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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: BigBull who wrote (3264)	7/31/2001 12:57:18 AM
From: chowder	Read Replies (4) \| Respond to of 206089

Big Bull, I tend to agree with you when I look at the world picture. I think RJ is focusing too much on the US and not enough on the global picture. Based on what I've read, the global economic situation is more vulnerable to world recession than we see or hear on our networks and newspapers. Japan is at a 16 year low. Think about that a minute. Every penny of profit has been wiped out for the past 16 years. London is at a 3 year low. The Seattle Times reported that half of the refinancing of homes is going to paying off debt. I would assume that means the consumer is getting worried and when the consumer follows through on that worry, that's the final nail in our economy. According to Greenspan, it's the consumer that is supposed to save the economy. These home financings are being done at a higher rate of interest too. In the refinancing booms of 1992-93 and 1998-99, only one in five borrowers were paying off debt. Refinacing a home to take care of unsecured debt? To put your home at risk over a credit card? This doesn't make economic sense to me. In recent earnings reports, CEO's haven't given any positive outlook as to when we can expect earnings to grow, all we've heard is things can't get any worse. Kodak: "we have yet to see signs of a recovery." Dana Corp: "we're less optimistic today about the rate of recovery in North America...." Compaq's profits fell 81%. GM's profits fell 74%. The WSJ recently reported that home owners are using their homes as a savings account. Can any of you economic types tell me if there is an economic theory that espouses continued accelerated debt as a method of achieving prosperity? And in addition to this, Stephen Roach of Morgan Stanley, in testimony to the Senate Banking Committee said.... "The other shoe about to fall in the third phase of the global downturn could well be the American consumer. This judgement is not without controversy. But as I see it, the case against the US consumer is more compelling than at any point since the 1970's. Saving short, overly indebted, and wealth depleted, consumers are about to get hit by the twin forces of layoffs and reduced flexible compensation (the year-end payouts granted in the form of stock options, profit sharing, and performance bonuses). Tax rebates notwithstanding, I believe that this confluence of forces will finally crack the denial that has kept the American consumer afloat. In my travels around the world, the wherewithal of the American consumer is at the top of everyone's list. A US-dependent global economy needs the American consumer more than ever. I fear the world is about to be in for a huge disappointment." And in a recent UPI News article: >> Last quarter personal consumption increased by 2.1% Real residential fixed investment increased by 7.4%. Real government expenditure increased by 1.6%. Non-residential fixed investment declined by 13.6% Real exports declined by 9.9%. So in other words, the productive part of the economy, those that provide jobs and sell goods abroad, are shrinking rapidly, while the unproductive parts, those that create credit card bills, top-heavy mortgage debts, and eventually a budget deficit are still strong. << Here are my favorite comments from Roach and I paraphrase... We are in the fifth recession since 1970. All of these recessions were triggered by a SHOCK. The global recession of 1975 was a by-product of the first oil shock. The 1982 downturn was driven by the SHOCK of the FED's anti-inflationary assault. (Remember the WHIP buttons?) The global recession of 1991 came about as the result of another oil SHOCK. The 1998 downturn was the result of an Asian currency SHOCK. And the global recession of 2001, in large part, the result of an information technology SHOCK. What if we are now in yet another energy SHOCK, a shock of an existence of a crisis, that never was? Nearly everyone agrees falling commodity prices are the result of lower demand. Demand is something that will hard to overcome in the face of yet one more global recession. Since the trend is still down in world markets, the glass truly is half empty. Caution going forward is the rally cry of the day. Short term positions with taking profits often will be the strategy that wins in the next six months, in my opinion. Be careful, it's a jungle out there! dabum