Financial News Includes Some Silver Linings

Bear Stearns also put out a report today opining that the economy is "beginning to recover after a sharp two-quarter slowdown." The firm does not expect a recession, and first-quarter GDP is likely to be revised upward (as I mentioned above), and the second quarter will show growth of 1.5% to 2.0%. Bear expects the second half to grow 3%. That would be nice.

Part of a negative view on the economy comes from a belief the consumer will be forced to hunker down and cut spending, since mortgage equity withdrawal (MEW) is no longer a vehicle for funds. Bear's analysis of the Fed flow-of-funds data shows a "clear connection between MEW and the household sector's net addition to financial assets and ... a relatively low impact on consumption."

I believe consumer spending is determined by personal earnings expectations, and that is why I watch the weekly unemployment claims and the monthly jobs numbers so closely. Despite all the other stuff, jobs data have been OK, not great but OK, and the economy has avoided recession.

---

Vincent Farrell Jr. is a principal of Scotsman Capital Management. Prior to joining Scotsman in April 2005, Farrell was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships. He is a regular guest on CNBC as well as other national print and broadcast media.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.