[Mark Heide]

A while back I had estimated that the DOW should be worth approximately 7200 and the S&P 500 should be 775. But, now I think that it could even go much lower due to many factors. I have no estimate for the NASDAQ, who knows how low it will be since it is primarily made up of the businesses of the '90s.

First the employment report came out on Friday indicating a 3/10% gain in personal income. What is disturbing about this figure is the gain was based on employee overtime. Companies are still announcing layoffs and most have hiring freezes. SBC announced they will be cutting 11,000 jobs, so we see a further decline in the telecommunications industry. I've never seen the employment situation for new hires this bad.

The company I used to work for was deeply involved in the dot com venture capital business that eventually made them file for bankruptcy. They ended up liquidating and selling our services division to their competitor, who eventually consolidated and closed us down 6 months ago. Since, I had worked there for over 11 years I fortunately received a decent severance package, but the same is not true for my former coworkers.

My friend Bill who is a Network Engineer with years of experience called me Friday morning to tell me he has a new job. He now works for the federal government as a Security Screener at Midway airport for less than half the money he used to make as a Network Engineer. The whole point here is that there is very little hiring for technology jobs. Furthermore, other people I have talked to that are working are putting in a lot of overtime, or the work is just not getting done. Companies are afraid to hire due to the economic conditions and uncertainty. But, some recruiters are expecting the hiring business to improve in November.

My biggest complaint about our economy is the role the federal government is playing. So far, they have done nothing to stimulate job growth. They need to pass legislation to give companies tax incentives for hiring. This will help stimulate job growth. I believe this is the key for economic recovery. Right now, our government is preoccupied with elections and possible war with Iran.

Speaking of Iran, the supply of oil is another problem. Right now the price of oil has a war premium priced into it, and could possibly go up to $40 a barrel if we do go to war. I currently believe that the price right now is too high making it expensive for companies to manufacture and transport goods. This cuts profit from companies and is a contributing factor to slow growth. An analyst that was featured on WebFN this week stated that every $10 per barrel of oil costs us 1% of GDP.

I know that a lot of financial analysts are expecting the fed to cut interest rates, but I see no point to it. Companies are not taking out loans for growth and expansion. All the cuts so far have not had much impact on business. Although, cuts have helped consumers refinance and buy big ticket items such as new homes and vehicles, but this is not helping the market.

Consumer debt is at an all time high. How long will it be before they stop spending?

The risks of investing in the market are extremely high. I expect the market to erratically fluctuate until the situation with Iran is resolved. My advice for reentering the market is to look for companies that are not exposed to technology and telecomm. Furthermore, because this is a bear market, the best investments will be value investments. Look to buy companies with reasonable P/Es for their industry. I see no reason to invest in growth stocks when economic growth is near a snails pace. Lastly, due to the volatility you may want to wait out the Iraq situation. Invest at your own risk. I'll stay out of the market for now.

Good Luck

Mark