Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Home on the range where the buffalo roam -- Ignore unavailable to you. Want to Upgrade?

To: pbull who wrote (13217)	4/27/2001 9:37:04 PM
From: pbull	Read Replies (1) \| Respond to of 13572

Recession update, from Briefing.com - Greg Jones The Economy: You know all those companies that reported falling profits, huge layoffs, and reduced capital expenditures in Q1? Well, turns out that was all just a bad dream. Or so the Census Dept would have you believe. GDP supposedly rose 2.0% in the first quarter, and now some economists would have you believe that the risk of recession is dead. Would that it were true. GDP Facts: This is a preliminary estimate by the Census Dept; it will be revised twice in the coming two months and even then can be revised further for years to come. Revisions of 2 percentage points or more are not uncommon. Because GDP calculations are based on quarterly averages, it matters a lot that the quarter started strong (consumer spending in particular). Unfortunately, it ended weak, so the prospects for Q2 are not so good as consumer spending for the qtr is likely to start on a weak note. Economic reports always tell you about the history, but some have forward-looking properties and others don't. GDP is one of the worst when it comes to rear-view analysis given that so much of the result is determined by 3-month old data. The Future: To say that today's report reduces the risk of recession to zero is to badly misjudge the nature of the current slowdown. It is investment-led, and that part of downturn was still evident in Q1, as business investment in equipment & software fell for a second straight quarter. What follows are layoffs, falling confidence, falling income, and finally - falling consumer spending. That's exactly what we saw at the end of Q1. The risks of a negative GDP reading have been and continue to be much greater for Q2 and Q3 than Q1. Business investment is a relatively small chunk of GDP and was unlikely on its own to drag GDP into negative territory. The secondary impact on consumer spending (2/3rds of GDP) will be the key. Bottom line: There is a tendency for investors to blow with the wind when it comes to the economy. Jobless claims up on Thursday? Recession. GDP up 2.0% on Friday? No recession. But the real story is not so volatile. An asset price and investment bubble has popped, with business investment suffering and the equity wealth effect reversing as a result. It will take some time for past excesses to be wrung out, and the risk of recession is more real than ever. - Greg Jones, Briefing.com