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

To: patron_anejo_por_favor who wrote (119402)	9/4/2001 1:20:22 PM
From: ild	Read Replies (1) \| Respond to of 436258

Global: Still Chipping Away Stephen Roach (New York) Denial in world financial markets has yet to truly crack. Investors have pretty much written off 2001, but hope springs eternal for 2002. Expectations of double-digit earnings growth are still embedded in the prices of equities in most major markets. Leading indicators in several major economies are starting to inch up. And the broad consensus of seers remains convinced that the time-honored forces of cyclical recovery are about to work their magic yet again. The risk is they won’t. I continue to harbor the unpopular view that this global business cycle is very different in all its phases -- the downturn, the bottom, and the upturn that will eventually follow. The critical differentiating characteristic is America’s asset bubble -- the excess it created on the upside and the havoc it is still wreaking on the downside. The aftershocks of a post-bubble US economy are global in scope. The world became overly dependent on the US growth engine during its bubble-induced spurt of the late 1990s. Now, courtesy of the new connectivity of globalization -- expanded trade flows, capital flows, global supply chains, and transnational linkages of multinational corporations -- the global economy has quickly caught the American disease. And the cure is hardly instantaneous. Our forecast for the global economy remains the weakest of any. And yet we’re continuing to chip away at our own numbers. Reflecting yet another round of forecast revisions in non-Japan Asia -- this time in Malaysia and Hong Kong -- we have cut our estimate of world GDP growth for 2001 to 2.1% (from 2.2%). As a point of reference, that’s literally half the 4.2% growth prognosis we were carrying a year ago. Not only are our latest numbers well through the global recession threshold of 2.5%, but they depict a world economy in the midst of a rare synchronous recession -- with all of the major regions of the world in the midst of either dramatic slowdowns or outright recessions of their own. Our global economics team is also in the midst of what I suspect will turn out to be a long and arduous process of lowering our sights on 2002. A few weeks ago we shaved a couple of tenths off our US growth forecast from 3.0% to 2.8%. And now we’re making a comparable cut t our 2002 European numbers from 2.7% to 2.5%. On the surface, even our scenario appears to offer grounds for hope. Our estimate of world economic growth in 2002 remains at 3.5%, even in the face of recent cuts to the US and Europe. If this estimate comes to pass, it would, indeed, represent a sharp acceleration in the global economy. But that’s really not the point. Not only is the acceleration coming off a very depressed base, but the outcome also falls below the 30-year trendline of 3.7% in world GDP. In other words, even our seemingly upbeat recovery prognosis for 2002 depicts a year of subpar recovery. For the two years taken together, 2001-02, we now expect world GDP growth to average just 2.8%. That’s 25% slower than trend growth and only 0.3 percentage point above the recession threshold -- precisely the stuff of a U-shaped global business cycle. The risk is I’m being generous in dubbing this a "U." In my view, the downside risks to our current baseline forecast of global growth in 2002 outweigh those on the upside by a factor of two to one. I think our estimates for non-Japan Asia (5.8%) and Latin America (3.3%) -- regions that collectively account for 31% of world GDP -- are particularly suspect in that regard. But I also fear that there are downside risks to our forecasts for the industrial world, as well. Six months ago, when our 2002 estimate of world GDP growth stood at 4.2%, I argued that the downside could fall in the 3.0–3.5% range. I stand by that view. We have just touched the upper limit of that range, and it is now quite conceivable that we could well test its lower bound. If the full extent of my downside risk assessment comes to pass and we cut our 2000 numbers to 3.0%, then the two-year average for world GDP growth will fall to 2.5%. That outcome would depict a global economy right on the cusp of recession for two consecutive years. Rather than a "U," it would be the functional equivalent of the dreaded global "L." Once investors wake up to this possibility, the deep-seated denial should finally start to crack. For now, however, that point of realization probably remains somewhere down the road, thanks largely to a residue of solid confidence in "The Maestro" -- Federal Reserve Chairman Alan Greenspan. In framing the bet in this fashion, the consensus is still banking on a fairly traditional cyclical recovery, aided and abetted by counter-cyclical monetary stimulus. Yet, in my view, both the Fed and the financial markets will end up being sorely disappointed in the lack of traction from these reflationary initiatives. That’s what the post-bubble aftershocks of U- or the L-shaped scenarios are all about. Next: Peering Inside the U. morganstanley.com

To: patron_anejo_por_favor who wrote (119402)	9/4/2001 1:27:05 PM
From: Haim R. Branisteanu	Respond to of 436258

Based on last consolidation area may be around those levels. IMHO the drop of almost 400 bp for no actual reason except some signs of US economic stabilization is again mass hysteria like that during the first half of August when they run the Euro to 0.9200 in few days. Will not be surprised if the Euro will back up to the 0.895 to 0.900 level. Next year that is another story ----- higher possible even 0.94 - 0.96 BWDIK Haim