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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Berney who wrote (36618)	11/29/2000 12:30:06 AM
From: Jack T. Pearson	Respond to of 42787

Interesting analysis. Good work. A big question regarding next year's earnings is the sensitivity of earnings to economic activity in general. That will vary by industry and company. I am more likely to defer buying a new computer than I am to defer buying medicine. When sales decline, companies can reduce variable costs by laying off labor and reducing investment, but since fixed costs of facilities and equipment can't be easily reduced, profit per unit sold will go down even as the number of units sold declines. Profits went up faster than sales when economic activity was expanding; they will go down faster than sales as economic activity contracts. It will be interesting to see what happens to productivity as the economy contracts. I suspect it will go down. That may make the Fed more reluctant to reduce interest rates.