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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Gordon A. Langston who wrote (36317)	9/12/2000 7:44:00 PM
From: 2MAR$	Read Replies (1) \| Respond to of 769670

Goldman's Cohen/Stk Outlook-3: Watching Japan, China, ECB As U.S. economic growth slows, Cohen said, the performance of individual stocks will depending less on their past performance and more on their earnings potential. Until March, she said, "there was one factor that determined more than any other how an individual stock was likely to perform in the current month. That one factor was how the stock performed in the preceding month. We were very much in a stock-price momentum market. That ended in March." Since then, "we have seen a stock market that has moved much more in line with fundamental factors, including earnings growth and relative valuation," Cohen said. She called that "a very helpful trend" and said it would help prolong the U.S. economic expansion. Still, Cohen said she had a few worries. They included the possibility that the U.S., having erased its once-gigantic budget deficits, will regress to a new era of deficits. U.S. politicians would be wise to be conservative in their estimates of budget surpluses over the next decade before they make plans to spend the surpluses, she said. "We all know that we are at a point of inflection. For years, we as a nation tried to cope with an ever-increasing deficit," Cohen said. "Now we have a very interesting mirror-image problem: What do we do with the surplus?" She said she hoped that no matter who is elected president this year, the U.S. government will devote "some important portion of the surplus" to paying off the national debt. "It's all right to run deficits when the economy needs that additional stimulus," Cohen said. "But the presumption is that when the economy doesn't need that stimulus, the resulting surplus would be used to pay down the existing debt. Let's not forget that our national debt quadrupled between 1980 and 1992. And while that debt is not growing as it was, it is still a very heavy load." Cohen said developments overseas don't pose much of a risk to U.S. prosperity. Still, she said, investors will pay close attention to developments in Japan, China and the European Union. Japan and China, she said, are having little success stimulating economic growth, and the European Central Bank is struggling to manage the array of dissimilar economies it oversees. "The European Central Bank still has to prove that it can do a good job when the disparate members have disparate economic performance," Cohen said. Japan, for its part, needs to prove it can restart its stagnant economy and reform its financial system. "The world's second-largest economy is showing growth at both the GDP and industrial production level, but very little of it is related to private domestic demand," Cohen said of Japan. "A good deal of the economic energy now being seen in Japan is related to exports and government spending." "We will be watching very closely to see whether the private domestic economy in Japan develops some momentum," she said. "And we will also be watching carefully the reforms in Japan - reforms related to banking regulation, corporate accounting and other very important issues." China faces similar problems. "Our concern here is, again, private domestic demand is having some difficulty regaining momentum," Cohen said. "The unemployment rate has risen over the last couple of years. Within the cities, the unemployment rate is reported to be about 10%, and in the provinces, where many government-sponsored operations are being restructured and shut down, the unemployment rate appears to be ranging between 30% and 40%." She urged U.S. lawmakers to approve China's entry into the World Trade Organization, saying "we think this is something that will help (China's) economy stabilize and ultimately grow." -By Joseph Rebello; Dow Jones Newswires; 202-862-9279; e-mail:joseph.rebello@dowjones.com (END) DOW JONES NEWS 09-12-00 07:40 PM * end of story *