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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (11154)	8/22/2003 8:52:46 PM
From: Donald Wennerstrom	Read Replies (1) \| Respond to of 95632

Once again, thanks to Les H on his thread, he has identified a nice writeup on the current situation. Message 19235157 A few "snips" from the BCA Foretrends report. <The economy is on track for real growth of 5% or more over the second half of the year. The Conference Boards Leading Economic Indicator (LEI) rose solidly in July and our preliminary estimate for August shows another sizable increase (Chart 1). The LEI has rebounded sharply since the brief Iraq war-induced drop earlier this year, and the economy has shown broad-based gains in recent months. This upbeat message is consistent with the trend in financial asset prices; stocks should continue to outperform bonds, with corporate bonds outperforming Treasurys. While the S&P 500 has failed to breach resistance at 1000, because of the perception that labor demand will not revive, we expect such a breakthrough shortly.> It is only a matter of time until we go through 1000 on the S&P. <Limited pent-up demand implies that the consumer sector may not be the main engine of new growth next year (it will still play an important role in sustaining the economy, but should not be the key swing factor). Rather, we continue to expect the largest positive shift to occur in business investment. The strength in profits and productivity was discussed last week (see Chart 5 in the August 15th Bulletin), with the conclusion that a solid, self-reinforcing upturn is underway. Spending on equipment and software has already been expanding in the past year, despite some soft spots in demand. Investment should steadily strengthen, but in a more orderly fashion than in the late 1990s and will probably spread to different parts of the economy (i.e. beyond telecom and Silicon valley). Last weeks massive power blackout highlighted two sectors in need of more investment: energy and infrastructure. These areas were relatively neglected in terms of investment during the era of cheap energy and fiscal budget restraint. However, times have changed as President Bush suggested this week, with Congress expected to expedite legislation to open up the purse strings regarding power and energy development.> <The corporate earnings backdrop remains bullish for stocks. The rebound in consumption, combined with an absence of new job creation and massive cost cutting, have fueled a powerful upturn in corporate earnings. While payrolls will have to rise at some point, investors are still underestimating the sizable leverage in the corporate sector, especially if deflationary pricing pressures ease. Forward earnings and revisions rose again in the past month (Chart 3 on page 4) and should climb further given the strength in the Leading Economic Indicator. While the boost to equities from falling interest rates is over, monetary conditions will stay accommodative. This, plus stronger profits, should cause equities to enjoy another upleg.> <Companies are mostly financing from internal cash flow, as is normal early in an economic recovery. However, the next step will be for companies to start taking risks and expanding; business loan demand should strengthen by yearend. The implication is that bond yields will soon have a new source of upward pressure from business borrowing.> <In recent months, confidence surveys have not kept pace with spending, and may not rebound until the employment picture brightens. The latter should gradually unfold this autumn, ensuring that moderate consumer spending is sustained, although it will be unable to match the rapid growth rate of recent months.> Concensus: Everything is looking good! Onward and Upward Don