Saturday, May 04, 2002

A Skittish Recovery " . . . Wall Street remains in a funk, as wary investors find reasons to worry. They fret about the contrary trends in business and consumer spending that have made a clear reading on the economy so elusive, the trade deficit, debt of all kinds, lackluster profits and possible oil shocks." "Yesterday's jobless numbers are further cause for concern. The Federal Reserve Board and most economists predicted that unemployment would continue to rise during a tepid recovery, but news that the rate has inched up to 6 percent — the highest level in eight years — could shake investor confidence and consumer optimism." "Few people expect the economy to sustain the vigorous pace it set in the first quarter. The bulk of that frothy growth can be attributed to a replenishing of business inventories, a one-time affair unless across-the-board economic activity picks up. Alas, capital spending by businesses was down for the fourth straight quarter. Consumers, who account for two-thirds of economic activity, heroically continued to spend freely throughout the slowdown, but there are questions as to how long this can continue. Zero-interest financing can talk you into buying only so many cars." "Improving global prospects should provide a boost. Warnings about a sudden falloff in consumer spending overlook the significant increase in real wages in recent years and the power of low inflation to boost confidence. America's current-account deficit continues to grow, but there appear to be no credible threats to the nation's status as a magnet for foreign capital." "The surprisingly steady growth in productivity is the one constant linking the exuberant late 1990's to the more anxious present. It suggests that despite the bursting of the Nasdaq financial bubble, there was something real to all that hype about the "new economy," and that perhaps all that investment in new information technologies is still paying off." 2:19:03 PM  Google It!  comment  []

Worries Are Increasing About Speed and Vigor of a Recovery "'We are in the midst of a recovery, but uncertainty about its strength has increased,' Nanette Abuhoff, a bond market strategist at J. P. Morgan Chase, said yesterday after the government reported that the April unemployment rate had climbed to 6 percent." "'We have a ton of stimulus now,' said James Glassman, a senior economist at J. P. Morgan Chase, who noted that the first President Bush had been reluctant to push for stimulus measures like the extended unemployment benefits now in place. Mr. Glassman said he thought Congress and the current president would provide more stimulus, if needed. And Wall Street, Mr. Glassman notes, now thinks the Federal Reserve is less likely to raise interest rates soon." "'The market looks out six months or so,' said Chuck Hill, director of research at Thomson Financial/First Call, which tallies analysts' estimates, 'and what the market is seeing is a lot of uncertainty.'" 11:47:03 AM  Google It!  comment  []

Companies must treat stock options as expense, Greenspan says "Federal Reserve Chairman Alan Greenspan said Friday the lucrative stock options that showered millions of dollars on top corporate executives over the past decade need to be treated as a business expense - even though such an accounting change could significantly reduce a corporation's reported profits." "Greenspan said under the current practice, which does not require companies to reflect the true cost of options in their annual reports, investors will continue to receive inaccurate information on the financial status of a company." "'The failure to expense stock option grants has introduced a significant distortion in reported earnings and one that has grown with the increasing prevalence of this form of compensation,' Greenspan said . . . " 9:18:14 AM  Google It!  comment  []

Downgraded credit for big companies becoming more common "That intimate club of companies with the highest credit rating is becoming even more exclusive. But having pristine credit isn't that coveted these days, at least not when it comes at the expense of the bottom line." "History also points to a weakening in the triple-A set with membership falling since the 1980s, when the nation entered the largest period of economic expansion. In 1980, there were 65 companies that had Moody's Aaa rating. By 1992, there were 21." "Credit ratings across the board have been sliding as well. Since 1998, downgrades have outnumbered upgrades 5 to 1, according to S&P." 9:14:23 AM  Google It!  comment  []