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Is There a Cure for the Summertime Blues?
By Peter S. Iuvara

We are in the heart of earnings season, what should investors look for in earnings releases from these companies? Although it's important for the company to at minimum meet the street, and preferable beat the street on both their earnings and revenue numbers, guidance going forward seems to be what the street is really focusing on. Investors are so focused on this guidance because our economy has yet to show pronounced signs of a recovery. I have heard ranges from analysts and economists on our economy's recovery ranging from as early as 3rd Quarter, 2001 to as late as 2nd Quarter, 2002. This range leaves a lot to be desired in terms of certainty, or at least a rough estimate.

So, When will our economy finally recover? We are looking to the middle of the 1st Quarter, 2002, around February 2002. According to rate cut models, the Federal Reserves interest rates cut on Jan. 3 should be entering the system right now. After that we have a minimum of 5 more rate cuts that should further fuel the economy in an accelerating manner. Hopefully, if things go as planned, the lower interest rates should increase the amount of borrowing and spending, which leads to expansion and growth. And on a Marco level, this expansion and growth creates a cycle of more expansion and growth as the need for more employees' increases and prices go up. This is what the economy should do once we have formed a bottom, and once CEOs, executives, IT managers, etc. decide to take the first steps to business spending.

Are we at the bottom? Yes, I think we are. Although Mr. Greenspan's speech last week lead us to believe that we have more rate cuts in our future, he also notioned to the fact the, "the rate of deterioration is slowing and we are seeing signs that the bottom is beginning to structure itself." For the past couple weeks on the Nasdaq for instance, we have been trading somewhere between 2000 and 2200, and at these levels it seems like the market is trying to formulate a bottom.

So what advice do you have for investors during this bottoming process? For short-term traders I would suggest buying on dips during this traders market, be wary of current quarter earnings, and try to trade with as much discipline as possible. The longer-term investor should focus on company's earnings, especially their guidance going forward. Focus on market leaders in optimistic sectors, with solid revenue and earnings streams, and companies that recently reported well with good guidance.

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