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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Boca_PETE who wrote (17809)	4/7/2003 11:36:18 PM
From: davidk555	Read Replies (1) \| Respond to of 42834

Bob Brinker certainly has taken a firm position on his opinion that the economy is headed for a significant improvement during the next 6 months. Here is an excerpt from my newsletter: Excerpt from David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service. THE ECONOMIC FUNDAMENTALS ARE IMPROVING Consumer Spending Bob Brinker Comment: Bob noted that consumer spending was flat for the months of January and February holding at an annual rate of $7.49 trillion. Spending continues to "bounce along" with little change. Americans' income, on the other hand, rose 0.3% in February which would project to a 3.6% annual rate of increase (if it continued). Bob noted that the American consumer has done a great job of continuing to spend despite the geopolitical concerns and the layoffs. Consumers have also been "reliquifying" by paying down some of their debt and hesitant about taking on new debt. Bob noted that reliquification is one of the necessary precursors for a better economy. If you are looking for the economy to improve sometime within the next six months or so, you would want to see a reliquification of the American consumer. That would also show up in an improvement in the savings rate, which we have seen lately. Editorial Comment ("EC"): I think Bob is starting to lay down the case for his view that the economy is going to recover in the next six months which, in turn, supports his thesis that a new cyclical bull market has begun. Remember, the stock market is a discounting mechanism that historically reacts to what it perceives will occur six months down the road. Hence, I don't think it was any coincidence that Bob used that six month time frame when discussing the economic recovery. I suspect that in an upcoming Marketimer newsletter, and in the months ahead on the broadcast, Bob will become more specific in discussing the positive aspects of the economy, which would support the "Economic Indicator" of his timing model turning positive. EC#2: The one thing that I think needs to be monitored, is whether Bob is looking for data to back up his position, rather than objectively analyzing the reality of the situation. Bob tends to focus on the data and news that supports his position, while ignoring the data that is contrary to what he has predicted. That can be very dangerous if you are in the prediction game. Part of my goal is to try and objectively analyze the data as well, and give you another perspective on investing-related matters. Consumer Sentiment Brinker Comment: Bob noted that the University of Michigan's sentiment index for March came in at 77.6 down from 79.9 in February. Bob downplayed the decline in March pointing out that you would expect a decline in consumer sentiment at the start of military operations. EC: The March sentiment index of 77.6 was actually viewed positively as it was smaller than expected by economists, and smaller than indicated by the preliminary March figures reported two weeks ago. Still, this is the lowest level since September 1993 and the third month in a row that confidence sank, so there really is nothing to cheer about in this sentiment gauge. Durable Goods Brinker Comment: Sales of big ticket durable goods -- products defined as having a shelf life of 3 years or more -- declined 1.2% in February. In the non-durable area, sales of products such as food, clothing, etc., were unchanged. With respect to service spending (i.e. utilities, gas, etc.), that was up .5% in February, but some of that could be related to the weather. Income Brinker Comment: There was a 0.3% increase in American's disposable income for the month of February versus an increase of 0.4% for January. Income growth is outpacing spending. That means that the personal savings rate increased again, and is now up 4% from 3.8% in January. Last year, the savings rate was 0% which Bob said was not a favorable indicator for a possible economic recovery in the next six months. Conclusion Bob concluded this segment noting that if you are looking for the possibility of an economic recovery in the next six months, you need better savings rates (which we are seeing now), and you need reliquification (which we are seeing now). All of this is exactly what we want to see. Economic fundamentals always develop favorably in advance of any follow through in the actual economic data. You can have an extended period of lackluster economic data while the underlying conditions are improving. That is why it is so important to look beneath the surface of the reports in order to analyze the condition of the consumer to determine how it is changing. EC: Bob's comments here confirm what I thought. Bob apparently sees an improvement in the underlying fundamentals of the consumer, and hence the prospects for a turn-around in the economy. Bob didn't address some of the negative economic reports last week, such as the decline in new and existing home sales in February. There was also some disheartening news that nondefense capital goods orders -- a barometer of capital spending -- fell 5.2% in February which wiped out the two previous months' gains and reversed an upward trend in total new orders. Still, the most important economic report is not due out until next Friday, when we get the employment report for March which will include data covering the average work week, hourly earnings, nonfarm payrolls and the unemployment rate. I will certainly cover this report in next weekend's newsletter. If you would like to read the rest of this newsletter and/or learn how to subscribe to my service, drop me a line at: mailto:davidk555@earthlink.net or visit my website at begininvesting.com