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To: ZinKzoo who wrote (240)	5/26/2001 12:21:54 PM
From: Jenna	Read Replies (1) \| Respond to of 1227

Stock Market just might NOT be a source of savings like in the past...Fed might not cut short-term interest rates as aqgressively as before.... In '97'98 the financial crisis was in Asia....this one is made in America deals with the excesses of a BUBBLE ECONOMY that permeated the real economy...and now the engine itself that helped pull the world out of enonomic upheaval is now OFF THE TRACKS ......Q: The Nasdaq bubble was obviously a bubble. But putting your point in perspective, through 1999 and into 2000, real consumer spending was growing at a 5%-6% annual rate. Now it's running closer to 3%. As to where we have been and why we are where we are, you obviously are quite right. Second-quarter-2000 GDP growth was running 6.1% year over year. Now we are way down from that. But that's not enough for you. You feel there is more punishment on the way. A: Yes. The way I would depict it, the consumption growth rate was surging at 4.5% per year from mid-'95 through mid-2000. The last two quarters were down to 3%. So we slowed the growth rate by about one-third. But if all the downside to consumption is 3%, then there is good reason to believe I'm going to be wrong and the economy will go through a major slowdown. It will be a soft landing and we will skirt recession. So to get the recession math to fall into place, I would say that consumption growth has to flatten to zero. And I do expect that to happen in the two middle quarters of this year. This was not a financial bubble that can be neatly, surgically excised from the system without having collateral damage on the real economy. The bubble went on for so long. It went so high. It was so broad. It was not just Nasdaq. Nasdaq was the icing on the explosive cake. We had five years in a row of 25% returns in the Whilshire 5000. At the end of that five- year period, I truly believe that consumers became convinced incorrectly that the stock market had become a new and permanent source of savings. At the same time, corporations acted in a similarly irresponsible fashion, believing incorrectly that anything and everything they bought in the realm of information technology would deliver the types of returns that the equity market and Nasdaq in particular would reward beyond their wildest dreams. And now I think the movie starts to play in reverse. The stock market was not a permanent source of saving that people thought it was. And it was not the permanent source of excessive or high return and productivity enhancement that business thought it was. excerpts courtesy of Barrons Off the Tracks" The U.S. is in Recession, Says a Wall Street Economist, And Pulling Out Won't Be Easy..* An interview with Stephen Roach