This is unedited, exactly as it appeared when sent from the Listbot mailing system

Subject: Economic Analysis of Crashes/imminent recession
Greetings, subscribers of FinalBookofDaniel.com. 

Todys message of March 23, 2001 contains a run-down summary of recent 
market declines as we approach recession. 

Long time readers over the past three years on the internet, since spring, 
2000, will have remembered that the general thesis in the economic 
portion, long before being awakened as Daniel, forecasted a future, but 
not imminent recession conceivably depression as properly defined, of 
historic degree at the end of the 90’s bull market and bubble. 

At the time it of course was mocked by many for being too pessimistic, 
especially considering the general euphoria of economic conditions at the 
time. The question of the economy’s slide into oblivion was simply then a 
matter of determining the timing (roughly) and magnitude thereof. 

Ironically, I had stopped studying the economy and failed to publicly 
cover the long expected economic collapse around early summer, 2000, just 
as financial and economic conditions began changing for the worse, 
spiraling out of control for the next six months. 
Obviously this was due to becoming awakened as a prophet and actual angel 
of God, and something of this degree alters the focus of attention, as it 
would for anyone. Some have said, “What do angels have to do with the 
economy?” Note that I first began publicly writing as a typical person 
fascinated by how the world works, cause & effect and how everything fit 
together through various cycles, strategic events and mass psychology. 
This naturally it what economics is about: attempting to understand these 
larger, interacting forces, and in a modern civilization involves the 
study of condition which can easily be measured with charts and numbers. 
Finally, by spring 2001, the economy began its rapid descent, along with 
historical stock market losses, so it was therefore to at give a general 
outline and stance as to where the economy was hereafter traveling. 

At the time of this analysis, March 23, 2001, sent out to hundreds of 
subscribers, the market had seriously declined over the past couple weeks, 
fulfilling a prophetic hunch I received, and mentioned publicly on March 
6th, 2001, 

“The author has not studied the economy in any way since spring 2000, and 
was not covered except when divine revelations were received. This should 
occur shortly, before the book is completed. I have not even followed the 
news for months. Prophetically, I've strongly sensed something dramatic to 
happen for this spring. This is not yet known, but could be a market 
crash, or outbreak of military hostilities in the Middle East.” (Listbot 
archive #108, March 6)(I had also mentioned something profound to occur 
during the significant period of Passover, April 14-24, during which time 
Daniel would be praying on a mountain top.) 


As you can see, within only two weeks, the stock market underwent 
devastating declines, and by March 23 the Dow dropped from 10,800 to 9,700. 

In spring of 2000, at the height of bullishness in the tech-heavy Nasdaq, 
I proclaimed the immanency of a massive bear market in stocks, with the 
tech sectors to be particularly hard hit with the Nasdaq leading the way. 
Well, one year later, the Nasdaq had plummeted by a whopping 60% from its 
peak of around 5000, to 1900, making this one of the greatest bear markets 
of all time, ranking up there with the likes of 1929. This is a natural 
result of the greatest bull market of all time (properly termed 
“bubble.”). 

The spring 2000 Merrill Lynch tech index stood at 1000; spring 2001: 370. 

The Morgan Stanely tech index peaked at 120 in spring 2000, tumbling to 20 
one year later. 

Obviously at the time of this writing the world had entered a widespread 
bear market, with the S&P 500 down 25% from peak, the Dow 20 percent or 
more from its record high of 11,722.98 on Jan. 14, 2000 (which Daniel had 
told everyone was the final top.) The Dow would have entered its first 
bear market since 1990 as it closed below 9,378.38. Globally, aggregate 
stocks in general were down 25% from the prior year. 

But is this the end, a bottom? No, fasten your seat belts, there’s more to 
come. 

Historically P/E levels for stocks in normal times range from 8 to 20 to 
one. At the peak of the tech mania, the Nasdaq aggregate P/E stood at 75. 
Even after losing 60% of its value, it still stands at a very overpriced 
45 to one! Even the S&P 500, whose peak P/E was an historically 
unprecedented 35, in the midst of the spring 2001 bear market, remains 
very high at 25. 

The mood of the investing public prior to summer 2000 was that of many 
misguided people who thought that “this time it’s different.” Well, it was 
not different from any past manias, despite the supposed promise of 
ever-increasing potential riches in the newly-touted “New Economy’ which 
became a fad in a mad, greedy rush to get rich quick. Many did, but many 
more got poor very quick. 

Although the internet and other recent innovations in tech sectors that 
have revolutionized the economy in past years will continue infiltrate 
around the world in coming years, the place where it all began, the U.S. 
and subsequent boom it helped fuel, is effectively near an initial 
saturation point with regard to such proliferation of PCs and other New 
Economy inventions. Since the late 1990s economic boom was significantly 
tied to such new technologies, the current and coming bust likewise 
revolves around excesses, for they have become intertwined; a New Economy 
recession as a result of a New Economy boom. 

Initially, when the mad rush to the internet began several years ago, 
thousand and thousands of venture capitalists flooded the web scene, 
funding glitzy web start-ups with the deluded promise of never-ending 
riches due to e-commerce and banner ads. Yet only a couple years later, it 
is these very businesses that suffered the greatest. The majority of web 
businesses started with continual losses, which investors had faith to 
continue funding, all based on the HOPE that one day they would turn a 
profit. Well, by spring 2001, even the internet blue-chip ventures such as 
Amazon.com are barely keeping alfloat, on the brink of virtual bankruptcy. 
And this was during a record economic boom! Imagine how bad the shakedown 
will be in the midst of a worldwide recession of depression. 

The main sectors of the internet to benefit or be transformed by the 
internet revolution will be financial services, entertainment, health 
care, education, information providers and government services. 
Until broadband technology improves radically and universally, the 
internet will lag in its potential to explode in innovative uses and 
functionality. Some telecommunication sectors relating to such issues have 
the potential to be the next miracle growth winners. 
The U.S. economy, since summer of 2000 had begun spiraling downward in 
virtually every conceivable way following repeated interest rate increases 
by the Federal reserve, who went to far by raising rates a half percentage 
point in spring of 2000; these effects take about 6 to 9 months before 
they work their way into the economy. That was the nail in the coffin. 

By the time Greenspan saw the writing on the wall, it was too late. He 
then began reducing interest rates in a dramatic fashion in the first 
three months of 2001 three time for a total drop of 1.5 percent, to 5 
percent, and more is on the way. However, the steep slide in conditions as 
we entered 2001 exceed the ability of such remedies to prevent what nature 
had started. If it hasn’t already begun, a recession is a 100% certainty 
in the 2001/2002 time frame. With these skillful rate reductions, along 
with Bush’s tax-cut proposal, should it be passed, we may be able to stop 
the slide into full-blown depression, which would last until 2004 in a 
worst-case. The effects of the interest rate reductions will not take 
effect for about 9 months, and in the meantime we would already be in 
recession, for the forces already underway are beyond the control of 
standard monetary policy. 

In a likely scenario, we will experience a very sharp but somewhat brief 
recession (which the media will over-blow in significance, creating a 
panic, cautionary mood in the minds of consumers) with anemic growth and 
recovery for a year or so with dismal stagnation, to be followed by 
another very sharp recession around 2004, which will certainly eliminate 
Bush’s chances of re-election in 2004 to zero. 

Consumer sentiment has mirrored the rise and fall of the Nasdaq due to the 
wealth effect. In the last few months of 2000 consumer confidence and 
spending took a sustained and alarming nose-dive from 140 to 100, and will 
continue to fall as the stock market tanks. Consumer spending accounts for 
two thirds of the economy’s spending, and any drop in spending means a 
drop in economic activity. 
Normally the prices of stocks bore a somewhat irrelevant relationship to 
activity in the economy, but now things are different: The household 
savings rate has approach zero since the historic average of 6% mostly 
because the public has effectively replaced traditional saving by plowing 
into the stock market. Historically the percentage of people invested in 
the stock market is 15 to 20%, but what has happened over the past decade 
was a dramatic (and dangerous) shift, where 50% are now stock owners. Most 
of whom have never learned the lessons of a prolonged bear market. The 
coming years will see many lessons learned by many people who joined the 
herd, and will be turned off stacks forever by the ravages of what may be 
the greatest bust of all time. 

Household net worth actually declined in 2000, for the first time since 
1955. 

Weekly jobless claims since spring of 2000 had been steadily climbing, 
from 250,000 to 380,000 by years end. The help wanted index has also 
dropped precipitously during the time, to the level of 1994. 
GDP growth, after stunning gains for years hovering around 5%, slowed in 
the 3rd quarter of 2000 to 2%, and the fourth quarter to 1%. Do not be 
surprised to see a negative growth rate for 1st quarter 2001. 
Where should the market lows be expected? As of this writing, we should 
see continued weakness in all stock markets, especially this spring, and 
the Dow should be near 7500-8500 by years end. The Nasdaq still has a much 
further to drop, and will at least reach 1000 before the possibility of 
hitting bottom and attendant secular rebound occurs. But do not be 
surprised to see it dip to 500. Of course, there will always be short-term 
rallies to give the false impression of a bottom, but the longer-term 
secular trend is down for the next year or two. A significant decline can 
be expected around September through November, as well as spring 2002, 
which stands a good chance of being a bottom. 

We are bout to enter the cold winter of economic calamity, are you dressed 
warmly? 



P.S. I want to thank those who have showed their financial support toward 
the upcoming book, and you will receive shortly a letter in the mail. 
However, HOWEVER...that received thus far has not been enough for the 
inititial costs! Therefore another appeal is made for contributions...it 
is actually quite imperative, that is, a necessity, that support is 
offered. To see why, and how to assist, visit theis page: 
http://finalbookofdaniel.com/charity.html 

Also remember that you are now able to obtain a full-length, advance 
manuscript version of the book not available on the web. See this link on 
information on how to obtain a copy...the proceeds are used to fund the 
publication of this divinely inspired book: 
http://finalbookofdaniel.com/Daniel.html