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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: William Griffin who wrote (37294)	9/17/2000 12:26:00 PM
From: Ian@SI	Respond to of 70976

Sounds like Min Pang will never be an economist; and I'm not sure that he's that strong an analyst neither. Seems to have taken a premise, not verified the underlying, incorrect assumptions, that developed a worst case scenario based upon that false foundation. Either that or the conspiracy theorists may have a point. Might he be trying to manipulate the market to let his clients in at a lower price? ;^). From this week's Barron's on the topic: Whole article for subscribers at: interactive.wsj.com And I trust Gene Epstein's economical acument a lot more than Min Pang's. ... Now let's assume that global warming finally takes a holiday this winter, and that the winter of 2001 will be about as frigid as its 1996 predecessor. Will the hit to consumer spending be such that the soft landing finally arrives? Probably fooled again, for even if the impact is concentrated in the first quarter of the year, the extra outlays required for gas and heating oil will account for 0.4% of total consumer spending, at most. After all, combined spending on these commodities normally comes to about 0.8% of total consumer spending in a typical year, or about $50 billion out of $6.6 trillion in consumer layouts. How about throwing in the extra cost of electric heating? In fact, let's include a 5% year-over-year increase in electricity prices generally; they're currently running about 2.5% above a year ago. That should boost the total bill for unanticipated spending on energy to 0.5%. But even that assumes no one will take the trouble to turn down the thermostat. Besides, consumers have been in the habit of paying for extra energy costs by dipping into savings rather than reducing their spending on other items. So let's cut that 0.5% in half and assume a 0.25% cut in spending generally. Against a projected increase in consumption of at least 5%, that 0.25% comes to a mere handful of BTUs. The boom, then, is likely to survive even a bitter-cold winter, which means that better-than-4.0% growth is likely to persist through 2001. But if past is prologue, you know what's going to happen. Wall Street analysts will still be looking for that soft landing just around the next corner, or the corner after that. ...

To: William Griffin who wrote (37294)	9/17/2000 2:24:47 PM
From: Gottfried	Read Replies (1) \| Respond to of 70976

William, I think the SJMercury News article is alarmist. Why single out the electronics industry as being affected by higher energy prices? I remember reading an Intel executive saying the cost of energy to their operations is a miniscule percentage. Additionally, electronics can make almost everything more energy efficient. High energy prices may actually stimulate demand for chips. Business Week addresses the concern and gives a few numbers. > To see where energy bites, start with the U.S., the world's biggest energy consumer. Overall, the U.S. economy remains in excellent health, with growth expected to top 5% again this year and unemployment just over 4%. And though consumers paid 19% more for energy in July than they did a year earlier, contributing to a 3.5% annual rise in the Consumer Price Index, that hike has not significantly driven up the cost of other consumer goods. The core CPI, excluding food and energy, rose a modest 2.4% through July. The major reason: The New Economy has been so productive, it's overwhelmed the negative effects of costly energy, says John A. Tatom, a Chicago-based economic consultant. But that could change as oil prices move. The U.S. forecast of Standard & Poor's DRI, a sister company of BUSINESS WEEK, is for continued healthy, noninflationary growth. DRI expects gross domestic product growth to slip to 3.6% next year, inflation to drop back to 2%, and unemployment to rise to 4.5%. That's assuming oil is around $30 a barrel the rest of this year and falls to $25 by the end of 2001. If oil were at $20 throughout the period, things would have been a little better. DRI says 2001 growth would have been 3.8%, inflation 1.8%, and unemployment 4.4%. But if oil heads up to $40 throughout the period, the bite could be much stiffer. Then, 2001 growth would drop to 3.2%, inflation could hit 2.3%, and unemployment 4.7%.< subscribers businessweek.com@@7uJ*3WQQ1@J6tAcA/premium/00_39/b3700058.htm Crude oil price forecasts are notorious for being all over the place, though. Less than 2 years ago crude was $10 and forecasts varied between predicting a further drop to $5 and a rise to normal near $18-20. Historic inflation adjusted price has been around $18. Gottfried