A more upbeat assessment?

LBO's seem to be all the rage these days, most recently with KKR's 25 billion dollar purchase of credit card processor king, First Data Corp. This deal, together with a more upbeat assessment for U.S equities given their relative cheapness to fixed income is helping to counter the negative repercussions of the housing slump somewhat. Today's Asian stock market gains reflect not only the rise in copper prices but also greater optimism on behalf of investors that the U.S. economic slowdown may not seem as worrisome as earlier figures would suggest. Activity in the LBO realm revive the notion of an embedded put option in the form of private equity cash stashed aside and ready to be put to use as opportunities arise. This may indeed be the case as long as corporate profits remain sanguine. The latest figures do suggest, however, that the economic expansion is decelerating, most recently with the slump in manufacturing growth for the month of March, and the forecast remains that corporate earnings growth for this year will be in the single digits. Add to this the negative impact that the housing jitters will have on consumption, and it becomes evident as to why the Fed should be less worried about inflation. This week's unemployment figures should provide further clues regarding the health of the economy.