You've got questions, we've got answers. Today we bring you a new SuperModels feature called "Hey Modelman!" (Submit your own questions here .)
Hey Modelman, whatever happened to your idea about buying stocks kicked out of the S&P 500 -- does that still work? Modelman: It's still flying high. The concept worked beautifully just last month when AMR ( AMR), the parent of American Airlines, got the boot. Standard & Poor's will stand behind the big-cap stocks in its standard-bearing S&P 500 Index for just about any crime against shareholders except bankruptcy. When it looked like AMR was going banko just before the start of the Iraq war, S&P showed the deft timing touch for which it is revered in America's poorhouses by forcing it out of the 500 on March 15. Since then, the stock has taken off, rising more than 200% through April 28 to $4.75 from $1.50. Its replacement, Apartment Investment and Management ( AIV), was up just 5% over that time, half the advance of the index itself. Hey Modelman, last week you said things were looking up for the economy, and then we get zinged with a GDP report showing annualized growth in the first quarter of 1.6%. What gives? Modelman: New weekly data from the Economic Cycle Research Institute, as well as government reports, continue to suggest that a new recession is not imminent. The data are providing fodder for both bulls and bears, but the bottom line is that the economy in 2003 so far looks a lot like 2002: We're getting positive growth in gross domestic product, but not enough to add jobs or to make businesses confident about investing. So you end up with an economy that is "limping forward on one leg," in the words of analyst Lakshman Achuthan. That one leg is the consumer, who continues to hang in there. To be sure, consumer debt is rising, but interest rates are so low that people have the cash flow to cover payments. The good news is that while the recovery from the 2001 recession is subpar, it looks like we'll avoid the global economic meltdown that appeared possible when oil prices were rising and worldwide consumer confidence was falling. The bad news is that business spending continues to appear anemic as the overcapacity produced in the bubble years continues to repress decision-makers. Figure on something like 2.9% growth in GDP for the year -- not terrible, but nothing to write home about. It may not even feel that strong to the investor class, because of the unusually high number of well-paying white-collar jobs that are being cut in the latest round of corporate layoffs.