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Recovery Will Take Years
-- February 11, 2003

This news isn't new. We've been warning investors for some time that a lack of capital spending will hurt stocks. After all, if a company doesn't invest in new equipment and products, it won't be able to grow. Productivity already fell 0.2% in the fourth quarter of 2002. And sales have plunged across industries as companies have chosen the cost-cutting route instead.

What's significant about this news is that it is from two of the largest investment firms in the US. Goldman Sachs predicts that capital spending will fall by 10% in 2003. Merrill Lynch adds that sales of technology products, which led the 1990s expansion, won't recover until about 2005.

When two major investment firms admit that capital spending won't pick up until "the middle of the decade," you KNOW that things are pretty bad. After all, these are companies that make money by selling stocks. When they tell investors that the one thing that makes stocks worth buying -- the ability to generate more revenue -- is in the pits, investors should start digging their own holes to crawl into -- or start selling.

related article: Two Studies Paint Bleak Picture for Capital Spending