Message-ID: <23359128.1075840983317.JavaMail.evans@thyme> Date: Sat, 19 Jan 2002 06:21:30 -0800 (PST) From: timely-invest@mail-list.com To: alewis@enron.com Subject: Weekly Economic Update Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: timely-invest@mail-list.com@ENRON X-To: alewis@enron.com X-cc: X-bcc: X-Folder: \ExMerge - Lewis, Andrew H.\Deleted Items X-Origin: LEWIS-A X-FileName: andy lewis 6-25-02.PST WELCOME - Vol. 7 No. 3 TIMELY INVESTMENT INFORMATION - Weekly Economic Update ====================================================== Welcome ! For new and old subscribers, there is an Archive Section on our website at: http://www.stockresearch.com/archive.html It lists the original copy of each of our research reports, at the time of publication. ============================================================= PLEASE SUPPORT OUR SPONSORS =========================== INDIVIDUAL MANAGEMENT FOR EVERYONE ================================== For everyone who has enjoyed reading our newsletter but has not had the $200,000 required for our personal, individual, asset management services, we have an incredible announcement to make: Green Mountain Asset Management Corp. and BridgePortfolio.com of Chicago, IL have created an alliance where you can now invest in the Green Mountain Asset Growth Portfolio through BridgePortfolio with a low minimum of $10,000. Your individual account will be set up at Schwab Institutional, which gives you 24 hr. web access. 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For those of you that would prefer an easier to read format, simply click on the link to our website, and if you want, print a copy. http://www.stockresearch.com/weekecon.html ============================================================ WEEKLY UPDATE FOR: January 19, 2002 Prior Week in Review: Financial Market Highlights: ============================ 01/18/02 01/11/02 %Change S&P 500 1,127.58 1,145.60 -1.57% Dow Jones 9,771.85 9,987.54 -2.16% NASD Comp 1,930.34 2,022.46 -4.56% Russell 2000 474.37 489.94 -3.18% SOX Index 523.04 568.89 -8.06% Value Line 358.32 369.76 -3.09% MS Growth 558.74 556.92 +.33% MS Cyclical 510.81 527.86 -3.23% T - Bill 1.58% 1.59% -1 BP Long Bond 5.37% 5.36% +1 BP Gold - Oz-Near Month $283.40 $287.70 -$4.30 Silver - Oz-Near Month $4.35 $4.70 -$.35 Economic News: ============== Last Week's Reports Very Solid With One Exception FRB's Beige Book Mixed - But Some Signs Of Hope Our View More Optimistic - Recovery Underway By Spring *December Retail Sales eased -.1% - Good News - See Below *Consumer Price Index fell -.2% in December - Core Rate - Ex Volatile Food and Energy rose +.1% - Non Event *November Business Inventories fell -1.0% - Sales off -1.4% Inventory/Sales Ratio remains at 1.39 months *Industrial Production fell -.1% in December - Capacity Utilization off -.1% to 74.4% *Federal Reserve Board (FRB) Beige Book - See Below *Housing Starts fell -3.4% in December to 1.57 mil rate *Building Permits in December rose +3.6% *Philadelphia FRB Index rose to 14.7 - First positive Level in thirteen months *Jobless Claims fell -14,000 to 384,000 - Four Week Moving Average fell -250 to 411,000 *International Trade deficit for November narrows -4.9% *Univ. of Michigan Consumer Sentiment 94.2 mid month Big gain from December's 88.8 Although stock market participants focused on individual earnings releases as the "official" earnings season got underway, our focus remained on the economic news. And, the reports were fairly good, and continue to support our view of a recovery in progress by Spring. For starters, the Retail Sales report was very good, even though the reported number was a decline of -.1%. The drop was fueled (pun intended) by a decline in gasoline sales, which fell -4.2% as energy prices fell - which also drove the trade deficit down. But, obviously a decline in gasoline prices is not a negative for consumers. As we have pointed out numerous times recently the decline in energy prices has the same economic impact as a reasonable tax cut. Not surprisingly, then, we liked the retail sales data. The implication is that inventories will not be a problem at the retail level after the holiday selling season. And, of course, the strength does support our contention that spending is driven by personal income, which continues to hold up very well and consumer confidence, which was quite strong at midmonth according to the Univ. of Michigan survey. The FRB Beige Book Survey agrees - sort of, at least for retail sales. Otherwise, they are not so sure, but seem to imply that they think the economy is bottoming out, with any hints at recovery very tentative. More so than is usual, even for the FRB, this report seems to steer clear of making any definitive statements. In addition to the fact that economic inflection points are very, very difficult to identify in real time, the FRB may be trying to keep their options open for the next meeting of the rate setting Federal Open Market Committee (FOMC). As you know, our view is that another quarter of one point cut is not necessary, but the FOMC may take out an "insurance policy." In any case, as we tried to make clear last week, the really important issue is the extent of the rebound in productivity growth, and not the exact timing of the onset of recovery. One other point worth noting, from the more obscure Philadelphia Federal Reserve Bank's Business Outlook Survey, is that their mid-Atlantic manufacturing index turned positive. And, the new orders subcomponent went positive as well, moving from -6.2 to +12.6, with the shipments subcomponent even stronger. Anecdotal evidence, yes. But directionally important, and the magnitude of the change would imply no huge revisions back to negative territory near term. In any case, we believe that by Spring a recovery will be underway. And, our view remains that the "bounce back" will be softer than what some are assuming, and could therefore be disappointing to those that are buying stocks that are dependent on the economic cycle. But, even 3% GDP growth should be positive for financial assets in general, and if the FRB is right about productivity trends, they will allow higher trendline growth than in the past. In short, nothing in the economic data, or the early corporate earnings reports for that matter, has caused us to alter our view. We expect a recovery to be underway shortly, if it has not already begun, and to accelerate in the second half. Last week the economy outperformed the stock market. But, the stock market should revert to form, as a discounting mechanism. And, when it does, it will look to the recovery, and not the history of the just ended quarter. Stay tuned ! Current Weekly Calendar of Economic Data: ========================================= Monday: MARTIN LUTHER KING DAY - U.S. MARKETS CLOSED Tuesday: Leading Indicators Wednesday: Thursday: Jobless Claims Friday: Fresh Money Buys: ================= In response to subscriber feedback, we have established this section to highlight recommendations from our list that we believe are the most attractively priced currently. We will limit the selections to three each week, even as our list of recommendations changes. Colgate-Palmolive (CL) $57.15 Fannie Mae (FNM) $82.60 Pfizer Inc. (PFE) $40.10 Original reports from the time of recommendation, are available on our Website at: http://www.stockresearch.com/archive.html You may obtain a "second opinion" from VectorVest, a service that provides limited access free so you may try their service at: http://www.stockresearch.com/vv.html We will not track the performance of this list as we are already monitoring the original recommendations. Hope this helps. ************************************************************** INVESTOOLS ========== Tech Buyback Portfolio Posts Stellar Gains: +39.23% YTD! David Fried knows a stock is undervalued when the company buys back its shares. That's how he earned 39.23% YTD in techs while the benchmark Nasdaq fell 21.82%. 'Buy these 5 techs today,' Fried says. 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