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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (111139)	7/3/2001 1:03:27 AM
From: ild	Read Replies (2) \| Respond to of 436258

Worst Is Not Behind Us Don’t assume that the worst is behind us. Personal income increased only 0.2 % in May while the April number was also revised downward to 0.2%, indicating that the weakening labor picture may be impacting income. Consumers, however, continued to charge ahead (no pun intended), raising spending by 0.5%, thereby lowering the savings rate to minus 1.3%, equaling the all-time low set in January. The rise in the NAPM Index to 44.7, its highest level in seven months, was widely hailed, but anything under 50 still signals a decline in growth. Although observers are using these numbers together with the economic figures released last week to argue that the economic decline is all but over, we doubt that this is the case. In our view the main drivers in the economy are the vastly excessive capacity, capital spending cutbacks, falling profit estimates, corporate downsizing and weak labor picture. None of these factors are stabilizing, but are actually getting worse. Moreover they are only beginning to spread through the rest of the economy as indicated by reduced airline revenues, a severe downturn in advertising and numerous pockets of weakness in both commercial and residential real estate. All of this is being exacerbated by emerging weakness in Europe, Latin America and Asia. In addition the Fed rate cuts are not performing their usual function of weakening the dollar and reducing long-term bond yields, thereby undercutting part of the favorable effect of lower short-term interest rates. At the same time investors have become disturbingly optimistic. Today the volatility index fell to 20.29, its lowest level since the late August to early September period, when the Nasdaq peaked at 4259 and the S&P 500 at 1530 prior to a major decline. Investor’s Intelligence Survey bulls significantly outnumber the bears, and the overall put-call ratio is back to a level indicating investor complacency. In our view we are close to another major downturn in the market. comstockfunds.com