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Stocks Come Tumbling Down
-- November 11, 2002

Stocks continued their nosedive today as investors finally began to realize that, despite a Republican trifecta and a big rate cut by the Fed, the economy isn't going to recover as quickly as they expected. And we think this stock sell-off has only just begun.

Policymakers and politicians just don't have any tricks left in their bags to boost the economy. Eleven rate cuts have come and gone without turning the economy around -- and this latest rate cut won't help, either. Plus, President Bush tried a tax cut maneuver last year, but it did little to stimulate the economy. And with the U.S. on the brink of war and the government surplus quickly becoming a deficit, more tax cuts aren't a likely option.

Plus, consumers have turned increasingly pessimistic, and corporations have continued to keep spending very low. In fact, many retailers are already expecting only minimal year-over-year sales growth -- and some are even predicting sales to drop compared to last year. Without sustained growth in consumer spending, the economy is likely to remain in its slump -- and sink further into recession -- especially if corporations don't step in to make up the difference.

Investors need to face the facts: The economy STILL stinks; corporate earnings will NOT improve significantly anytime soon; and stocks are STILL overpriced. Before stocks to return to normal valuations, a big sell-off will have to occur. And it looks like this will happen sooner rather than later.

related article: U.S. Stocks Slide as Growth Slows