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Strategies & Market Trends : The Amateur Traders Corner -- Ignore unavailable to you. Want to Upgrade?

To: Sojourner Smith who wrote (17880)	1/3/2002 7:38:21 AM
From: Tom Hua	Read Replies (3) \| Respond to of 19633

Good morning Sojourner, I don't think the government will do anything to rid of short term traders but will try to do something to prevent future Enrons from happening. The Naz will be less volatile in the years ahead, for 02 I predict a trading range between 1200 to 2400 dictated by hope for rapid economic recovery and hit by disappointment when reality plays out. in a Barrons article this week, some guy predicts a strong V-recovery in 02. IMO a strong V-recovery is highly unlikely simply because consumer spending did not shrink significantly for it to rebound strongly. This recession is driven by slow down in business spending and investment which is a direct consequence of excess inventory, over capacity, the internet bubble and y2k hoax. Although inventory has dropped quite a bit, that's a far outcry from saying production will rebound strongly. Manufacturing contracted in Dec for the 17th consecutive month. Production will be driven by end demand and that's why consumer spending will determine the speed of the economic recovery. Consumer spending, on the other hand, has held up pretty well for 4 reasons: (1) Surprisingly low energy prices coupled with very warm weather which further reduced energy consumption (2) Strong housing market thanks to low mortgage rates most of the year, warm weather also helped new home construction (3) 0% financing for autos (4) Heavy markdowns by retailers during the holiday season Given its resilient strength, there's less of a chance to see much uptick in consumer spending. In fact, the current rate may not be sustainable because: (1) Energy prices are beginning to creep up, winter weather has turned from way above average to below average. OPEC agreed to cut production (2) Mortgage rates are rising in the past several weeks. 30-yr fixed rate rose from 6.25% early Nov to 7.25% today, together with colder weather housing activity will be dampened (3) 0% auto financing ended 12/31, sales will be sluggish as they were borrowed into last Fall (4) Holiday shopping season is over and so are the discounts I predict a slow recovery that will start in 2003. Regards, Tom