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Bond
investors usually get excited about deflation and are paranoid
about inflation, as inflation erodes the value of the interest
payments that they receive for the bonds that they own.
Nevertheless, bond investors remained spooked in November,
even though inflation was not an issue. Why bond investors
embraced the hope that the U.S. economy was poised for a
recovery in early 2002, is anyone's guess.
You would think that the news released about the number
of people collecting unemployment hitting near historic
levels at the end of November (totaling nearly 4,000,000
people) would have been reassuring to bond investors,
but it wasn't.
Adding more fuel to the fire at the end of November, was
the declaration by the "National Bureau of Economic Research",
stating that the U.S. economy had entered a recession in
March of 2001.
Congressman and senators fought throughout December about
how to stimulate the anemic U.S. economy. However, adjourning
before Christmas in political grid-lock.
In addition, at the end of December, insurance companies
pleaded with the government to pass some legislation
to under-pin their risks to terrorist attacks.
Many commercial policies lapse at the end
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of
the year and the few companies that are still offering "Terrorism
Insurance" to companies had to raise their premiums significantly.
But our politicians deferred their debate on "Terrorism
Insurance" into 2002.
The economic news that was released throughout December
continued to depict the continuing contraction of the U.S.
and global economies. More layoffs were announced pervasive
to many sectors of the economy.
Most major stock market indexes remained range-bound throughout
December, gaining very little ground. Many Wall Street pundits
continued to trumpet their enthusiasm for a potential early
recovery of the U.S. economy, in early 2002. They based
their predictions on economic news being released throughout
December that indicated that the worst may be over for the
ailing U.S. economy.
These were the same pundits that were loath to predict the
slowdown of the U.S. economy in 1999, the "Tech Wreck" in
early 2000, and the recession in 2001.
Most global economies finished the fourth quarter of 2001
also mired in an economic decline or in a recession.
Japan entered into its fourth official recession in ten
years during the last quarter of 2001.
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