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To: rich evans who wrote (6099)	10/5/2002 10:52:11 AM
From: Asymmetric	Respond to of 6317

"Hang in there" may not be the proper response. Here are two articles that point out that maybe conventional responses to this market decline (diversification, buy-and-hold) are not the proper response any longer. The 2nd article on the Nikkei is simply stunning and very unsettling: Where in the world should I invest? By Paul Erdman, CBS.MarketWatch.com /Oct. 3, 2002 American investors in domestic equities took one of the biggest hits of the century in the third quarter of this year. Those who sensed it was coming and diversified out of common stocks and into other assets classes -- bonds, real-estate trusts, money-market funds, gold -- came through relatively unscathed. But those who followed the advice of investment advisers claiming global expertise and suggesting to their clients that the key to safety through diversification lay in investment in foreign stocks have since found out that they were led down the garden path. Underwater overseas Because the carnage in overseas stock markets has been much worse than what's happened here in the United States. Taking the world as a whole, while the average American mutual funds was down 15 percent in the third quarter, global equity funds were down 20 percent. Where blue chips were concerned, while the Dow (INDU) fell 18 percent, the U.K.'s FTSE fell 20 percent, France's CAC 40 was down 29 percent and Germany's Dax lost 36 percent. Japan was a relative bright spot: The Nikkei fell just 12 percent in dollar terms, but its losses would have been much worse if the government had not directly intervened in the market near the end of the quarter. In the high-tech sector, while the Nasdaq plummeted a further 20 percent, the disaster striking similar stocks listed in Europe was also much worse. Losses on Germany's Neuer Markt were so severe that authorities in Frankfurt closed the exchange down permanently. Dazed German investors had seen $483 billion -- the aggregate market value of all the stocks listed on that Neuer Markt at its peak in March of 2000 -- go entirely up in smoke. We all know that past is not necessarily prelude, but if you try to figure out what lies in the increasingly murky economic future, it might very well be. While the American economy keeps bouncing off the bottom and then fading again -- as is happening again in the fourth quarter -- at least we are on a rising trend. In both Europe and Japan, it is all fade and no bounce. Both are now suffering from what might be best described as secular stagnation. Markets' chilling effect Something else is happening out there that is getting little attention: The number of people willing to put their money at risk in the stock market is shrinking -- some would say radically shrinking. Germany provides the classic example: During the past two years, the number of Germans owning equities has plummeted from 6.2 million to 4.6 million. The same phenomenon is occurring in France, Japan and even Switzerland as the middle classes in these countries are returning to the traditional habit of keeping savings in the bank or under the mattress, where it might not earn much but where the principal at least remains intact. The shrinking of demand for stocks that this process entails does not bode well for the future liquidity of Europe's stock markets, nor for the prices of the individual stocks listed there. The potential effect of foreigners turning their backs on stocks after having suffered such bitter disappointment in recent years goes further. New issues in the so-called eurozone are at a seven-year low. While even established companies are experiencing difficulties in raising cash through stock issuance, startups don't have a ghost of a chance of finding money there. Yet they provide the entrepreneurial energy that is necessary to fuel the economic future of their countries. The pessimistic view, from Tokyo Commentary: If the Nikkei is our model, trouble lies ahead By Paul Erdman, CBS.MarketWatch.com / Sept. 6, 2002 SAN FRANCISCO (CBS.MW) -- A growing number of pessimists among us are increasingly suggesting that what happened to Japan after the bursting of its bubble more than a decade ago may well represent the fate to which the United States is doomed after the bursting of our bubble: an extended period of economic stagnation. One year after the terrorist attacks and 30 months into the worst bear market in a generation, the American way of business is at a crossroads. In this two-week series, we examine what needs to be done now to fix the problems. One of the major reasons being cited as justification for these fears is the apparent failure of both fiscal and monetary policies to re-stimulate economic growth. Neither rising budgetary deficits nor the lowest Fed funds rate in memory are working. What could this mean for the stock market? A perceptive analysis piece in Thursday's Nihon Keizai Shimbun suggests an answer. Despite the fact that Japan's budgetary deficits in recent years dwarf those in other industrialized nations, and the fact that its interest rates are at or near zero, the Japanese economy steadfastly refuses to respond. As a result the plunging Tokyo stock market -- already at a 19-year low -- is flashing renewed warning signs about the economic outlook. "It appears to be quaking before the prospect of a global economic recession," the Nikkei piece commented on the market. The single biggest source of concern in the stock market, the Nikkei analysis says, is the uncertain outlook for the U.S. economy: "If the all-important Christmas shopping season in the U.S. proves to be disappointing this year, the prosperity of Asia's technology sector could be snuffed out like a candle in the wind." Back to the stock market. If government policies in both Japan and the U.S. continue to fail to lift their economies, how low can stock prices go? And perhaps more importantly, for how long could they stay low? If Japan represents the model for our future, the answer to that question isn't going to make your day. The recent decline of the Nikkei Stock Average has brought it to within a few points of its 50-year moving average of 9,070. "To understand what this means," the Nikkei points out, " imagine the case of a 50-year old investor who has purchased every month since his or her birth one share that represents the Nikkei average. If the Nikkei breaks under its 50-year moving average, the hypothetical investor will see any unrealized gains earned in the past 50 years completely wiped out." Tell that to your broker the next time she suggests to you that the way to achieve eventual financial security is through dollar-cost averaging during bear markets.

To: rich evans who wrote (6099)	10/5/2002 12:51:50 PM
From: Sam	Read Replies (1) \| Respond to of 6317

Downgrade Hits Contract Manufacturers Friday October 4, 12:49 pm ET biz.yahoo.com. LOS ANGELES (Reuters) - Shares in contract electronics manufacturers fell sharply on Friday after Credit Suisse First Boston downgraded three companies in the sector on concerns about the timing of a recovery in the industry. The downgrade battered the entire sector, with three companies falling to all-time lows on the reaction. CSFB analyst Michael Walker cut Celestica Inc. (Toronto:CLS.TO - News; NYSE:CLS - News) and Benchmark Electronics Inc. (NYSE:BHE - News) to "neutral" from "outperform" and cut Sanmina-SCI Corp. (NasdaqNM:SANM - News) to "underperform" from "neutral." Celestica shares were off 11.2 percent, or $1.36, to $10.74 in Friday midday trading on the New York Stock Exchange after hitting an all-time low of $10.60. Shares in Sanmina-SCI were off 12.1 percent, or 37 cent, at $2.70 on Nasdaq after hitting a session low of $2.61. Benchmark shares were off 16.4 percent, or $3.27, at $16.67 after hitting a session low of $14.50, a level not seen since Sept. 21, 2001. The steep downward drop in those stocks pulled down shares of their competitors as well. Shares of Jabil Circuit Inc. (NYSE:JBL - News) were off 10.4 percent, or $1.53, at $13.17 after hitting an all-time low of $13.11. Solectron Corp. (NYSE:SLR - News) shares were off 5.5 percent, or 11 cents, at $1.90 after hitting a session low of $1.84. Meanwhile shares of Flextronics International Ltd. (NasdaqNM:FLEX - News) were off 3.9 percent, or 28 cents, at $6.90 after hitting a session low of $6.75 in midday Nasdaq trading. Shares of smaller sector companies trading lower on Nasdaq including Plexus Corp. (NasdaqNM:PLXS - News), down 6.5 percent, or 59 cents, at $8.43 after hitting an all-time low of $8.36; and Pemstar Inc. (NasdaqNM:PMTR - News), off 5.1. percent, or 7 cents, at $1.31, just off their session low of $1.30. CSFB's Walker, in addition to the downgrade, cut his estimate of Celestica's 2003 earnings to $1.03 from $1.30 and reduced Sanmina's 2003 estimate to 15 cents from 25 cents. "We believe that the broad end market landscape has not stabilized, as previously assumed, but rather is likely to further deteriorate well into 2003," Walker wrote in a research note. He said electronics manufacturing service companies, already facing capacity utilization rates of only 50 percent, will probably have to restructure again as a result. Contract manufacturers have been heavily battered over the last two years by the global economic slowdown, as their customers have struggled, leaving the manufacturers with too much capacity, too many employees and heavy pressure on their already thin margins. Many have entered into major restructuring plans, cutting capacity and headcount in higher-cost regions like the U.S. and western Europe in favor of lower-cost production in places like China and eastern Europe.