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To: Jim Willie CB who wrote (10677)	12/20/2002 12:05:14 AM
From: stockman_scott	Respond to of 89467

Greenspan Cautiously Upbeat on Economy Thursday December 19, 10:43 pm ET By Glenn Somerville NEW YORK (Reuters) - The U.S. economy still is working through a soft patch but growth should accelerate next year if global tensions ease and corporate profits improve, Federal Reserve Chairman Alan Greenspan said on Thursday. Speaking to the Economic Club of New York, the Fed chief said there was no reason to fear the United States was at risk of price deflation as he delivered a cautiously upbeat assessment of future prospects. Without mentioning Iraq, Greenspan said geopolitical risks had risen sharply and put a damper on demand, but "any significant fall in the current geopolitical and other risks should noticeably improve capital outlays, the indispensable spur to a path of increased economic growth." He said there was scant chance of the United States falling into a deflationary spiral. "The United States is nowhere close to sliding into a pernicious deflation," Greenspan said. If a widespread decline in asset and other prices did develop, the U.S. Fed chief said policymakers had ample tools to fight it. "If deflation were to develop, options for an aggressive monetary policy response are available," Greenspan said. Some economists have expressed concern the U.S. could fall into a deflation cycle like the one that has bedeviled Japan's economy in recent years. LOW RATES A TONIC Greenspan said that since U.S. central bank policymakers cut interest rates by a half percentage point on Nov. 6 -- to a four-decade low 1.25 percent for the federal funds rate -- there have been signs the economy was getting past a bout of weakness. "The limited evidence since the November easing has supported our view that the U.S. economy has been working its way through a soft patch," Greenspan said, helped by cheap credit. "More broadly, strong growth of labor productivity, supplemented by reduced tax payments, has provided a boost both to incomes and to spending. Greenspan conceded the downturn was extensive -- "the patch has certainly been soft" -- with job markets still "subdued " and stronger business investment stalled until profits fatten. Still, Greenspan said, low interest rates and rising rates of productivity were helping support economic activity. Greenspan returned to a theme he addressed last summer -- whether or not the Fed should have been more alert to the risk of the "bubble" that developed in U.S. stock prices in the 1990s, so the aftermath of the collapse in prices after March 2000 might have been less severe. Trillions of dollars in wealth was lost when stock prices tumbled, prompting criticism of the Fed for failing to do more to prevent it. 'BUBBLES' HARD TO SPOT As he did before, Greenspan insisted "whether incipient bubbles can be detected in real time and whether, once detected, they can be defused without inadvertently precipitating still greater adverse consequences for the economy remain in doubt." He said it seemed "improbable" that another bubble might develop soon, since investors now were sensitive to the necessity that asset prices are backed by earnings. Since October, Greenspan said, conditions in the nation's financial markets have improved. "The overall cost of business capital has clearly declined, inducing in recent weeks increased issuance of bonds of all grades and halting the runoff in commercial paper and business bank loans," he said. He said there were signs of "some stirring in capital investment" necessary for a vigorous recovery, but it was too early to judge them. There was no question that companies still have trouble raising prices and keeping them higher, Greenspan noted. In response to questions, Greenspan said concerns that China's growing volume of low cost exports was effectively exporting deflation by keeping global prices down was unlikely. Much of China's wealth goes simply to feeding its people, he noted. "The argument that you often hear that the Chinese are exporting deflation to the rest of the world is frankly a rather large exaggeration," he said.

To: Jim Willie CB who wrote (10677)	12/20/2002 12:08:59 AM
From: stockman_scott	Respond to of 89467

Forecast 2003 By: David Chapman, Union Securities TECHNICAL SCOOP Charts and technical commentary by David Chapman of Union Securities Ltd. 69 Yonge Street, Suite 800, Toronto, Ontario, M5E 1K3 (416) 604-0533, (416) 604- 0557 (fax) 1-888-298-7405 (toll free) email david@davidchapman.com www.davidchapman.com Forecast 2003 As we head into year-end a few themes are emerging that should carry us into 2003. War, rising commodity prices (particularly gold and oil) and a falling US$ are the three main areas that are catching our attention. If these three themes continue to dominate through 2003 then the stock markets could find themselves in the horrifying position of four years in a row down. Not even the Great Depression of the 1930’s accomplished that as the market saw us down for three hard years 1929-1932 then 1933 saw a strong rally following a first quarter low. Nor did the great Nikkei Dow bear market of the 1990’s have four consecutive down years. The Nikkei was down from 1990- 1992 then managed to have a strong 1993. Odd that we should mention those themes as we go into 2003 because in looking back on last year’s forecast we also emphasized golds, metals, oil & gas and the US$. None of them disappointed us as golds enjoyed an excellent first half and following a downward consolidation they are emerging from their six month rest and are rallying strong into the New Year. Golds should do well once again in 2003. Oils and the metals did not enjoy quite the same strength as gold did throughout 2002 but by year’s end they were also emerging as strong themes. Other interesting notes from our 2002 forecast expected that the Dow Jones Industrials would go as low as 5500 (actual – 7177), S&P 500 to 700 (actual – 768), NASDAQ 900 (actual – 1108) and the TSX Composite to 5400 (actual – 5812). Okay so at least we got the direction right. But those numbers were not unrealistic if the Fed had not once again to come to the rescue in October and save the day. Actual our forecast was short on average by 17% with our closest predictions bein g the S&P 500 and the TSX Composite. We were furthest off on the DJI. I would hate to think that we can get four years down but with those themes once again dominating as we go into 2003 we confess that it does not look good. And if commodities are rising, and the US$ is falling and the war drums continue to beat then bonds will not do well either. All of these themes are of course closely related to the possibility of war. War in the Mid-East still seems to be a strong possibility especially between the US and Iraq. A secondary one is the possibility of a second front in the Palestine/Israel conflict between Israel and Hezbollah. The Bush administration still appears to be committed to war against Iraq. If this is to be accomplished then it must get under way in the next month if they are to avoid a prolonged conflict into the heat of the summer starting in May. Also having the conflict completed in 2003 would suit Bush’s chances for reelection in 2004. Of course the bulls best hopes lie in no conflict at all and an easing of pressure that would lower commodity prices and gold and oil and result in a strong stock market rally as we proceed through 2003. One of the charts we showed last year was the 1962 (40 year) cycle. This chart turned into one of our best predictors for the year. The 1962 cycle saw the market make a top in the first quarter 1962 then off the cliff into July followed by a strong August rally then a secondary low in October. So with the 1962 cycle being so successful last year will lightning strike twice and 1963 provide the basis for 2003? We don’t think so because absent from that mix was the themes of war, rising commodities (gold and oil) and a falling US$. For those three themes we turn to the 1973 cycle. That was the period of Vietnam (even though it was ending), a mid-east oil embargo, and conflicts between the Arabs and Israelis and rising gold prices. What was interesting is that period was at the heart of the Kondratieff summer that has themes of risingcommodity prices, falling stock markets and rising bond yields. Isn’t the Kondratieff winter supposed to be about falling or at least steady commodity prices? Well yes it is but that doesn’t mean we don’t or can’t have a period where it dominates and causes the markets particula rly the stock market, bond prices and the US$ grief. And this may be one of those periods. As our chart of the 1973 cycle (30 years) shows we can not help but be struck by the rally out of October lows in 1972 peaking in early January then off the cliff for a good part of the year. This is a bull’s worst nightmare so if you are a bull then look at it closely as you may be seeing the highs for the year as we go into 2003. Another year that also was a bear market was 1953 (50 years). But 1953 was a corrective year within the context of a bull market. Still it was period that saw rising commodity prices and a continuation of the Korean War. But for years ending in 3 the theme is often an up bull year and this remains the great hope for the bulls in 2003. That was the case not only in 1963 (40 years) but also 1933 (70 years), 1943 (60 years), 1983 (20 years) and 1993 (10 years). While war was raging in 1943 the other years were characterized by falling commodity prices and falling interest rates so those were ideal periods for stocks. Another important cycle is the 25-year cycle (1978) and this too proved to be generally positive year. 1978 is interesting as it also had a year end rally followed by a hard down first quarter then a strong rally into October/November before once again going off the cliff. This one bears watching. Besides 1953 and 1973 as bear years the 100-year, 1903 and 80 year, 1923 were also down years. One other, the 90-year cycle (1913) saw the stock market roil in the first half and rally in the second but generally it was shallow moves. The 1903 cycle should be watched closely as that year saw a financial panic as debt defaults; bankruptcies and rising interest rates were themes. That year the market managed to rally into the first quarter then it was off the cliff. 1923 (80 years) was a corrective year within the context of the great bull market of the "Roaring 20’s". But it is interesting as it also made a pivot in December then it was up into the first quarter before going almost straight down the balance of the year. We should be reminded that even though we have already seen some spectacular bankruptcies in Enron, World Com, UAL and others there could be more to come. And one shouldn’t forget the ongoing rumours of significant problems in the banking sector particularly at J.P. Morgan Chase and Citigroup. Debt default and bankruptcies is one of the major themes of the Kondratieff winter and we have often pointed out that the overburdened consumer and corporations are debt accidents waiting to happen. Worse after years of getting their fiscal house in order the US has returned to deficits. Stocks still remain overvalued by most measurements of valuation. With that in mind it is almost impossible to get any sustained rally going unless we are first able to do it from much lower levels. We are still looking for our four-year cycle low although many believe it came with the lows seen in July and October this year. But a massive head & shoulders seen on the S&P 500 and as well on the TSX composite suggest much lower prices. But since we are late in the four-year cycle if the October lows are not the ones then we should see it no later then the first quarter or so. For that reason the 1978 cycle (25 years) intrigues us the most with the significant low in the first quarter. Targets could be Dow Jones Industrials down to 5500, the S&P 500 falling to 600; NASDAQ to 700 but 900 may be more possible and the TSX Composite to 5400. If the October lows are good then we will at worst see a severe test of those lows in the first quarter or small new lows. Conversely oil, gold would top in the first half of the year and the US$ would bottom. These would not of course be the final tops or bottoms in any of these cases. We suspect that will still be to come but further out in the decade. If the market is to rally after the first quarter it is important that the much talked about war between the US and Iraq not happen. In that way the themes going into 2003 of rising oil and gold prices and firm commodity prices and a falling US$ would ease (and provide support for bonds that will fall in price rise in yield if commodity prices are rising and the US$ falling). Certainly the cycles overall do seem to favour a more positive year in 2003 but clearly we need to push war talk into the background. If we can’t and war does start and it doesn’t end quickly then all bets are off and we could, incredible as it seems, see a fourth consecutive down year. The market would shudder. The Kondratieff winter is not a period that is kind to investors. We will update our forecast as the year progresses. For Charts, click on link goldseek.com

To: Jim Willie CB who wrote (10677)	12/20/2002 9:43:41 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Two Refiners Ask U.S. for Oil From Strategic Reserve By NEELA BANERJEE The New York Times December 18, 2002 At least two large oil refiners have begun talks with the Energy Department to explore borrowing oil from the Strategic Petroleum Reserve to make up for shortfalls in Venezuelan exports caused by strikes, company representatives said yesterday. Representatives for the Amerada Hess Corporation and Citgo confirmed that they had approached the Energy Department about the issue. Both companies said they had not yet received a response. Exxon Mobil, a partner with the Venezuelan state oil company, Petróleos de Venezuela, in a refinery in Chalmette, La., said it had not spoken to the agency about such an option. A spokeswoman for Lyondell Chemicals, another refiner, had no comment on the matter. Other large refiners, including ConocoPhillips, did not return phone calls seeking comment. The Energy Department said it was not considering lending oil from the 598-million-barrel reserve at this point. "Currently lending or exchanging oil from the S.P.R. is not an active consideration," an Energy Department spokesman said. Before the strikes, Venezuela had been the fourth-largest exporter of oil to the United States, supplying about 1.5 million barrels of crude oil a day, or about 14 percent of all imported oil. But the standoff between supporters and opponents of President Hugo Chávez has brought oil production in Venezuela to a near-standstill. The price of oil for January delivery was unchanged at $30.10 on the New York Mercantile Exchange at the end of trading yesterday but fell as much as 9 cents after hours. Carl T. Tursi, a spokesman for Amerada Hess, based in New York, said of his company's discussions with the Energy Department: "We have asked them that if they are going to make oil available, we would be interested. We would step up refining rates if we had more oil." Hess is a partner in the enormous Hovensa refinery in St. Croix, V.I., with the Venezuelan state oil company. Last week, Hovensa announced that it would cut its output for December to 275,000 to 300,000 barrels a day because of shortfalls in Venezuelan crude oil, Mr. Tursi said. The refinery's capacity is about 495,000 barrels a day and it is a major supplier of gasoline to the Eastern United States. Kate Robbins, a spokeswoman for Citgo, which is based in Tulsa, Okla., but is owned by the Venezuelan government, said that her company had so far been able to replace the Venezuelan oil by buying supplies on the spot market and had not been forced to reduce output from its refineries. Nonetheless, the company is preparing for a possible worsening of supply problems. "We have asked for their assistance," Ms. Robbins said of talks with the Energy Department, adding that Citgo had approached the agency late Monday. "But there is nothing specific as far as amount or timing." The growing concern among the oil refiners has emerged against the backdrop of new data from the American Petroleum Institute that showed a sharp drop in crude oil stocks in the United States for the week ended Dec. 13, a decline of 3.16 million barrels, to 283.9 million. "It looks like we're seeing some impacts of Venezuela, though it's hard to tell," said John Felmy, economist with the institute. "You need to have a couple of weeks of this to have some confidence in the numbers. But it is something we're watching very closely." A resolution of the Venezuelan crisis still appears distant. Now worries are growing about possible difficulties in resuming oil production once the conflict is over, said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation. Venezuelan oil is mostly heavy and some of the fields there are old, and if they were not shut down properly during the strike, Mr. Goldstein warned, that could damage the oil reservoirs underground and even reduce production capacity. That also throws into doubt how quickly Venezuela could increase production after the crisis. "People are generally saying it will take between 10 days to two weeks to resume production," Mr. Goldstein said. Copyright - The New York Times Company