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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (13245)	8/1/2002 7:13:40 PM
From: Proud_Infidel	Respond to of 57684

I saw that and was amazed....the channel has no shame! A business channel? Please!

To: Lizzie Tudor who wrote (13245)	8/1/2002 7:15:22 PM
From: stockman_scott	Respond to of 57684

A credit crunch? Cash is increasingly hard for companies to come by. August 1, 2002: 5:44 PM EDT By Justin Lahart, CNN/Money Staff Writer NEW YORK (CNN/Money) - Stocks' sharp decline is provoking a fear that a credit crunch, where even solid companies can't raise needed funds, is looming. Stocks drop in July had investors pulling back from all kinds of risk. Not only were they dumping shares, they were also shunning the corporate bond market. Corporate bond issuance fell to its lowest level in seven years while bond trading got so ugly that at its worst moments traders were comparing it to the meltdown following the 1998 Russian debt crisis. With stocks off their lows conditions have improved -- but not by much. Yields on corporate bonds are incredibly steep compared Treasury bonds. With rates so high a company would have to be desperate to put through a large bond issue right now. And if a company is desperate for cash, the bond market will charge it much higher rates. Trying to raise money through an initial public offering in the stock market is out of the question -- July was the lowest cash month for IPOs since Nov. 1995. "Every layer of the market is pulling back from extending risk at this point," said CreditSights analyst Louise Purtle. Banks, too, may get into the act shutting their windows to lenders. Even with the fed funds rate (what it costs them to borrow) at 1.75 percent they've shown an unwillingness to lend, tightening lending standards on commercial and industrial loans. The fallout The immediate fallout from a credit crunch is that cash-strapped companies would face failure. Already this has happened in certain sectors like energy trading (home to Enron, Williams and Dynergy) and telecom (home to Worldcom and Qwest) where the excesses during the bubble years were profound. The trouble could spread. "What we had seen prior to three weeks ago was that credit problems were sector and industry specific," said Morgan Stanley chief U.S. economist Richard Berner. "The sharp slide in stocks changed the picture." How would all this play out? Let's say you run a profitable candy factory. At certain times of the year -- Halloween, Easter -- you need to stock up on chocolate, sugar, corn syrup and so on to meet rising demand. You take out a short term loan to buy the supplies you need, but if credit is hard to come by you're going to have to pay higher rates. Since that will cut into your earnings, maybe you'll buy less. That doesn't just hurt you, it hurts the guy you buy chocolate from. Now maybe the machine you use to make marshmallow peeps is getting gummed up all the time so you can never make as many as you could sell. Normally you might raise money in the bond market for a new peep machine. But now that's too costly. So you stick with the old machine and are less productive than you could be, employ fewer people and make less money. The company that makes peep machines makes one less sale. And in a credit crunch, what happens to your candy factory is happening all over the place. "It would hurt their growth and profitability," said Northern Trust economist Paul Kasriel. "Production wouldn't be as strong. Hiring would remain lackluster, or go down." In the end the economy would suffer, which would only serve to make investors and lenders even more risk averse. Could it happen? Bank One chief economist Diane Swonk thinks that as long as the trouble in credit markets doesn't deepen we'll be in the clear. Good companies still have access to cash and what we've seen so far could be little more than a hiccup. "As long as it doesn't last too long it won't be a problem," she said. "And if it does last too long, the Fed will ease." But a pessimist might wonder what a Fed ease would do. If investors and banks are unwilling to give extend cash to companies with the funds rate already at it's lowest level in forty years, why should they get less tight-fisted if Big Al cuts? _____________________________ btw, Lizzie I didn't hear Morgan Stanley's Roach mention much about capital spending -- he remains concerned about the possibility of experiencing a 'double dip' recession.

To: Lizzie Tudor who wrote (13245)	8/4/2002 4:17:17 PM
From: techanalyst1	Read Replies (1) \| Respond to of 57684

How much do I wanna bet these girls were from California? Man they give us a baaaaaaaaaaaaaad name! A statistical oddity for ya: Naz was down intraday in 2000 43.77% from it's close on Dec. 31st 1999. It was down 43.85% intraday in 2001 from it's close on Dec. 31st 2001. At it's intraday low this year it was down 38.86%. Less than 100 points from the intraday low we just saw equals the two declines in the previous two years. Nothing goes straight down. I'll be surprised if there is a whole lot more downside in the naz for the remainder of the year even with a crummy economy. TA