|
|
|
|
|
|
The "Bulls" and the "Bears" continued their battle as July unfolded.
Fueling the "Bulls" was the hope that the plethora of doom and gloom news about the decline of the U.S. and global economies would end soon, and as such, the worst was over for the implosion of corporate profits.
Fueling the "Bears" was the belief that the worst was ahead for the U.S. and global economies and that corporate profits would continue to deteriorate for some time to come.
In early July the earnings news was released for the second quarter of 2001. Many companies, especially most high technology bellwethers, revealed that in the second quarter of 2001 they actually lost billions of dollars. These were the same companies that just a year ago were amping up their capacity to deliver their products. Many of these companies said that they had been loath to predict their sales would dissipate as they have so far in 2001.
Adding insult to injury was the
|
|
|
|
|
|
|
|
|
|
|
new accounting law that came in to effect on July 1. This new law mandated that all public corporations could no longer amortize the "good will" that they purchased in their acquisition frenzy. They instead have to write it off at one time.
This new accounting rule set the stage for tens of billions in write downs on goodwill by many high technology companies.
Goodwill is the accounting term of what you pay for a company in excess of its tangible assets. Many high technology companies in the past few years went on a buying binge, paying ridiculous prices for the companies that they acquired, often paying for these acquisitions with their common stock, as investors bid their stocks up to the sky in 1999.
One high technology company actually posted losses for the second quarter of 2001 in excess of 50 billion dollars, an astronomical number by any gauge.
July ended with most major stock market indexes losing
|
|
|
|
|
next page
|
|
|
|
|
|
ground for the month, albeit somewhat muted, with the last week in July ending on the upside for the stock market.
Investors seemed to regain some confidence at the end of July, perhaps being hopeful the Federal Reserve (Fed) would continue to lower short-term interest rates at their next scheduled meeting on Aug 21.
Investors confidence was short-lived in early August as more and more news was disseminated
to the public depicting the continuing deterioration of the U.S. and global economies and the accompanied profit implosion for many corporations.
The high technology sector continued to stand out as the biggest loser, with no visibility ahead for investors. Many of the high technology bellwether companies that set records for ever increasing growth and profits in the late nineties, set new records for losses and layoffs in 2001.
|
|
|
|
|
|
