To: Joan Osland Graffius who wrote (5077 ) 11/16/2001 12:19:31 PM From: John Pitera Respond to Nasty statistic: the 13th consecutive decline expected in this morning's release of Oct industrial production is the longest string of declines since 1932 -- 70 long years ago leaving the current industrial recession the longest in post-war history. Getting back to our 1998 comparison, we would note that there are some psychological similarities between now and then that may be an influential driver of the recent Treasury pullback . The big concern back in 1998 was that contagion would spread from the emerging markets to the US, essentially dampening the ultimate demand channel in the global economy. However, this dynamic never materialized, while an aggressive Fed seemingly helped to further inflate the asset bubble. In addition, the resilience of corporate and consumer America allowed most of the rest of the world to forgo structural reform to take advantage of the cyclicality surrounding a new economy mentality. notion of a safe and secure global backdrop has forced Treasury market to price out some of the worst case scenarios. not be able to completely restore the peace dividend . As we mentioned yesterday, the FBI continues to suggest that the anthrax scare is likely separate from al Qaeda, while it seems inevitable that Iraq will return to center stage. Not to be outdone, while the perpetrators of the events of September 11 may have justice brought to them, there is not much that can be done to pacify the heightened shock that was thrust into an already battered economy.
