Tuesday Aug 15, 2006

Fear of falling and economic growth

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Fear of falling and economic growth

by J. Christoph Amberger

Being somewhat accident-prone by nature, I credit certain aversions to my survival past 40 years of age. First and foremost among these dislikes are heights. I like to keep a healthy distance between myself and steep drops, even when these are secured by railings and other insufficient means of keeping the reckless from falling to their deaths. (The other aversion involves deep, dark, cold water: I hated the movie Titanic and haven’t watched The Perfect Storm yet. And I hope I never will.)

Which is why I personally found it surprising to feel myself inching up to a sheer 120-foot vertical drop off a cliff in Bucks County, Pennsylvania, last week. Even worse, approaching it backwards, clutching a flimsy rope and hoping the sweat that started pouring from my forehead wasn’t washing away the helmet that kept my head together.

But unfortunately, there was no way out. There were four teenage Boy Scouts watching my every move, and two rock climbers in their early twenties. And what upstanding adult male wouldn’t rather rappel down a sheer cliff than admit defeat before such an audience?

-- Indeed, Boy Scout camp is not for the faint of heart, as I found out accompanying 30 boys of our Troop to summer camp. Especially when you’re an adult and not yet willing to admit that you’re past your prime. As I gradually maneuvered my rear end over the edge of the cliff, the words “snap,” “plunge,” and “splat” kept popping up in my brain, as I tonelessly whistled the age-honored Boy Scout song “Gory, gory, what a heck of a way to die” to myself.

But strangely, the greatest difficulty to rappelling lies in overcoming that moment of panic, as you step backwards out of your comfort range and put the first foot down the cliff and let your weight rest against the rope.

The rest is quite easy. And kind of enjoyable.

As I hopped, bounced and scrambled downward toward the belayer, I realized that I had experienced this same kind of feeling before, many years ago, when I first committed a then not inconsiderable chunk of my worldly fortune to the markets.

Investing, like rock climbing and rappelling, is really about taking manageable risks. You don’t want to throw yourself or your money down that cliff, but make sure that you know what you’re getting into... especially that your safety equipment is in place.

If that’s the case, you may as well step out and enjoy what you’re doing.

-- Two weeks ago, the talking heads were grousing over “lower than anticipated” GDP growth in the United States. But what qualifies for a slowdown in the USA looks like Seabiscuit on the home stretch compared to Europe. Only that the audience isn’t cheering for Seabiscuit but for the three-legged geriatric mule at the end of the field.

The Euro-clappers liked to point out that “the economy of the dozen euro nations grew the most in six years in the second quarter as exports spurred spending by companies and consumers.”

Giddy-up, I say: But total EU GDP growth for the second quarter of 2006 came in at only 0.9%, following an even less spectacular limp of 0.6% in the first quarter.

The EU Commission managed to find the good news in that: “Growth will probably reach about 0.7 percent in the next two quarters before slowing to 0.5 percent at the start of 2007.”

According to the International Monetary Fund, the rate of euro-region growth in the past five years has averaged 1.4% compared with 2.6% in the U.S.

I guess that, too, will translate into the advice of “buy euros” in the age of value inversion...

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Earnings Announcements for Tuesday, August 15, 2006:

Abercrombie & Fitch Company, American Eagle Outfitters, Barr Pharmaceuticals Inc, Deere & Company, Dick’s Sporting Goods Inc, eDiets.com Inc, Fossil Inc, Home Depot Inc, La-Z-Boy Inc, Pep Boys, Petsmart Inc, School Specialty, Shanda Interactive, and Varsity Group are releasing earnings.

Brought to you by your FREE American Capitalist.

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Unlock Dates for the Remainder of August 2006:
8/14/06 -- Morgans Hotel Group Company is unlocking 18 million shares.
8/14/06 – Spark Networks PLC is unlocking about 33.3 million shares.
8/21/06 – Mariner Energy is unlocking 33.3 million shares.
8/22/06 – Liquidity Services is unlocking 7.6 million shares.

Brought to you by Extreme Volatility Speculator.

Upgrades and Downgrades:

Ford Motor upgraded by Bear Stearns from Underperform to Outperform.

Digital Insight upgraded by CIBC World Markets from Sector Perform to Sector Outperform.

Shanda Interactive upgraded by Brean Murray from Hold to Accumulate.

Whole Foods upgraded by JP Morgan from Underweight to Neutral.

Weight Watchers upgraded by JP Morgan from Neutral to Overweight.

Aeropostale downgraded by Brean Murray from Accumulate to Hold.

Culp Inc downgraded by Morgan Keegan from Outperform to Market Perform.

General Motors downgraded by Bear Stearns from Peer Perform to Underperform.

National City downgraded by Rochdale Securities from Hold to Sell.

Brought to you by Red Zone Profits.

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Quote of the Day

“The upside for the Dow is at best 11,650 - 10,720, while the downside is between 9,700 and 10,200 -- or 10,000 as the most likely c-wave target. For the Nasdaq the upside is likely 2,190 but the downside could be as low as 1,750 or 1,880. That does not mean we will go that low, but that the chart patterns suggest as likely if we get more bad news and that would not be hard to come by with the economy slowing and so many global tensions. With the weakest seasonal months of the 4-year cycle ahead, it’s simply better to be safe than sorry, even if we see short term bounces.”

- Harry S Dent, August 14, 2006

“Grass is done for.”

- Henryk Broder, August 14, 2006

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