S.A.R.S.-suddenly another recession syndrome

more commonly known as severe acute respiratory syndrome, a virus that is spreading around the world and causing fears wordlwide. the WHO has issued warnings and advisories, the CDC has done the same. doctors are trying to figure out what it is, why its spreading and how to cure it. for investors, SARS could stand for something else.

S.A.R.S causes a low grade fever, headache, dry cough and difficulty breathing. all the symptoms that may soon be felt by market players and strategists that have enthusaistically grabbed hold of the recent market rally. recent economic data has clearly shown that whatever recovery was starting is now hitting the wall. the data was released as we toppled statues in baghdad so much of it was overshadowed by the war news. when the economic data was focused on, the weakness was blamed on the war. now the war is "over" and companies say they cant give good business guidance because of the economic weakness(caused by the war). go figure?!

what i do know is that corporate cost-cutting cannot continue at the current rate if we expect the economy to improve. people that cant find work cant be good consumers. corporations working off debt burdens and over capacity will not increase capital spending no matter how low rates are. retirees wont spend money if they fear for there financial well being as their wealth continues to errode and there incomes decrease.

as unpopular as it may be, some economists have begun putting up the "red flags" signaling the onset of a new recession. even our president, in his effort to get his tax package passed, has started whining about how bad the economy is. in his last effort to get the word out and promote his plan, he said "in january, when i first discussed the tax plan, the economy was in urgent need of an economic stimulus plan and now the need is even more urgent". yet he and his advisors all say the economy is fundamentally sound and most of the weakness is due to the war, so why pass tax cuts...mostly for the rich? the answer is political. he wants to get re-elected in 2004.

tax cuts, rate cuts, job cuts, cost cuts...the cutting will continue. probably in all areas. yet none will alleviate the economic pain that we will endure as a result of the economic boom we all experienced. time is the only cure for what is happening. the economic cleansing is in full swing and will continue for a few more years. the double-dip is upon us and there is no quick fix to ease its effects.

have a grateful day!

larry