Jurgen; RE:" Chit-Chat "
You mentioned a lot of feelings for which we share a similar sentiment, Jury.
Message 5660203
Reviewing my charts this week-end, I remain wary that what has happened was a crash rather than a correction. As kapital flows are no longer supportive, it can no longer be a so-called "bull market". But to label this process of decline a "bear market" is to imply some sort of recession or, a business cycle contraction, neither of which is true, IMHO.
Things are being fundamentally de-valued. Post-WWII Americans, for the most part, being BabyBoomers such as myself - grew up in an inflationary world order. That we called the first signs of de-flation -- "dis-inflation", reflects our unwillingness to accept any fundamental change in our economic psyche. Quite simply put, the first reaction to betrayal is denial. FWIW, the second reaction is usually anger.
Now most troubling to me is this: after a (considerable) decline in equity valuations, the USDollar loses strength relative to the Euro, and even the Yen: Commodity prices, mostly traded in dollar terms, went up in cost - despite the fact that demand continues to be weak, and raw material supplies are in a surplus state. Though the kost of kapital is declining, there is little if any rationale to invest to expand production capacity, as a means of reducing costs of goods sold. This affects profit margins in such a way that the likely response is to reduce labour costs.
A basic form of dis-employment arises as a result of consolidations, where companies are merged or acquired and "surplus labour" is eliminated; but this ("down-sizing") has been going on for some years now, and is nothing new: for the most part, "down-sized" (American) labour has been able to find employment else where.
Real dis-employment will probably take two forms: "out-sourcing", which means things like substituting "in-direct" personnel and/or specialist companies for full-time employees and/or integrated operations; and, "globalization of labour", the so-called big sucking sound as American jobs go off-shore, where labour is relatively less expensive. Ironically, if one can "tele-commute" from a "home-office", an American worker sitting at some network node in a cubicle can be replaced globally by someone sitting off a network node in Hong Kong, for example.
That is to say, if production is even sustainable at current levels - and one could make the case that it is not... That, not unlike a real depression, the surplus is so massive, that even "out-sourcing" and "globalization of labour" will be minimal. In this worst case scenario, industry has no exit - and capacities are idled rather than re-organized.
If we are truly evolving in "third wave" towards becoming an "information economy" - we would be naive to think that such a fundamental change could occur without destroying a lot of what was before.
So I do not see a (simpler) process of equity devaluation - what it feels like to me is (fundamental) destruction of kapital itself.
-Steve |
