The Schadenfreude Quarter

Daily Reckoning

Weekend Edition

March 31-April 1, 2001

Waterloo, New Hampshire

By Addison Wiggin

MARKET REVIEW: The Schadenfreude Quarter

AP called it “one of the market’s worst quarters in decades”.

On Friday the Dow rose 79 to close out the final trading day of Q1 2001 at 9878, up 374 for the week. The Dow has successfully posted its most dismal first quarter ever in terms of overall points – down 908. The 8.4% 3-month loss also garners the title “worst first-quarter performance since 1978” in terms of market percentage.

Friday also saw the Nasdaq finish up… plus 19 at 1840. But it wasn’t enough to erase early week losses. The index dropped 88 points for the week. On Thursday, the Nasdaq closed at its lowest level in more than two years. Having fallen 25.5% during the first three months of 2001, the Nasdaw also brings home a “worst-ever” award – Q1 2001 represents its worst-ever first quarter. “The Naz” is down more than 63% from its high of 5048 – a misty peak reached just over a year ago.

The S&P 500 rose 12 points on Friday to close at 1160, up 21 for the week. The S&P, too, posted swarthy numbers for Q1… and remains 24% off its high and “officially” in bear territory.

All markets have suffered the wrath of earnings warnings, pink slip announcements and subsequent investor nerves for the past two weeks. Despite increasing consumer confidence numbers, analysts and investors alike fear weakening fundamentals in the economy and

Markets Around The World: The Nikkei and DAX each dropped 0.8%, while the FT-SE and CAC-40 inched up a skosch.

The Russell 2000 rose 7 for the week to 450.

ADD’L PRICES FOR THE WEEK: What’s up with the dollar? And what’s wrong with the euro?

Gold: $257 down $4

Crude Oil: $26.29

Natural Gas: $5.02

CRB Index: 210

Dollar Index: 117 going up

The Sad, Sad Euro: $.87 going down

British Pound: $1.41

Japanese Yen: $.80 (a 30 month low)

FLOTSAM AND JETSAM: Rumors Of Their Death Have Been Greatly Exaggerated

– From David Tice’s PrudentBear.com

“The surprising news this week continues to be the resiliency of the American consumer. Economists were shocked by the rebound inconsumer confidence. The March reading of 117 was the first increase after five consecutive declines.

Most of the gain was due to the expectations component, which jumped 13 points. Also to the surprise of most economists the housing market continues to enjoy tremendous strength. New home sales continue to increase at better than a 900,000 annualized rate. Existing home sales are also showing no signs of letting up. February home sales came in at a 5.18 million-unit rate.

The average of the past two months, 5.2 million units, is ahead of last year and on course with 1999, which was a record year. Another testament to the housing market is the continued increase in prices. The national median price of an existing home sold rose 4% to $133,800, while the median for new homes increased marginally to $167,000. There still are pockets of extreme strength around the country such as the Twin Cities. The Minneapolis / St. Paul metro area posted a whopping 15% increase in existing home sales and 14% increase in the median price from last February.

Borrowing a term from Bill O’Reilly, the Most Ridiculous Item has to be the report from the National Association of Business Economist. In a report released Monday, 34% of NABE’s members believe that the Federal Reserve has been too restrictive. Please scroll back up and take a look at the M3 chart.

The next couple weeks should be very interesting as to how companies guide going forward. Will technology companies join John Chambers and say “things look horrible” or will they hide behind the fog of “no visibility”? Will retail stores continue to report dismal same-store sales growth, while posting solid total sales gains, proving the point of retail over-expansion? To paraphrase Mark Twain, so far it does seem the death of the consumer has been greatly exaggerated.”

Bon week-end,

Addison Wiggin

The Daily Reckoning