Bill Meehan
There's little reason to get all riled up about the financial underpinnings of the world's second-largest economy, according to collective Wall Street wisdom. After all, it's hardly new news. Who wasn't already aware of Japan's dismal state of affairs? Heck, it's been more than decade since its bubble burst. Get over it. Besides, this time there's a legitimate chance that all will be resolved soon. Surely, with things appearing quite grim again, another new leader will soon take the reins with great resolve and a united purpose. In the Land of the Rising Sun, decks will be cleared of the detritus clogging the banking system, and the ill-conceived policies keeping consumer confidence in the dumps will be rethought. Right?
strategists hadn't espoused that view, I'd feel much better about the possibility that such a turn of events will actually occur. Nonetheless, I am cautiously optimistic that this time really will be different; the alternative is too grim to dwell on. One can only hope the Bush administration will continue to follow a productive course of action. At least our government will be speaking from a much more humbled position. The U.S. bubble, which so many foreign leaders feared over the past several years, has burst, and our economy is no longer expanding at a chest-thumping pace. The global economy is in a precarious position again -- or still, if you please -- and the world's two largest economies have little margin for error. Margin Clerks Back in Business
Anyway, it was rather nice to have a quiet day on Wall Street, although tech stocks' inability to hold up throughout the session was disappointing. I thought the techsters would continue to outpace the so-called Old Economy stocks, especially after the positive reaction to Nokia's announcement, but that was hardly the case. Apparently, so did Morgan Stanley Dean Witter's Barton Biggs, who penned a piece Thursday eerily outlining many of my own concerns and suggesting a period of outperformance in tech. One fact gleaned from his missive was that my intuitive belief that margin clerks have become quite busy again is indeed a fact. According to Biggs, "Margin account calls, according to Merrill Lynch, have soared back close to their November highs, which was a record for the last 15 years." I guess that explains some of the afternoon tech swoon, although skittishness about Oracle's report and rumors of Compaq guiding lower and chopping heads, confirmed after the close, also weighed on traders' minds. Intuit's midsession warning after glowing comments recently gushed forth from a couple of wirehouses didn't help matters either. Abby Joseph Cohen's call to overweight tech seems inappropriate to me, but it's clear that many funds and individuals already exceed her recommendation to allocate 27% to tech and another 5% to telecoms. It's that overhang that could trigger an avalanche in the not-too-distant future. In any event, the response to Oracle's meeting lowered expectations but missing revenue in applications was muted. Yet the postclose strength on Globex waned in the light of dawn. Investors and traders had lots of time to reflect a bit about how best to attack the wily beast, but it looked like many opted to keep an eye on the NCAA basketball tourney. Of course, the bigger diversion that kept many sitting on their hands is Tuesday's Federal Open Market Committee meeting. Gaming the inscrutable Alan Greenspan is far more difficult than picking the Final Four, and it should be fun to watch stock and bond-market traders jump through hoops upon the Fed's announcement. Fed funds futures now reflect an 80% chance of a 75 basis-point rate cut. It could get really ugly if there's just another 50 basis-point cut, as that's already been fully priced into the markets. It's no wonder that traders are standing aside, and I continue to believe that aggressive traders should put out shorts on bounces. Threat of a Global Slowdown
We sure got some nice pops in the financials Thursday, which helped the Old Economy stocks to recover some of Wednesday's losses. I gave our folks a list of 24 new names in the cyclical, electric utility, energy, financial and pharmaceutical groups Thursday morning, as I expect the broader market to continue to flag. Analysts' expectations do not yet reflect a domestic recession, which, along with Japan's economic woes, threaten a global slowdown of unknowable proportions. While the four-week average of initial jobless claims
reached its highest level since 1998, the Philly Fed report showed a bit of improvement, although still contracting. Neither had much of an effect on the markets, although the bonds firmed late in the session as the Nasdaq Composite Index faltered in the afternoon. Today we'll get the producer price index and industrial production reports, but the center of attention is likely to be the release of the mid-March University of Michigan consumer sentiment index. Stability could dash hopes of more than a 50 basis-point rate cut, but significantly weaker readings might also spook investors. However, a weaker number would appear preferable for the bulls, because the Fed is the primary hope for those looking for a second-half recovery. Clearly, the luck o' the Irish is required for all the pieces to fall into place, but it's going to take more than luck to get things turned around as quickly as many strategists insist will happen. Cohen, a typically conservative forecaster, expects the S&P 500 to rise a tad more than 40% over the next three quarters. Seems like grasping at straws and quite a bit of wishful thinking, but, hey, if folks are willing to drink green beer, I guess anything's possible. I'll stick to unadulterated Bud in the bottle. Have a happy and safe St. Paddy's Day! And may the luck o' the Irish be with you. But, better yet, why not raise some cash? That's about the only thing that Wall Street isn't advising, and those folks haven't had much luck at all for some quite some time.
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