AN IMPROVED ECONOMIC OUTLOOK

HARRISdirect ^ | July 03, 2003 | Jack Ablin, CFA

[fight_truth_decay]

MARKET OUTLOOK

An Improved Economic Outlook

A quick resolution to the war in Iraq has resulted in an improved outlook for the U.S. economy and has buoyed a dramatic rally in the U.S stock market. Retail sales picked up in May, after declining in April amidst war coverage and a barrage of bad weather in the East and Midwest. Consumer spending continues to fuel whatever modest growth the economy has experienced. The impact of yet another round of mortgage refinancings and lower taxes add to a positive environment for the second half of 2003.

Although the jobless rate has edged up to 6.1%, payroll activity has improved slightly and consumers are generally more confident about the economy than they were before the onset of the war. Consumer sentiment, as measured by the University of Michigan, slipped somewhat in June's preliminary findings. Yet it remains well above its earlier lows. We are still waiting for tangible signs of improvement in the business sector. However, there has been slight improvement in the Institute of Supply Management Index, which showed an increase in new orders in May after two disappointing months in March and April. Together, these factors point to modest upward movement, and we believe that the economy remains on track for 2.0% growth in gross domestic product (GDP) in the second and third quarters.

Equities Stage a Comeback

At this writing, the stock market, as measured by the S&P 500, has risen nearly 25% off its low point of last October, and it has gained more than 13% for the year to date through June 15. The technology-heavy Nasdaq's gains have been even stronger. Since mid-April, when favorable tax legislation was virtually certain, dividend-paying stocks have unseated growth and technology stocks as the market's leaders. Utility stocks in particular have rallied. The smallest 100 stocks in the S&P 500 have outpaced the largest 100. Finally, higher-yielding value stocks have pulled ahead of growth stocks for the year. Much of the move can be attributed to the resurgence of previously-pummeled technology stocks that crossed over the value side. Although we are still somewhat neutral in our outlook for the stock market, we are encouraged by the market's strong momentum and by investor willingness to take on risk in their portfolios. With an improving stock market and a rebound in consumer confidence, there is a sense that we are moving forward.

Bonds Hold Their Own

Once again, the riskiest bonds-corporate and high yield-were the best performers as investors expressed their confidence about a strengthening economy and their willingness to take on risk. Yet, Treasury securities continued to rise in value as interest rates declined during the month. The 10-year U.S. Treasury bond touched down near 3.0%, setting more than one 45-year low during the period. Lower interest rates set off another round of mortgage refinancing, which restrained the environment for mortgage bonds.

Our Outlook: Good Opportunities in Stocks and Bonds

As we head into the second half of 2003, we believe that it makes sense for investors to increase their exposure to small-cap stocks and to equities in developed foreign countries, either in their individual portfolios or through mutual funds. Small-cap stocks have historically been strong performers in the early phase of an economic recovery. In the foreign markets, the price-to-book ratio of foreign stocks has been at 55% of U.S. stocks-an indication that there is room for these stocks to rise in value. In addition, we continue to have a strong inclination toward emerging market stocks and recommend that investors overweight the sector.

Although we are currently underweight in bonds, we continue to believe that high-yield bonds are attractive. In general, we believe it is important for investors to pay attention to bond yields. If they continue to drop, it could have a deleterious effect on stock market returns and could break the momentum that is currently in place in the equity markets.*

Jack Ablin, CFA
Senior Vice President and Chief Investment Officer
Harris Bank

[fight_truth_decay]

* Note: Subscription trading site.

[Willie Green]

* Note: Subscription trading site.

I'd cancel the subscription.
They don't understand the difference between "the economy" and the "stock market".
Most Americans can't support themselves strictly on investments.
The vast majority have to actually work for a living.

[snopercod]

The vast majority have to actually work for a living.

And a growing minority can only dream of working for a living...

Did you catch my post on the other thread about the last factory in our county boxing up all their machines and sending them to Mexico to set up shop there? Coats American in Rosman, NC. All the other factories here have shut down.

But hey, things are great on Wall Street, eh?

[LS]

You and Willie really need to get out once in a while. Try roaming around the outskirts of Dayton, Ohio, or Cincinnati, where there are hundreds of small machine shops and software design/tech firms. Don't see them closing up. In fact, latest info from the Dayton Daily Worker is that things appear to be ok.

But, hey, you "gloomsters" have a great 4th, hear? Maybe if you put on all your gloom hats at one time, you might actually cool down the weather.

[angkor]

Sadly, one must become as opportunistic and coldblooded as American management in order to succeed in America.

For example, the Coats American workers should band together and get an ExIm Bank loan, setup shop in Mexico, and use their market and technical expertise to undercut their former employer (hopefully putting them completely out of business).

Or, American programmers facing H-1B outsourcing moves to India (or some other third world country), should open a huge outsourcing biz based on the radically lower cost of living and doing business in those countries, move their American programmers to those lower-cost (and often idyllic) locations, and put the H-1B companies out of business.

Capitalism is a bitch.

[snopercod]

Get out more?

I drove around and made personal visits to prospective employers for 9 months -several per week, and sent out hundreds of resumes.

I drove hundreds of miles away to different cities and different states and always got the same answer: "We're not hiring."

Call me a "gloomster" if you want, but you are the one who should get out more. I got my first job (in a machine shop) 39 years ago, and have never been involuntarily unemployed since. This is the worst I've ever seen it.

[LS]

Then we have different experiences. Currently I know four people who are unemployed. 1) a top level exec with Huffy bicycle corp who has had two other jobs, but refuses to leave the Dayton area. So, he basically sits on his pension; 2) a 49-year old musician/country-line-dance teacher who voluntarily retired (yes, at 49), living off his accounts and self-paid pension; 3) a 52-year old (maybe slightly older) fellow who was laid off from SAIC in the late 1990s and who is perfectly capable of getting some type of work in defense/electronics/or even carpentry (he's very good)---but he doesn't want to and is living off his company pension/savings. All three of these have upper-middle to upper- upper-middle lifestyles. The fourth has been a musician friend since high school. While he is very good with his hands, he has always had some drug-related damage from high-school and he simply will not hold a job. (For a while, he had a perfectly good apartment complex manager job . . . but he wanted to play music). He never has shown up on job rolls, nor jobless rolls. But it is totally his choice.

Now, I may have a small circle of experience---certainly not like yours---but all of these people COULD work if they chose, and yet don't, and only one (the last guy) is suffering (but he always suffered---again, his choice).

Today I had my air conditioning fixed. I have been trying since Wed. night. Two places never returned phone calls, despite saying they had 24-hour emergency service. A third wouldn't talk to me until Mon. Two told me they were going all day until 8 at night, every day. (Same in winter with heaters). There is certainly opportunity in air conditioning repair. Come to Dayton. I'll help you get something good!

[evaporation-plus]

Don't you love the honest opinions of stock people. Especially the ones who have something to gain from you buying more stock.......

[fight_truth_decay]

The vast majority have to actually work for a living.

Do I sense a little animosity?

That's your opinion. Depends on how good you are, as in any occupation. Many investors have done well and will continue to do so. And if you don't think it's work, then you are sorely mistaken. Don't compare the do-it-yourself- get-rich-quick-wannabe-daytrader with those investors with years of experience in the market. Holding long term, taking some short term risks, and following the market from the opening bell to the close most market days..doing research into the evening. It's a job just like any other.

This Harrisdirect site is for trading. That is why the subscription. One has to invest is the tools one uses and this site for investor research is key. You get what you pay for. I have a positive outlook on the market as a whole; but have kicked myself for not picking up some tech stocks that have been on the climb lately with restructuring. However, I have chosen to smell the roses for a while. Something I had forgotten how to do...addiction combined with liking one's job (never feels like a job) does that!

[fight_truth_decay]

Agree.. a Machinist shop/company 53 years young has been hiring in my area with benefits (all medical/dental) 401K, vacations...full and part time around the clock and on the job training..experience not necessary.

Just a part of research..finding the signs of what is working and what isn't in the marketplace.

A good 4th to you as well!

F_T_D

[Capitalist Eric]

Currently I know four people who are unemployed.

Then you don't get out much.

OTOH, being in California, the Communist hell-hole (bankrupt and all), it's worse than the rest of the country...

Making a long story very short- unemployment is very high, and I had the same experiences as snopercod, even though I have an excellent job history, plenty of professional references and a skill-set very difficult to match...

But hey, maybe I'm just a "gloomster" too... I wasn't, until I had to actually get a job... I finally got it together last Monday- after three months of serious hustling.

No, I don't think you get out, much...

[Princeliberty]

I would like to hear one of them every say
at some point now is the time to sell!

To hear them say it everyday we should
buy stock and never sell it.

[snopercod]

Thanks for the stories. My neighbor commutes to Dayton every few weeks - 7 hour drive.

The reason you are having trouble finding an A/C company is that those outfits only pay $9 per hour (the rate in my area) to their "technicians". Therefore the companies can't keep any good ones.

The good ones are prevented from going into business for themselves by government licensing requirements.

I worked as an electrician for a couple of years here, and made "top rate" (meaning it would never go higher) of $15 per hour. The boss charged the customers $60 per hour for my work. On two large lakefront homes that I wired, I grossed him $160,000 in less than three months - must have earned him $80,000 pure profit. I asked him for a $500 bonus, but instead he fired me.

It's rough out there...

[LS]

You make a good point on the regs. My brother-in-law, who is very good with mechanical stuff, about 10 years ago went to Florida where he was going to start a jet ski repair and paint shop. His pain designs were fabulous---real funny car stuff. BUT, he found that the Environ. Protect. Agency required any paint facility to be completely sealed (a typical facility costs about $200,000). Here he had gone through jet-ski repair school, moved to Fl. and never looked into the regs behind actually opening a shop!

I am skeptical that all repairmen make $9 per hour. I do spend a great deal of time talking to all the workers who come to my house, and talked to this guy yesterday. He basically finances his vacations through his overtime work on holidays. Now, that isn't Bill Gates, but it isn't soup line stuff---it's more or less the same position I'm in when I have to teach summer school to get our vacations paid for.

[LS]

I get out a little more than you think, and due to my job, I travel a lot, mostly around economists who are involved in the job sector. But the key as I see it to your comment is the word CALIFORNIA. Moving is a necessity when searching for work. That socialist mecca is NOT going to grow again for several years, until a sensible government gets in place. Try Nevada.

[LS]

Remember in the mid-1990s, Rush had calls from people who couldn't GET help. One aircraft parts manufacturer in GA said he would start at $15 an hour, with very quick raises, no experience, a high-school ed only, and would train on the job. He couldn't get ANY applicants.

[snopercod]

I am skeptical that all repairmen make $9 per hour.

The range in my area of Western North Carolina is from $8/hr. for helpers to $15/hr. for experienced professionals. The clown I was working for offered zero benefits and zero overtime. If you don't believe me, log on to the NC Employment Security Commission website and look for yourself at what is available in the Asheville area. Follow the "find a job" link.

Here's a sample from a search I just did of the three surrounding counties (roughly 100 mile radius):

List of Jobs

There were 426 jobs found, select the title to view details about a particular job.

Page 1 of 9

You may want to click on the Advanced Search Button below to narrow your search.

Date Job Posted	Title	Location	Salary
07/03/2003	Installer Repair Tech	Asheville, NC	Other
07/03/2003	Nurse Aide/Home Health	Asheville, NC	Other
07/03/2003	Security Officer	H'ville, NC	$7.00 Hourly
07/03/2003	Computing Sup Tech II	H'ville, NC	Other
07/03/2003	Supervisor Case Mngt	H'ville, NC	Other
07/03/2003	Lic Clinical Soc Worke	H'ville, NC	Other
07/03/2003	Registered Nurse	H'ville, NC	Other
07/03/2003	Pavement Marking Labor	Hendersonv, NC	$9.00 Hourly
07/03/2003	Family Preservationist	H'ville, NC	Other
07/03/2003	Geographic Info System	Hendersonv, NC	$16.53 Hourly
07/03/2003	Locator	Hendersonv, NC	$7.00 Hourly
07/03/2003	House Managers	H'ville, NC	Other
07/03/2003	Direct Support Person	Hendersonv, NC	$7.00 Hourly
07/03/2003	Mason Laborer	Brevard, NC	$8.00 Hourly
07/03/2003	Customer Service Rep	Asheville, NC	$8.00 Hourly
07/03/2003	Bookkeeper	Asheville, NC	$12.00 Hourly
07/03/2003	Processing Assistant I	Asheville, NC	$19,626.00 Yearly
07/03/2003	Building Custodian	Asheville, NC	$1,200.00 Monthly
07/03/2003	Office Assistant	Asheville, NC	$8.00 Hourly
07/03/2003	Office Manager	Asheville, NC	$8.00 Hourly
07/03/2003	Precision Inspector	Asheville, NC	$11.00 Hourly
07/03/2003	Vision Health Screener	Asheville, NC	$8.00 Hourly
07/03/2003	Cleaning Technician	Arden, NC	$9.00 Hourly
07/03/2003	Road Crew Workers/Temp	Asheville, NC	$8.42 Hourly
07/03/2003	Floral Designer	Asheville, NC	$6.00 Hourly
07/03/2003	Tech Support Rep	Asheville, NC	$8.00 Hourly
07/03/2003	Store Staff	Asheville, NC	Other
07/02/2003	Automobile Detailer	Hville, NC	$7.50 Hourly
07/02/2003	Youth Program Asst I	H Ville, NC	$10.89 Hourly
07/02/2003	Youth Program Asst II	H Ville, NC	$11.78 Hourly
07/02/2003	Plumber/Helper	Asheville, NC	$13.00 Hourly
07/02/2003	Laborer	Hendersonv, NC	$8.00 Hourly
07/02/2003	Processing Asst. I	Horse Shoe, NC	$17,127.00 Yearly
07/02/2003	Office/Admin/Professio	Arden, NC	Other
07/02/2003	Receptionist	H'ville, NC	$7.00 Hourly
07/02/2003	Desk Clerk/Night Audit	Fletcher, NC	$8.00 Hourly
07/02/2003	Tool-Crib Attendant	Fletcher, NC	$9.00 Hourly
07/02/2003	Construction/	Lake Lure, NC	Other
07/02/2003	Wall Former	Hendersonv, NC	$10.00 Hourly
07/02/2003	Bookkeeper/Reception	Hendersonv, NC	Other
07/02/2003	Housekeeper	Hendersonv, NC	$7.50 Hourly
07/02/2003	Presser	Hendersonv, NC	$6.50 Hourly
07/02/2003	Tire/Lube Technician	Hendersonv, NC	$8.00 Hourly
07/02/2003	Office/Professional	Asheville, NC	Other
07/02/2003	Pt Member Serv Assoc	E Flat Rk, NC	Other
07/02/2003	Clerical/Technicians	Fletcher, NC	Other
07/02/2003	Assembly/Packaging	Asheville, NC	$6.75 Hourly
07/02/2003	Surveyor Helper	Asheville, NC	Other
07/02/2003	Service Mechanic	Asheville, NC	$10.00 Hourly
07/02/2003	News Promotion Produce	Asheville, NC	Other

[fight_truth_decay]

"I would like to hear one of them every say at some point now is the time to sell!"

They do..that's why you read the Current Investment Ratings under Thomson Investor or Zacks. You study the charts, Industry news, ratings, P/E, debt/equity, shortselling (way before Martha Stewart sold hers..big signal right there alone)etc. You do your homework. You decide with an educated guess.

Wall Street Ratings: Strong Buy 6..Moderate Buy 3.. Hold 11.. Moderate Sell 0.. Strong Sell 2.. Average Rating* 2.50.. [current] 1 Week Ago, 1 Month Ago , 2 Months Ago, 3 Months Ago etc.

(this chart was just an example of one particular stock} Only a few times in one's lifetime that there is such great opportunity to build wealth. One just doesn't put all one's eggs in one basket.

F_T_D

[Afronaut]

If you invest at this point you will just be feeding the fish. If you can afford to do that then good luck.

The market will never again take off and keep going up. No one will buy anything for no reason at all. It's a shell game and you are the pigeon. Good luck. They will take this market down on a loud fart. Watch and learn AGAIN.

[fight_truth_decay]

I guess my long time experience tells me differently. There were always those that spoken such as yourself over the years..and I can only wave back at you and say: "You do what is best for you." We can't dictate another's direction in life. However, education will always be the key...no matter what path in life we choose to take. We don't leave for others to do what we can do for ourselves.

Thanks for the 'pigeon' comment..will not degrade myself to placing a 'name card' on you. I have been very fortunate in my work aka play. I thank God for that everyday. Wish success for you and yours as well.

Respectfully,
F_T_D

(psst..'they' don't want you to know people ARE making money and always will continue to do so.)