To: Joseph G. who wrote (2247 ) 6/15/1998 10:00:00 PM From: Cynic 2005 Read Replies (2) | Respond to
I didn't expect a "shoot it straight" interview with the Chief Inv Strategist at Merrill.We've had four quarters of very strong U.S. economic growth and strong domestic spending, and yet, profit growth has slowed to a crawl. We've had no profit growth at all for two quarters, in fact, it's been falling. Our niches of corporate cash flow suggests cash flow has been falling as well. It may explain why breadth was so bad in the marketplace. The average stock was doing worse than the Dow and S&P, even before Asia appeared on the scene. What we think is happening is corporations are investing too much. There's just too much capacity out there, and it's beginning to hit pricing and profitability. So, the positive is interest rates. We think interest rates could go substantially lower if the economy slows. But we've got an earnings problem. So, we think investors should be careful in stocks and pretty fully invested on the bond side. Capital spending grew at a 22 percent annual rate in the first quarter, and that's five times as fast as the economy grew. I think capital spending is a bit vulnerable here. >>quote.com
