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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (64816)	7/20/2003 5:49:37 PM
From: Gary H	Read Replies (1) \| Respond to of 94695

financialsense.com Pondering where all this money went, we took a look at the pattern of consumer spending from 2002’s first quarter to 2003’s first quarter. What we found greatly surprised us. Apart from a temporary, minor surge in the sale of motor vehicles, expenditures on consumer durables were flat over the year. Among nondurable goods, the major increases in spending were on food, gasoline and fuel. Actually, 63% of the higher consumer spending was on services, and mainly on housing and medical care. It was a discovery that has shocked us - because we learned that the American consumer’s heavy borrowing is largely financing expenditures on essentials. The other, equally important conclusion to be drawn from these facts is that consumer spending, despite ever-new records in borrowing, is not able to lead a sustained recovery. So far, it has prevented a deepening recession, but it is much too weak for more than that. The obvious indispensable further condition for sustained, stronger economic growth is higher business fixed investment. Mr. Greenspan has certainly realized this, having said in a recent speech, “the central question about the outlook remains whether business firms will quicken the pace of investment.” Scrutinizing the GDP numbers and also the necessary conditions for a broad recovery in business fixed investment, we see no chance for it to happen. But first a clarification of facts: Over the 12 months to the first quarter of 2003, nonresidential fixed investment has declined in nominal terms by $21.7 billion and in real terms by $17.6 billion. The decline occurred across the board, but it was centered in structures, that is, in nonresidential buildings. Business investment on equipment and software, measured in current dollars, increased slightly, by $10 billion, or 1.2%, implying virtual stagnation. Measured in real terms, however, one item - computers and peripheral equipment - showed a sharp increase by $56 billion, or 21%. For many bulls, this is one ray of hope in the economy’s overall dismal picture. But we see nothing but hedonic pricing. In current dollars, business spending on computers rose by just $4.4 billion.