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"Standup Economics" This economy is a what? |
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Suspend your logic. "It's all good - and getting better!" "Good times just ahead." "The dollar doesn't matter." The stock market posted a decent gain yesterday on what is arguably bad news. The bad news being that unemployment was actually up a tad in the latest report, and the US dollar, although jammed up at mid-session, didn't hold onto its gains as the week ended.
My personal outlook is for the stock averages to go on to new nominal highs - and even 16,000 becomes possible, but not on anything approaching reality. It's really more a function of the Dow companies having some intrinsic value, and with so much money being created at the moment (being loaned into existence with low-interest loans), the number of dollars effectively chasing the asset (the Dow average, or pick almost any other index) will naturally drive its nominal price up.
As I've explained before, the Fed is trying to throttle inflation just enough to prevent the onset of a wildly deflationary global collapse, while at the same time, stepping on the economic brakes hard enough for obvious inflation not to appear. When it does, government (hedonically) makes most of it disappear. --- Overseas, investors in the UK (as one example) are likely laughing their (you-know-what's) off at us because it turns out that the job report yesterday contained a major revision to the previous month's job figure and as "The Independent" headlined it this morning "US Jobs figure that trigged Fed's rate cut 'was a mistake'. Oops. So sorry.
Meantime, I'll keep watching is the consumer debt figure (which the Fed touts as their "Consumer Credit" report - because bankers don't want to call debt by an ugly or repulsive name so they call it 'credit' instead) and then there's the roughly 14.5% present growth rate in digidollars. That's why the Fed stopped reporting M-3 a year ago March.
Feeling better about being a bull? Paper gains may seem appealing,; but in past economic cycles, a fifth wave of stock appreciate has usually been accompanied by major increases in things like the metals, commodities, and oil. So, I am out of paper largely, playing in commodity options for now: The way I see it, a Fed policy of "economic stability" in lieu of "sound money" (a much more important metric to humans saving for a rainy day or retirement, but that's only my view) is about as close to a guarantee of higher commodity and energy prices as one can find...so making 'money' there should be a no brainer. Metals, energy, grains.
Recession? Not yet. I'm bullish on the market (*including the Dow) because absent some exogenous event, we have consumers continuing to pile on debt - and as long as the debt monster is alive, and people keep trading their work for paper and buying things beyond their pay grade, the economy will do fine. Friday's Consumer Debt Report (OK, so it's called "consumer credit, but I'm just trying to be a little more honest about how eCONomics works here) the annual rate of increase was 5.9% - which means production will continue and good times for investors seem ahead.
George the bull? No: George the realist. Don't bet against the house. Especially when they control the printing press. And worry about being up to your ass in debt? Nope: Just exercising your credit strenuously.
Cool. There's just one problem: Unintended consequences.
I'm all for science, except that recently, humankind's track record at turning new science into a genuine improvement in humanity has been a little spotty. While it's true that genetic engineering of crops, for example, has led to increased yields on a per-acre basis, I think most folks would have to admit that it has also served to concentrate more and more power of corporations who use such technology to round up more corporate profits.
We know, for example, that StarLink, and other forms of transgenic corn, have been at the center of a controversy over whether they cause an increase in allergic reactions in humans. And, then we have the case of Iraq, where 'corporate seed' is required - not optional. I refer specifically to Paul Bremer's "Coalition Provisional Authority Order Number 81 which says in part:
In other words, if a farmer's crop in Iraq happens to have been exposed to a genetically modified crop, then the farmer may not save and reuse his seed.
Yet, here's the catch: The seeds of genetically modified crops tends to pollinate off the property of the originator. While most people are terribly ignorant of the outreach of GM seeds (and pollens) there are a few places where the battle lines are clearly set, as in Percy Schmeiser, who was the Canadian canola farmer sued by corporate agribusiness after Roundup Ready genes drifted into his fields from surrounding farms and contaminated his crops.
So while the claims of being able to artificially create life from the 'ground up' are pretty interesting from a science standpoint, there's the huge issue of containment of such life forms.
Having already failed miserably to contain things as simple as Frankenfood canola and Frankenfood corn, I see little reason for optimism on whole artificial life.
And if the subject of food control and DNA dispersal into the environment through artificial vector's isn't convincing enough to make the point that "Man can invent things that we're not intellectually or spiritually prepared for yet" do you really want to have the conversation about our track record in another field - say nuclear energy and weapons? --- On the brighter side, such a discovery might make it possible to grow the perfect political animal. All you'd need would be to engineer a species that can talk out of both sides of its mouth at the same time, does exactly the opposite of what it promises to do, and comes with an extended lower GI tract where its head is often stored.
OMG, wait! I think we've already got those.
US-backed president Musharraf is planned to be the next president of his country, although there's still that question about whether he can head up the military and serve as president at the same time. Hmmm...Pakistan as Southwest Asia's Florida, maybe?
Vlad Putin continues to prepare for ruling from behind the scenes in Russia. Sort of like the Wizard of Oz, he'll be behind the curtain still running things, it seems.
Taiwan is being slapped around by Typhoon Krosa today. It then heads for China.
This whole illegal driver's license thing is such a mush - You saw recently where in Colorado, a group of illegals were waiting for their licenses and got put to the head of the line of legally entitled folks because the interpreter got off before the licensing operation closed for the day? File under : "Sucks to speak English."
Topps 21.7 million pounds of beef being pulled from store shelves can be costly. Ask Topps Meat Company which is now going out of operation. according to reports. --- Kraft has a chocolate recall underway.
Washington Mutual (WaMu) says due to the mortgage market (mess) their earnings will likely drop 75%...
Merrill is writing off $5-billion from related issues.
With the linguistics pointing to a Big One (possibly a double-quake) we're watching the daily reports from USGS. Might want to bookmark this. Should be before the 18th of the month unless we get that volcano to reroute air traffic soon.
My arms are sore, my back is sore, and Elaine's got bruises on her arms - but it's done. This week we finished putting in over 1,100 feet of goat fencing. And while that was going on, the water heater disaster (which meant reflooring part of the house) and a ton of client work on top of all that.
This weekend? A little R&R - setting up the big lathe in the shop and framing in a new cabinet in the kitchen where a new hot water heater lives. Sunday, for Peoplenomics subscribers, a practical approach to portfolio balancing. I get asked questions about that all the timely so this week some focus on 'all season profitability'.
No, this is not a discussion of what's ahead for the dollar -- as in the "dollar's fate being in limbo". Nope, this as we do each week, is an examination of options available to us 'little people' as the dollar goes limbo -- using the word as in the Caribbean "how low can you go Limbo" dance. As simple chart, a simple question, a review of Russia and Argentina's experiences, and a quest for some simple contingency plans, that's what a number of readers are asking about. The trick, as with any good Limbo (the dance) is how to figure out how 'low you can go' without hurting yourself or having your personal economic fall over. To steal half a lyric from Bobby McFerrin, "Don't worry, be happy, be limbo..."
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If you find the alternative contexting of major financial and global affairs presented on this site of interest, please tell your friends about it. That way, more people will become aware of what's going on in the economy, and with more smarts, maybe we can wake up America. Click here to shake them from their sleep. Also, if you operate a website, a link is always appreciated and I will link in return.
Order our handy ebook "How to Live on $10,000 a year or less - and learn to live like a Third World person now. It's coming anyway, with big job layoffs this summer - and by ordering now, you can beat the rush...You may have more time to read this fall if the economy falls apart as I expect...
Friday October 5, 2007 Special Update: PayPal Back Up 10:44 AM Central - whew!
In the kind of condition the financial world is in, even the smallest things cause me jitters. For example, as of a minute ago, the PayPal site was down. www.paypal.com. Hopefully this will be a short-lived problem.
Cheap Money and Bankrupt Policies While it is all but a certainty that this morning's job report would be used to pimp up the prospects of the stock market - and maybe even power it to a new all-time-high today, some of the most important economic news missed by LameStreamMedia has been buried in testimony given before the House Committee on Financial Services at a hearing titled "System Risk: Examining Regulators' Ability to React to Threats in the Financial System" chaired by Barney Frank.
I realize this is not going to be quick, but please book mark the testimony that's online and read the comments of the presenters. Among the experts:
In all, it's about 50-pages of reading. More than you'll have time for this morning, especially with the "news" about September employment. In particular, Robert Kuttner's remarks about parallels to the 1920's abuses and the subsequent invention of serial bubbles to avoid paying the piper his due, resonates with the framework of this site.
So please come on back when you get some time over the weekend, and read it all because I think it will help put today's financial situation into context. You might even be able to get a sense of what's coming next.
Myth building is going full steam today. Consumer confidence is reported up - and then this morning we hear the latest on jobs. Good and better. OK, that sounds fishy if you recall all those construction jobs that ended, and yeah, what about all those 20-30 thousand mortgage industry layoffs? The Construction jobs going bust? Shhh!!! Didn't happen! Faulty recall, Citizen. (Do you need some re-education?) Just read the latest 'statistics' and don't ask too many pointed questions:
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