2nd HALF RECOVERY aka 6th PIE SLICE SURGE

well, here we are again. july 2003 and the beginning of the 2nd half of 2003 or the 6th pie piece of the first 3 years of the 21st century. WOW. its already the 3rd year of the 2000's and still no economic recovery from the 1990's economic party. we all know that the harder and longer you party, the harder your head bangs and the longer the hangover lasts. so here we are. the alarms still going off. ready to wake up yet? open those eyes and stumble out of bed? lots of people are counting on you, so get up. that would be the economic recovery we have been talking about.

the stock market is tired of waiting and is forecasting the long awaited recovery. even in the face of persistently mixed economic data and less than robust corporate forecasts, stocks have been rising for almost 5 months pricing in lots of hope that the economy is ready to get out of bed now.

problem is that so many companies are still cutting costs (jobs, SG&A, and capital expenditures) and prices that a real economic recovery seems much more of a prayer than a hope. in fact, judging by the recent consumer confidence readings, the only ones who are confident are the stock market bulls. as we await further economic data that i'm sure will most certainly and unambiguously reinforce the fact that the economy is still readying itself for the 2nd half recovery, the presdients economic team continues to tout the great economic plan that the president has initiated and its incredible effects on the slow, soon to be above-average, recovery we are now experiencing. got it. by the way, that 2nd half part of the story is upon us. how you feeling?!

last years 2nd quarter (2Q 2002) was pretty bad on the heels of the surge in the first quarter (1Q 2002) after the attacks on 9/11 (late 3Q 2001) so this years performance was relatively good compared to a lousy 2Q 2002. i know thats alot of Q's, but for the 2nd half recovery to materialize, economic activity has to pick up substantially and soon.

even as most companies have been reporting "better than expected" eps, they almost all say that the rest of the year is uncertain at best. in fact many companies are lowering forecasts due to the "continued slow economic recovery" which makes for lousy pricing power(read big discounts and lower margins) and the higher costs of doing business in todays world of high energy prices, insurance rates, healthcare increases, pension deficits, and labor costs(unless they are laying off workers). if that enviroment is still persisting now, all the stimulus in the world, which by the way we are getting, wont get business capital spending to come back and will only get the consumer into more debt.

now its time for the rubber to meet the road or for the economy to start its recovery. we are 1/6 into the 2nd 1/2 of the 3rd year that we've been working on this. the NBER courageously called the end of the last recession as november 2001. that was 19 months ago! since then we have been in a liquidity and debt driven "bounce", fueled by 2 tax cuts and numerous interest rate reductions. unemployment has risen from 4.5% to 6.4% as the nation has lost some 1.5 million jobs.

hopefully, thats enough "pain" for the time being and we can get back to the business of re-building this nations economy. my fear is that theres still a bunch more jobs to be cut and further reorganizing to do before this economy gets back on the track.

have a grateful day!

larry