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Strategies & Market Trends : Charts & Scans -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Jordan who wrote (2866)	5/12/2003 8:16:51 AM
From: Jeff Jordan	Respond to of 5125

UNFOUNDED OPTIMISM By James R. Cook Virtually all of America anticipates an economic recovery and renewed boom later this year. Unfortunately, there is only one thing booming in this country, and it’s credit. In the past five years private credit growth amounted to $10 trillion. Meanwhile, the economy grew $2 trillion. In addition, the consumer took on $2.00 of debt for every dollar of new income. Uglier still is the mountain of corporate debt that now translates into $200 billion of interest payments. Not only does this choke off business profits, it forces a wave of new borrowing to cover the interest. All this indebtedness goes for naught. The most fantastic money and credit expansion in history has failed to revive the stagnant economy With financial institutions borrowing a trillion a year, the highly leveraged financial system has decoupled from the real economy. This massive amount of credit goes for speculation and consumption rather than all-important investment spending. More recently, credit growth has spun so out of control that $10 of credit brings about a meager one dollar of GDP growth. This equation cannot last. Furthermore, 90% of GDP growth comes from consumer spending. This too is unsustainable. There’s no improvement in the fundamentals of the economy and nothing in sight to indicate a viable recovery. Corporate profitability is the worst in history, and profit margins are at their lowest. The more you look at the numbers, the more you are forced to conclude that the monetary authorities have set their policies on a collision course with financial disaster. This crisis threatens to be of a magnitude so enormous it can’t now be comprehended. If the falling dollar keeps falling, if capital inflows lessen, if interest rates have to rise to reverse those trends, then we face a torrent of problems. In America today, the most serious threats are not taken seriously. Wishful thinking has replaced sound economic analysis. The hopers and the dreamers are directing the music on Wall Street and the mass of investors are dancing to their tune. Unfortunately, the game is over and whoever gets the news last also gets their head handed to them. investmentrarities.com -=-=-=-=-=-=-=- BEST OF STEVE PUETZ May 6, 2003 The majority of economists continue to predict a strong rebound during the second half of 2003. Yet, it’s growing harder by the day to ignore the recessionary news, as the newsletter MFR Commentary (One Liberty Plaza, 46th Floor, New York, NY 10006) points out: "The four-week moving average [of initial unemployment claims] increased to 442,000 from 441,000 last week, and 426,000 two weeks ago…. The recent increase looks as if it cannot all be blamed on seasonal adjustment problems or the effect of the Iraq war. The inescapable truth appears to be that the labor market remains very weak and that normal seasonal hiring isn’t occurring in some industries. Combined with ongoing efforts by households to increase savings and reduce non-mortgage debt, this is hardly the stuff that sustained rebounds in consumer spending are made of. Unless the weekly figures begin to move down to the 400,000 to 425,000 range that we have been expecting, we would have to draw the conclusion that the labor market is even weaker than our fairly pessimistic forecast would suggest." =-=-=-=-=-=- Greenspan uses the labor of this country to print free money for his friends. So when labor isn't producing he has problems. ~j =-=-=-=-=-=- BEST OF KURT RICHEBACHER April 11, 2003 No policy plan will be able to create lasting prosperity for a number of years. What is wrong with the [American] economy cannot be fixed quickly. The only way to return to long-term financial health and economic vitality is through an extended financial retrenchment. Until this is accomplished, prosperity can be achieved only by temporarily reversing the process, increasing the downside potential and delaying the bitter medicine. The Levy Forecast, Feb. 19, 2003 THE PROFIT TRAP During the past two years, sharply rising consumer and government spending have prevented a deep recession in the United States from beginning. Business investment spending suffered its steepest fall. It has been widely recognized that its rebound is the indispensable condition for a sustainable U.S. economic recovery. There is no sign of that happening. Profit conditions are, of course, crucial. But they are inexorably worsening. Focusing strictly on economic data, rather than the Iraq war, we see accelerating deterioration across the board. The question is whether or not a quick and positive outcome of the Iraq war will buy the economy a few more months of expansion. What truly matters are the looming, large imbalances and structural distortions that are the legacy of five or six years of unfettered money and credit creation.