If the current problem is simply an inventory correction, it could well be over by the end of the March quarter, or at worst, the June. Well, we are certainly hearing the explanation enough. During the recent earnings-reporting season, technology company after technology company blamed its looming first quarter of 2001 problems on a temporary inventory correction. And some days, the V scenario is even plausible. Now give me a U On other days, however, the U scenario is frighteningly believable.
U stands for ugly .
In the U scenario, the economy falls off a cliff and then stays on the valley floor while we all suffer through a full-blown recession. That kind of recession would definitely kill the prospects for a second-half turnaround this year. That fear certainly seemed justified last Thursday. That's the lowest level for this index since March 1991, when, guess what, the last recession was just ending. Most days last week the news felt like a recession, too, and not an inventory correction.