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.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (39598)	5/10/2001 9:01:45 AM
From: IQBAL LATIF	Respond to of 50167

The most important item in the GDP report that started this rally was inventory correction which is now full blown. Dismal writes on it as follows <The U.S. economy now appears to be lingering at a fork in the road. Some positive economic reports and sings of life in equity markets point to recovering strength, while mounting layoff announcements and low consumer confidence indicate a further decline. Nevertheless, one wholly positive development is that the inventory correction is now truly in full swing, as evidenced by the recent release of first quarter 2001 GDP. First quarter GDP growth was much stronger than anticipated, with domestic output increasing 2% in comparison to the 1% posted in the fourth quarter of 2000. Even more notable, however, is that the growth in GDP occurred despite the large negative contribution of business inventories. Indeed, the change in business inventories, which is a sub-component of gross investment, took a full 250 basis points from overall GDP growth. This is the largest negative contribution from business inventories to GDP in more than two and half years and is actually a bigger negative drag on GDP than the positive contribution of personal consumption. It is important to note that the change in business inventories is included in the calculation of GDP, not the level of inventories itself. The current quarter is a case where this distinction makes a large difference. The $7.1 billion inventory decline in the first quarter of 2001 is not only significant as a quarter-to-quarter decline, but also because inventories posted a $55.7 billion increase in the previous quarter. Thus, it is the reversal in business inventory accumulations that matters for GDP growth, and the drop from a $55 billion accumulation to a $7 billion liquidation amounts to an enormous negative impact on overall output. Though previous months' business inventory reports had indicated that some momentum was building for an inventory correction, the GDP release was the first report to confirm the actual large-scale drawing down of stockpiles. Combining the large $7.1 billion quarter-to-quarter decline with the already available January and February detailed business inventory reports, it is clear that a significant inventory contraction can be expected in the March report to be released on May 14. Indeed, barring a very large downward revision to the February inventory tally, March's decline should be one of the largest single-month drops on record. Furthermore, while the inventory correction may have had negative implications for first quarter GDP, it is a resounding positive for the economy as a whole. The unanticipated buildups in stockpiles over the past year, as testified by rising inventory-to-sales ratios, caused producers in many industries to enforce stringent production cutbacks until excess inventories were absorbed. The expectations of large inventory declines in the March report indicate that downward movement in inventory-to-sales ratios is highly likely. As the ratio returns to more desirable levels, production can return to a more normal pace.>

To: IQBAL LATIF who wrote (39598)	5/10/2001 9:14:27 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

Market like facts, it is irony that liking facts and digesting facts are two opposite things that market tries to accomplish in a single session more often that not with disastrous results, it is for this that noise should never be traded. Every day it tries to build the new data, efficient pricing demands that, when more uncertainty is created market breaks the up or down side more than what is required, a weekly data had very little significance but in times like these all those insignificant numbers have come to fore. Last week huge rise in ‘Jobless Claims’ led to a significant decline in the markets that continued next day after a weaker than expected unemployment data and we saw a close at 1248 and test of our support at 1228 but a rally from that low point that was last week,, now with a benefit of hindsight we find that last week increase was an actual aberration, look at the charts and you would find that this sharp decline in the jobless claims will help us recover the losses of the last week. Once market realizes its mistakes it tries to overdo on the other side, today central banks actions and revision of a significant data like weekly jobless claims dropping big will help DOW towards that 11000 number and Comp towards the 2250 resistance, once we are going to break that only PPI will possible make a dent. dismal.com