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To: Knighty Tin who wrote (257542)	8/25/2003 9:31:00 AM
From: stockman_scott	Read Replies (1) \| Respond to of 436258

sunspot.net

To: Knighty Tin who wrote (257542)	8/25/2003 9:32:53 AM
From: zonder	Read Replies (1) \| Respond to of 436258

From Merill's Morning Memo, fwiw: Today’s must-reads: front page of WSJ runs with an article putting doubts in the extent of a vigorous capex-led growth surge ("Signs Point to Tech Turnaround, But So Far It’s Narrowly Based"). Article makes the point that Intel's better sales news seemed to stem from Asian, not North American demand (outside of laptops). A survey by SG Cowen cited that 35% of 228 corporate technology managers are cutting their IT budgets while 32% are raising them. Our own research shows that ROA at the median company level is actually falling and that 25% of profit growth since the recession ended has been due to nonoperating items like accelerated depreciation—cash flow from operations are barely up 4% from the trough. Ultimately, it's sales growth that drives capex, and outside of energy and financials, and once the artificial effect of FX translation is adjusted for, top-line growth is running at the grand total of 2% y/y pace. And this is a red flag as far as the consumer is concerned—"Gasoline Prices to Stay High Awhile" on page A8 of the WSJ. Looks as though a test of the March record of $1.73/gallon is in store, from $1.63 currently (every penny at the pumps drains over $1 bln for household cash flow at an annual rate). Meanwhile, the old-economy cyclicals get a shot in the arm on page C1 ("Smokestack Stocks Catch Fire")—one area we flagged last month as the JoC index was breaking out and the bear-bond steepener really taking hold. And these areas do well when the ISM is above the key 50-mark (as was the case in the first half of 2002).