Your investments and the economy

By Mike Comerford
Daily Herald Business Writer
July 11, 2004

Mike Comerford recently interviewed Nancy Coutu. Coutu is the founder of Money Manager Advisory Inc., Oak Brook.

What worries you about this market and economy these days?

"You always look at consumer sentiment … and in June it began to fall … I think that is because it sets your head spinning what is going on in front of us these days … We have huge oil prices, international problems, terrorist problems so even the hardiest of portfolio managers is rolling their eyes back into their heads."

Are interest and inflation rates going up faster than people think?

"We need interest rates to go up. Inflation, as a true measure of consumer spending, is rising at a rate of 4.4 percent … That's not (the consumer price index) which I think is all smoke and mirrors because it factors in other industries … and yet interest rates are at 1.25 percent. We need to go above a 4.4 percent interest rate before we head off inflation. Inflation is coming down the pike at a high rate of speed and we have to head it off."

What does that mean for the economy and investors?

"It means, get out of bond funds … It means we're going to see real estate prices hurt. We're going to see mortgage companies going out of business. We're going to see banks going out of business. Insurance companies, same thing. All the above are going to be affected in a negative way."

If Intel's earnings on Tuesday disappoint, will it send ripples through the tech sector?

"The tech sector still has major problems. That's because companies aren't buying computers. Companies aren't buying telecom equipment. The other reason is, (stock) prices are still too high. (Price/earnings) ratios are still too high. That one stock (Intel) won't take the fire out of the sector. But it is going to be a long road for the tech sector, especially as interest rates climb."

Do the markets have a momentum these days?

"(Recently) a customer came in with a (Crain's Chicago Business) profile of me. They interviewed me one year ago … Usually, I don't like to make predictions about the market but they asked and I said, in general, the market is going to go sideways, up and down, up and down. Then we took a look at a chart of the (Standard & Poor's 500 index) for the last year and it was up and down, up and down. So, if you ask if there is a momentum to the market, there is none. It is going to continue to go sideways."

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