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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: PuddleGlum who wrote (39097)	5/7/2003 10:15:01 AM
From: stevenallen	Respond to of 57110

Here's some support for the bears, I mean the cubs, fans ... The Ernie Banks Economy AHEAD OF THE TAPE By JESSE EISINGER Soon it will become harder and harder to believe in the coming of a strong second half. That's the fabled time when all the outlooks are strong, the CEOs are good looking and the quarterly earnings are above average. It's when recoveries happen, not just in technology or travel or retail, but also for the whole economy. We are in danger of turning into a nation of ever-hopeful Cubs fans, observes Paul Kasriel, an economist at Northern Trust. "Course, the Cubs always fold in the second half," the Chicago economist points out. Maybe Alan Greenspan's sanguine pronouncements about the economy will come true. The whole of the Wall Street establishment believes it. The stock market is on a seemingly unstoppable rally, continuing to break through important technical indicators. The corporate-bond market is reflecting optimism. It is nearly impossible to find a major economist who thinks the second half's gross domestic product will be lower than the first's. But Tuesday, the Fed had to face the reality of the current economic data, acknowledging that recent readings on production and employment "have proven disappointing." It blamed the war and repeated the recent string of positive developments: the fall in oil prices, the polls showing consumers who supposedly claim to be more confident and the improving stock and bond markets. (As an aside, might the price of oil be down somewhat because of the weak economy? There's an analogy here to the investors who have been getting so excited about all those companies that have such great cash flow because of improvements in working capital. Yet, as soon as demand picks up and the companies have to burn cash to build more stuff, cash flow will look weak again.) So how seriously should investors take the belief, as espoused by the Fed, that "the balance of risks ... is weighted toward weakness over the foreseeable future"? Judging from the tumble the dollar took Tuesday, seriously. But judging from a small fall in the stock market after the Fed's announcement, not very. Investors didn't worry too much about the Fed's statement about the risk of deflation outweighing inflation, nor about near-term weakness being more probable than near-term strength. It's undeniable that the recent economic data have been tainted by the shadow of war. The lonely few remaining stock bears will be proved wrong if the next round of economic data improves sharply and stays that way, justifying the stock rally. But it'd be nice to see some numbers first. Updated May 7, 2003