by a
wide margin for a long period of time. (Figure 1) Although
the wealth effect is very much in evidence, the limits of that
affect are likely to be seen soon. . . |
