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To: Boplicity who wrote (3641)	9/14/2001 9:44:30 AM
From: im a survivor	Respond to of 13815

Salomon Smith Barney September 13, 2001 > > Waiting > > As we await the re-opening of the U.S. equity markets it seems to be > a good time to reflect on some of the fundamental and technical issues we > will have to confront in the weeks ahead. To say that the future is > unclear is to state the obvious. We must examine the information > currently available, make suppositions about the likelihood of future > events and structure our portfolios in a way most likely to exploit short > term market inefficiencies and take advantage of our long term strategic > views. > To us, there are at least five issues which will influence the > course of the economy and markets in the time ahead. The effects of > global liquidity, consumer confidence and energy prices should determine a > great deal of the equity market's direction and internal dynamics. In > addition, the fundamental and market performance of the Technology and > Financial sectors should have an impact beyond their normal sphere of > influence. > > 1. Global Liquidity: We believe that the Government will try to make > individuals and institutions as whole as possible. Clearly, Washington > does not want a financial panic to exacerbate the physical damage already > done. We believe that the Federal Reserve will effectively make unlimited > liquidity available to the system, as they have done during prior crises. > Additionally, the Executive and Legislative branches appear ready to > provide fiscal assistance as needed. We should assume that the Government > will behave rationally and apply the techniques used successfully in the > past. These actions would tend to be supportive to the markets. While > the European Central Bank has stated that no easing is imminent, they > obviously are ready to inject liquidity on an "as-needed" basis. > > 2. Consumer Confidence: Clearly the Consumer will be negatively impacted > in the short run by recent events. Obviously air travel and lodging will > feel an immediate impact. However, the key questions are: how much will > the consumer be effected and for how long? We note that following the > "Crash" of 1987, Wall Street predicted a dramatic consumer slowdown which > did not materialize. We do not intend to draw direct analogies to 1987 > but would merely point out that predictions of Consumer collapse have > proved to be unreliable. While some slowdown will inevitably result from > the catastrophe, one must remain aware of the Consumer's inherent > resilience and the potential offset of the fiscal and monetary stimulus > discussed above. > While we do not wish to minimize this potential problem, we believe that > it must be viewed in a broader historical context. > > 3. Oil Prices: Early indications are that responsible oil producing > nations will not move to seriously curtail production or shipments. > While nothing can be ruled out, it is hard to say that the perceived risk > to world-wide oil supplies will necessarily result in higher oil prices. > This is important. The absence of a price spike would significantly > differentiate today from the 1990 precedent. Then, the risk of inflation > affected the Fed's ability to rapidly lower rates and offset the price > rises. In 1990, higher energy prices undoubtedly contributed to the > subsequent recession; and the Fed's decision not to immediately cut rates > adversely impacted the Consumer. We must indeed ask ourselves if the risk > to the world's oil supplies is significantly greater today than it was a > week ago? > > 4. Technology and Communication Services: Surprisingly, Technology was > one of the better performing areas in the European markets in the days > immediately after the tragedy. While one does not want to read too much > into this, a logical progression of events could help the group's > fundamentals in the months ahead. Initially, much of the infrastructure > damage done will have to be undone. After any disaster, the first > response is to replace or repair that which has been damaged. This could > provide a short-term boost in spending. Longer-term, there will likely be > a need for increased spending on bandwidth, back-up (recovery) systems, > storage and communications systems. In recent months, many corporations > have deferred technology expenditures. This week's events may accelerate > the resumption of meaningful technology spending, lending a much needed > boost to the group. > > > 5.Financials: Financial Services companies are obviously adversely > affected by recent developments. Existing concerns have been heightened > by these events. Insurers face the potential of massive claims. Banks > and brokers face potential credit concerns and the impact of distracted > capital markets. However, as mentioned earlier, we anticipate that the > Fed will be injecting needed liquidity. It would be rare indeed for > Financials to fare poorly while such an easing is underway. A healthy > financial system is essential to our country as well as the world. > Investors, while recognizing the damage done, should also be aware of the > potential benefits of impending remedies. > > > <<...OLE_Obj...>>