Posted on 10/17/2003 10:05:37 PM PDT by sourcery
The economic statistics released today have encouraged most economists to revise the third quarter real GDP up again. This has been almost a ritual over the past few weeks as the quarter was ending and is continuing now that it has ended.
It is amazing how brilliant the economists become after the end of the period they are forecasting. Do you remember how excited they got (in unison) at the beginning of 2000 about the robust economy when real GDP grew at 7.1% in the fourth quarter of 1999? The ?forecasts? of that quarter were also revised up throughout the fourth quarter and beginning of 2000. Their excitement stimulated speculators into the market during the first quarter of 2000 just as the market peaked. We will put the latest economic indicators in perspective by including long-term charts of the statistics and we would like you to be the judge as to the significance of the releases after looking over the charts.
We may not be correct in our assessment of the economy continuing to struggle (after all we are not economists). However, looking at the numbers over a longer period is convincing evidence to us that the post bubble economic environment is still not in a strong recovery. Comments by CEOs at the business meeting at Greenbriar, and after earnings releases, also confirm our scenario and do not support the strong economic recovery view of almost everybody else. The CEO of International Paper, John Dillon, stated that he did not expect a strong upturn in the economy based on the orders he sees at IP. If anyone should be able to predict a strong recovery it would be the CEO of a company that dominates corrugated boxes in which most manufactured goods are shipped.
The best Sam Palmisano, CEO of IBM, could come up with was ?we are beginning to see signs that the economy has stabilized?. Given these views, it is not surprising that insider selling is outnumbering buying in record proportions.
Industrial production rose by 0.4% in September and the previous month was revised down to a 0.1% decline vs. an earlier reported positive 0.1%. The latest number came in at about the same level as consensus forecasts. Increased auto production was a major factor in this month?s gain, and most major market segments expanded for the month, with only non-industrial supplies experiencing a decline. Most of the commentary about the increase was very positive and most economists believe that the economy is now moving into full recovery mode.
Capacity utilization also edged higher to 74.7% in September, but looking at the chart on a longer-term basis puts things in perspective. The only time it registered lowered numbers with more excess capacity than now (since 1967) was in the worst post-war recession in the early 1980s.
The numbers were surprisingly strong in the regional manufacturing surveys, but most of these numbers don?t have much relevance to us since there is not a long enough history (or in the case of the Philly Index is too volatile).
So far this year, we have not been correct on the market and we are trying to be open-minded to the bull case, but it is not easy to accept the theory that this is a normal recovery after a normal bear market.
We believe everything was turned upside down after the financial mania and the residual imbalances that occurred need to be corrected. Until we get the liquidation we believe is inevitable and the stock valuations down to much more reasonable levels, we don?t think the bears will have to go into hibernation.
P.S. In between innings look for my daughter, Kristin Minter, on ER tonight as Randi, the desk clerk. She is returning after about a year hiatus. (NBC 10:00 PM) (Just heard that they might show re-runs on the major networks due to the competition with the Yanks-Red Sox--so this may apply to next week).
the market dropped fifty points on friday while reports of home building, intel and nokia are 30% above forecasts.
30% how fast does the economy have to get for these bears?
The problem is that even after massive monetary and fiscal stimulation and interventions into the economy and the financial markets, the economy only managed an unsustainable blip in activity. Now, it is back into the tank for the economy cause it is all downhill from here.
Richard W.
Arete,
That says it all.
The end of the refi boom, etc., etc.
Good point. I don't know. Got me wondering. Maybe look at This thread: US Sept oil demand declines 1.5 pct vs yr ago-EIA, and the links to the full report:
Energy Information Administration: Monthly Energy Review - Contents
and the 'current' pdf file at the bottom -
Seeing as I haven't heard of any new significant oil/gas fields, power plants or refineries, I don't know where capacity would have increased to the point that Net Davis Research's chart would be correct, unless they're all of a sudden counting all those lands that Clinton locked up.
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