14 Dec 2001

Posted at 15:27h in The Friday Brief by
To the casual observer, this week’s markets seem overly concerned with news that should have been expected and already priced into stocks.  We know, for instance, that a recession means higher unemployment numbers, declining payrolls, and weaker retail sales.  So why did it seem like investors ran for the exits this week after the buying spree of the week before?  The answer lies somewhere between human nature and the tax code.  Last week saw a market poised shake off months of pessimism in favor of the possibility that the economy would be turning soon.  Stocks rallied as investors and portfolio managers bought to avoid being left behind in case a new bull market was emerging.  Another common characteristic of investors is their tendency to hold positions with losses as long as possible hoping that time will reduce their losses.  As the year comes to a close, investors must sell their losses to recognize them for tax purposes.  Some years the process is orderly.  This year’s tax selling season will likely be more erratic because of the significant losses sustained by investors in 2001, generally bad economic news, and disappointing quarterly corporate earnings reports.  Sellers may panic into ‘selling at any price’ on market decline days, forcing some stocks to decline further than they would in more normal markets. 

07 Dec 2001

Posted at 15:42h in The Friday Brief by
In April of 1991, the National Bureau of Economic Research declared that a recession had begun eight months earlier in July of 1990.  They later announced that same recession had ended in March of 1991.  The recession was actually over and recovery in progress before the recession was officially declared.  The same official body recently declared that our economy entered a recession in March of this year. The economy contracted at a 1.1% annual rate between July and September as consumer spending slowed, business spending slumped, and companies slashed inventories. It is the largest decline since the first quarter of 1991, at the end of the previous recession. 

30 Nov 2001

Posted at 15:46h in The Friday Brief by
Often, the fear of the monster lurking in the darkness is greater than the actual sight of it.  The monster’s out, the U.S. is in recession.  The National Bureau of Economic Research on Monday said the U.S. entered a recession in March even though contraction did not actually show up until the third quarter.  A common definition of a recession is two consecutive quarters of economic contraction, but the NBER, considered the official arbiter, relies on a variety of factors to determine the state of the economy.  Most expect contraction in the fourth quarter of this year as well.  On that news the markets actually rallied for a couple of days. 

16 Nov 2001

Posted at 15:53h in The Friday Brief by
On Tuesday of this week the government announced that U.S. retail sales rose more in October than in any month in the government's 10 years of record-keeping.  Consumers spent money at auto dealers, department and discount stores, and building supply outlets.  Sales surged 7.1%, almost three times analysts' expectations, after falling 2.2% in September. The Commerce Department's report also showed sales excluding a record increase in purchases from car dealers rose 1% after falling 1.5% in September. The rise in vehicle sales was a result of no-interest financing offered by automakers.  General Motors has announced a continuation of their 0% program through January 15th.