The Week ahead

Whew, Congress is gone

He upcoming week is at least one without political impact on the markets. The NASDAQ and the Dow swooned when the Bush-Daschle squabble resulted in no stimulus bill passing the congress. I think the Alternative Minimum Tax giveaway was a crime. I think Daschle's reason for killing the bill was equally silly. Both versions of the bill provided health insurance subsidies. The real sane thing was the congressmen who gave up because it was not needed.

With the economic news last week it became apparent to a few politicians in Washington D.C. Stimulus is not needed. The economy pumped up by government spending, Greenspan and lower energy prices is showing signs of recovering on its own.

Next week we'll start to see some preliminary figures on the holiday shopping. Sales at traditional stores are likely to be down. Dollars have been shifted from luxury goods to practical bargains. A lot of dollars have finally shifted into the e-commerce domain.

Only the strong internet plays survived the bursting of the bubble and those retailers are cleaning up. I don't personally holiday shop. I had to buy some things for my business, and to avoid shopping used the internet. I only stepped into a retail store to buy groceries.

So any drop in sales in traditional, physical stores may be more than made up for by e-commerce. In my opinion.

Let me return to a thought above. The economy is showing signs of recovering on its own. Show us a few more signs and we might see that equity market burst you see when everyone is sure the recession is over. We did NOT see that since September 21. What happened since then was the panic selling after the attacks ended and the market returned to pre-attack levels. These were pessimistic, but do not represent a change signaling the end of the recession.

We sitting right at the recession is happening low we were at before bin Laden messed everything up for the economy. The question now is whether the economy keeps going when the zero percent auto financing stops on January 2.

If the ball keeps rolling, the week ahead might not be sweet, but the month or so ahead is looking very promising.

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Shmuel Protter
investmenttool.com