Recession hit economy hard
Stockholders, investors and people all over the country in general are still waiting for an economic recovery after stocks fell drastically in January.
Financial giants such as Intel and J.P. Morgan Chase took hard hits as their shares fell last month. Intel plans to cut its capital spending by 25 percent in 2002.
Kent Engelke, markets strategist at Anderson & Strudwick, believes that if Intel won’t be spending much, a lot of other technology firms won’t be either.
“This market has been priced for a quick recover, but now people are coming to the realization that we have come too far, too quickly, so now we’re starting to retrace some of those steps,” Engelke said.
J.P. Morgan Chase cited bad loans, Enron’s bankruptcy and economic problems in Argentina as major reasons for low earnings.
Utah State University business professor Alan Stephens believes Enron can be blamed for much of the economy’s recent problems.
“Everyone has a fear that accounting statements aren’t telling stockholders what they need to know because of what happened with Enron,” Stephens said. “There’s this sort of distrust now of the reporting standards and that has had an effect on the market.”
Stephens urges students especially to think critically when investing money and resist the urge to follow investment trends.
Conglomerate Tyco International also felt the repercussions of Enron’s mistakes. Many Tyco investors were concerned about possible accounting discrepancies after the Enron fall-out, CNN reported. Tyco recently held an investors’ conference and reassured them of its stable financial status. Company representatives said they also expect a cash flow of $4 billion this year.
The world’s largest auto maker, General Motors, has also suffered. GM earnings fell 58 percent, mainly because of the weak U.S. economy. National airlines American and Continental also reported major losses because of the economy despite receiving federal assistance after the terrorist attacks on Sept. 11.
Although there is no question the economic recession has had it’s effect on Logan. Economics professor Chris Lewis believes Logan has not been hit as hard as the average American town or city. He cites Utah State University as being a stable component of the economy that helps Logan remain more fixed.
Another negative sign of the economy’s problems however is discount retailer Kmart’s bankruptcy problems. Kmart hit a 35-year low last month announcing the company might not even break even after holiday sales.
Some blame Kmart’s problems on the economy or competition with other retail stores such as Wal-Mart and Target. Despite these factors, Stephens blames Kmart’s dilemma on the fact “businesses live and die in the market place.” Stephens said Kmart did a poor job of managing capital given by investors and that such problems were only a matter of time.
Representatives at the Logan Kmart had no comment.
Although the stock market and economy has taken longer to bounce back than many expected, professionals are still hopeful.
“We are in a recession. There are positive signs however that we are possibly on the off-swing,” Lewis said. “There is a light at the end of the tunnel.”