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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: pater tenebrarum who wrote (4869)	6/12/2001 2:58:48 PM
From: Rarebird	Read Replies (4) \| Respond to of 74559

<It depends on how bad the economic situation gets> IMO the most important question facing the U.S. economy right now is whether those companies experiencing earnings shortfalls will continue to fire employees in an attempt to cut costs. The market is currently not pricing in another two to three quarters of negative earnings surprises. If earnings continue to weaken we will probably see some P/E contraction. P/E contraction combined with an economic slowdown driven by a weakening labor market could very well put massive downward pressure on stocks. Current economic difficulties IMO are due primarily to a capital spending led downturn. As you've pointed out time and again, capital led slowdowns often prove to be unresponsive to Fed rate cuts - at least until the equipment in place and the accumulated inventory is absorbed. Some Interesting Stats: Total state unemployment insurance claims has averaged over 2.8 million in the latest two weeks of May, up more than 400,000 within three months. The magnitude of this rise in such a short period has never before occurred within the 34 plus year history of the claims statistics without a recession. In fact, over the last 30 years the largest 3 month rise in average claimants that has ever occurred without a recession is 277,000, which was in January 1988. Year/year rise in total claims on the same measurement basis is now over 800,000 - that has never occurred unless you were at least 3 months into a recession. The U.S. stock market is signaling that a recovery is on its way, but I don't see one coming anytime soon. It is very dangerous to be long the indices here except for the HUI and XAU. With an hour to go in the trading session, it sure looks like HM is telling us that the most recent Gold Stock correction is OVER.