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To: ild who wrote (114825)	7/27/2001 9:55:54 PM
From: ild	Read Replies (1) \| Respond to of 436258

comstockfunds.com No Evidence Of A Bottom There is little or nothing in recent economic releases or corporate financial results to support the view that an economic recovery is imminent. Durable goods orders were weak in June and are down 22.8% over a year ago, the lowest in at least 41 years. Initial unemployment claims have been bouncing around this month because of tricky seasonal adjustments relating to auto plant closings, but the number of insured unemployed has remained over three million for the fourth consecutive week for the first time since 1992. The second quarter GDP number released this morning was slightly disappointing, and certainly did not show any signs of a bottom. The annual growth rate of 0.7% was the lowest since the first quarter of 1993, and it was the first time growth was lower than 2% for three straight quarters since the 1990-1991 recession. Although auto sales have been holding up relatively well, incentives on SUV’s have now risen to over $4000 per vehicle, a giveaway that will seriously crimp manufacturer’s margins. All it proves is that you can sell anything if the price is low enough, but at some point automakers will have to cut back production. Even now overall US industrial production has been down for nine straight months, while payroll employment for July is likely to be down for the third time in the last four months. In addition corporations continue their barrage of negative announcements without a stop. The latest reports of drastically lower earnings or employee reductions were from Business Week, Goldman Sachs, Dresdner, Sony, Dow, DuPont, JDS Uniphase, Hewlett Packard and Corning. Even more disturbing, American Express reported a huge $400 million loss in junk bonds that top management had not known about until very recently. Given the history of prior financial bubbles, it is highly likely that there is a lot more of these unpleasant surprises waiting in the wings. First call consensus earnings estimates have been dropping at the rate of one percent a week, indicating that overall current estimates are still far too high. In the midst of all this turmoil investors remain complacent, if not downright optimistic, and the S&P 500 still sells at 28 times this year’s estimated earnings, compared to an historical average of 15. The market has already been in a major downtrend since March 2000, and we think that it has much further to go.