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It's okay to be gloomy, because the economy's comatose. But it won't always be so.

In other words, American investments are the place to be, says Nancy Kimelman. Stop predicting when the recovery's going to happen-it only makes things worse-and start looking at the long-term horizon.

While the rest of us are perplexed and confused by the economy, Fed Chairman Alan Greenspan has it pegged: In his testimony before Congress in mid-February, Greenspan described the economy very simply-it is, he said, essentially in the same place as it was six months ago. No better. No worse.

That does about sum it up, thank you very much. Contrary to our hopes, prayers and forecasts, the U.S. recovery is stalled. The economy lurches forward one step onlyto fall back a step, with the net gain being about two percent growth in real income, zero growth in employment and modest single-digit gains in corporate earnings. Not that we were expecting much more: three percent growth was the consensus forecast at the start of the year. But at least three percent would give us positive job growth and stronger gains in real incomes. Two percent falls flat.
It might have been different. Had the upcoming war with Iraq not dominated hearts and minds for the past few months, consumers might have found rising incomes and low interest rates a compelling combination. And corporations might have been less jittery about investing in new people, new technologies and new facilities. Had European nations not been boxed in with respect to monetary and fiscal stimulus, the weakening dollar mighthave benefited U.S. manufacturing and service exports. Had Japan not been unwilling to address its banking structure, the world's second largest economy might have been able to take steps to cure the spread of deflation. And had Venezuelan workers not gone on strike, oil prices would not have spiked as sharply (even without the conflict in the Middle East, oil prices would be up sharply from last year thanks to Venezuela's problems). The result is that acceleration in economic growth did not happen.

And yet Greenspan reiterated to Congress his belief that the U.S. economy is flexible enough to weather the current storm without additional stimulus in the form of even lower interest rates. Why? There is no other economy on the globe that can compare to the U.S. economy. Outside of China and Russia, which are finally making up for years of almost-criminal neglect, the U.S. will experience the strongest growth this year. Europe and the UK will be lucky to see positive growth. Japan is in a league all its own.

Our growth potential is more than luck. Our corporations are resilient and well funded, our workforce is flexible and productive, our government responsive to the economy's cyclical needs. No other nation has a financial structure as efficient and transparent as that of the U.S. No other nation has regulations and tax structures as conducive to growth, which is not, I might hasten to add, to say they are perfect.

Speaking before Congress Greenspan also explained in some detail the advantage the U.S. holds by dint of our flexibility. He told the Senate: "...The improved flexibility of our economy, no doubt, has played a key role (enhancing our ability to weather the shocks of the past few years). That increased flexibility has been in part the result of the ongoing success in liberalizing global trade, a quarter-- century of bipartisan deregulation that has significantly reduced rigidities in our markets for energy, transportation, communication and financial services, and, of course, the dramatic gains in information technology that have markedly enhanced the ability of businesses to address festering economic imbalances before they inflict significant damage."

We are the strongest nation, and investing for the long term means where the long-term prospects are strongest. Investing for the long term means investing where risk and return are balanced. That means the U.S. And investing for the long-term means investing where value is placed on honesty, accountability and trust. That wasn't the case all last year, but it is now. In other words, the U.S. equity market is the place to be. Not to the exclusion offoreign equities or bonds which are important components of a well-diversified portfolio. But surely as the core of an American investor's portfolio, and to an increasing extent, as a large chunk of foreign investors' assets as well.

2003 poses a large number of big risks for U.S. investors: serious political and military confrontations; potential deflation; a sluggish economic recovery at home and little or no growth abroad; and the overhang in the tech sector. U.S. equities may yet see further declines as the nation grapples with these challenges. Make no mistake: There can be short-term pain. We just have to be wait it out.