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While there are various means to = measure this so=20 important indicator for future economic activity, I like the ones that = reflect=20 actual major purchases. Two months ago, we saw the effect on auto sales = figures=20 responding to all the 0% interest deals. Already I have seen some = evidence that=20 current car sales were cannibalized by that. This week, we had several = more=20 indicators, including mortgage application activity for home purchases = and the=20 Durable Goods Report. Despite increasing unemployment (a lagging = indicator),=20 mortgage applications hit another record high last week, up over 15% in = the past=20 four weeks. Disregarding seasonal adjustments and using actual = applications, it=20 was up nearly 45%. And this is despite a sharp drop in refinancing = activity seen=20 in November, when rates bottomed. Undoubtedly, a good bit of this is = people=20 anticipating rates going up further in the future, and locking in a deal = now.=20 But combined with other indicators, it shows consumer confidence in = their=20 employment future. Economists had expected the Consumer Confidence Index = to drop=20 to 83.0 from 84.9, instead it jumped to 93.7, first increase in six = months.=20

Unemployment is rising, although less = than=20 expected, yet remains low compared to other recessions. Latest figures = show new=20 claims increased to 393K (400K was expected). But this is still well = under the 4=20 week moving average, a far more reliable indicator, which dropped to = 413,250=20 from 438,500. Continuing claims only gained slightly. Overall = unemployment is=20 likely to continue rising from 5.7%, probably over 6%, during the next = several=20 months. I actually found an economist who agrees with me that the 4th = Quarter=20 may not show negative GDP, thus defying the traditional definition of a=20 recession (despite the dweebs from Nat'l Bureau of Economic Research who = declared recession started in March because that's when the growth=20 slowed/stopped (but didn't go negative until the third quarter). Given = recent=20 economic reports, I think it now unlikely that the Feds will cut the = rates again=20 at the March meeting. They may even signal an end to rate cutting by = removing=20 the bias left on at the December meeting, to my surprise.

Sales of new homes jumped 6.4% in = November while=20 existing home sales increased 0.6%, both exceeding expectations = (especially the=20 new home sales). Existing home sales are expected to exceed the record = set in=20 1999. Existing sales represent over 80% of all home sales. On the other = hand,=20 new home purchases likely create more immediate purchasing activity. = Meanwhile,=20 following the strong 12% gain in durable goods sales in October (largely = due to=20 sweet deals on cars), this Index dropped 4.8% in November. But excluding = the=20 highly volatile transportation orders (which dropped 48%, who's buying a = plane=20 right now?), the core index increased 1.1%. Excluding defense goods, it = went up=20 2.8%.

Recession, what recession? NBER said = last month=20 that, oh, by the way, the recession actually started back in March even = though=20 we didn't go negative on growth until the third quarter. Gee, slipped = right by=20 us, didn't it? Now, looks to me like the economy has already bottomed, = and may=20 prove my bold forecast of a positive GDP for the fourth quarter (made = months ago=20 right here) prove accurate. NBER is going to look pretty funny if, in = six months=20 or so, they are forced to announce that the recession actually ended = only a=20 month after they found it. Granted, the fears of inflation because of a = record=20 11 rate cuts by the Feds have proven unfounded so far. Granted, a = dramatic drop=20 in energy has helped both fight inflation, and spur the economy = (certainly much=20 more so than any actions by Congress). And we cannot forget the drop in = the yen,=20 lowering the relative cost to us of any products imported from Japan. = With the=20 6% production cut in crude oil production now set to start Jan 1, 2002 = by OPEC,=20 and increasing business activity likely to create increased energy = demand, our=20 days of cheap oil appear to be quickly ending. But if OPEC keeps the = valves=20 partially closed too long, I suspect they will lose the support of the = non-OPEC=20 producers, who will be quick to crack the valves open and take advantage = of=20 rising prices. So, WHERE DO YOU INVEST FOR 2002?? Read a very = interesting report=20 from Sam Stovall, a strategist at Standard & Poors, that studied = what=20 sectors or types of stocks did the best following the end of recession. = In=20 particular, studied the past three recessions (1980, 1982, 1990) and = found that=20 stocks gained 21% in the first 6 months from the bottom (he picks = 9/21/01 as the=20 bottom) and 30% for the first year. He also points out that the place to = be is=20 in growth (vs value) stocks where the performance was 21% for value, 23% = for the=20 S&P500, and 26% for growth in the first 6 months. Looking further, = he found=20 that the performance was 46% for the Russell 2000 and 47% for the NASDAQ = Composite for six months. For the first full year after a recession, he = found=20 that the growth was 29% for value stocks, 33% for S&P500, 36% for = growth=20 stocks, and for R2000/Naz a whooping 66/67%. Technology won out in every = one of=20 the past three recoveries from recession. Given how battered technology = has been=20 in the past 18 months, I see no reason for a different result this time. = I think=20 I will keep playing my small caps, and try again to hit my goal of 100% = overall=20 in a single year, I gotta be able to beat an index by at least half, or = I should=20 retire.