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Strategies & Market Trends : The Thread II -- Ignore unavailable to you. Want to Upgrade?

To: SirRealist who wrote (985)	6/11/2001 2:04:22 AM
From: Smart_Money	Read Replies (2) \| Respond to of 9026

The Texas floods are really amazing. I been out all day helping friends pump water out of their homes. Thank goodness I was spared. Now back to the stock market..... this article might make some sense. DON'T BE FOOLED BY THESE FIVE LIES THIS SUMMER By JOHN CRUDELE June 5, 2001 -- SUMMERTIME, and living - and lying - is easy. On Wall Street, so many money managers and stock gurus have their minds on leisurely pursuits that untruths seem to get a free ride. So here are some lies that you'll likely encounter in the coming months. * Lie #1 - The "summer rally" story. There are stock market rallies in summer. It's tough to go through any three-month period and not have something resembling an upturn. But summer rallies, according to the Stock Traders Almanac, tend to be the weakest. Rallies during the summer months have averaged 9.7 percent since the early 1960s. In contrast, winter rallies sent stocks up an average of 14 percent. * Lie #2 - The economy will improve this summer. First Call analysts, who track the economy through corporate profits, expect corporate profits to be down 14 percent in the current quarter compared to the same period last year. Wall Street thinks company profits will be down only 3.5 percent in the summer quarter and then will show an improvement of 8 percent in the fourth quarter. Next year, the pros are predicting, corporate growth will rise 18.6 percent. Wall Street is either lying to us, deceiving itself or too many analysts have already been out in the sun too long. The Jerome Levy Economics Institute - which doesn't make money by making you feel optimistic so it can sell you stocks - thinks the economy will get worse in the second half of this year. * Lie #3 - The unemployment rate went down last month. Last Friday, the D.C.eivers announced that the unemployment rate fell back down to 4.4 percent from 4.5 percent, even though it was also announced that 19,000 jobs disappeared. The 4.4 percent rate was little consolation, but it made some people happy. The truth is that the unemployment rate declined only because the government decided that the nation's work force had suddenly gotten smaller. And that will automatically happen when job seekers become too demoralized to look for work and pull out of the work force. As for the modest 19,000 jobs that disappeared - the number had several major statistical adjustments that rendered the May count virtually worthless. * Lie #4 - If you believe what you read, Federal Reserve Chairman Alan Greenspan will cut interest rates again on June 27 without any opposition. Greenspan may very well make the sixth rate cut of the year. But it won't be an easy call. For one thing, other Fed officials have been issuing warnings about inflation. Finally! Fuel costs have been climbing all year. The price of gold is soaring. And now, in the sixth month of 2001, the Fed is acknowledging what companies already know - energy costs are killing us. So on June 27, the Fed has to decide if six cuts - even if this next one is just a quarter point - could make the inflation alarms blare too loud. * Lie #5 - Your broker says the stock market is safe right now. He'll probably say that stocks are down enough already, and even if the market starts to slide again, the Fed will come to the rescue. Lies. Stock prices are still very overpriced at 25 times earnings per for the S& P 500 index. And with corporate profits actually declining, the market becomes more overvalued each time companies report earnings - even if the stock market only stays right where it is. And what about the Fed coming to the rescue? Each rate cut has a little less impact. Cut No. 6 will not be a magic bullet. Now go and enjoy the beach. * Please send e-mail to: jcrudele@nypost.com nypostonline.com