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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (27892)	7/30/1999 11:10:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

Chicago number led to that little dip to 1348.5 and back up, yesterday the talks where traders meet was that if inflation is rearing its ugly head and economy is slowing what is going to happen to corporate profits. In my motes to this thread I referred to that, now as NAPM came out and it was slightly higher than expected the grief of 'infaltion within slowing economy' disappeared, the dip came in a quick one within 2 minutes atest of 1348 and back to 1353 although treasury traded down to 6.12 and change.. now we have these S&P earnings going stronger we have these core stocks not breaking and we have NDX not ready to go down, NDX has led the market here and it has to break for that big one.. The otehr worry about $, if inflation is in offing why is $ selling, purely because it is believed that a lot of money would be shifted as 'continental rotation' of money takes place, $ right now is being hurt by asset deflation worries and not on fudamental. In my opinion no market is big enough to absorb the kind of money loking for safe home. US stocks and top notch companies will and have stayed in the forefront of the economic cycle. Profitability will increase and not decrease, the sellers of real stock are not around, global economic revival will be a bonaanza for the US economy and the leading comapnies would benfit from it, the French numbers of production, German IFO and Japanese numbers all in last week pointed out a trend that is regaining strength of global economies. That is good sign and not bad omen, inflation from lows of falling prices it would send a wrong signal as if we are seeing rising prices that would certainly imapct the market and like yesterday cooler and saner heads prevail as you se today in future also, these numbers and strong economic results will flow in, very slowly the marekts are going to realize that productivity gains shall out pace wage inflation. CRB index still sits at all time lower band, those who are confused with all this dats need to see 1986-90 era and Jimmy carter days of 'malaise'. In this new economy the responses would be extreme, the best thing is that take these guys to cleaners day in day out. This is what I have done fro last 5 years and intend to do. The guys who are buying puts on MU were buying puts on MU at 25$ and was selling SOX at 180 just last Oct 98. they never ever loose, they told all of us that 9500 DOW is the long term top and we saw 11400 just 2000 points higher, they never got it right than, they will neither get it now. The best way to protect your portfolio is buy out of money options on SPU and sit tight, one of these days like yesterday get out of them. This market is going to be range bound in next few months we will see the lower range of 1280 and higher range of 1418 being tested. Today we will see 1362 to 1345, only a break of 2274 on NDX will let me short the SPU options I will go long the 1320 puts...

To: IQBAL LATIF who wrote (27892)	8/1/1999 6:39:00 PM
From: IQBAL LATIF	Respond to of 50167

Water And Diamonds We need water to live. But it's generally pretty cheap. We don't need diamonds for much. But they're expensive. Why are diamonds more costly than water? .......taken from IBD.. Date: 8/2/99 If you can answer that question, you're doing better than Adam Smith, the father of economics. He raised the so-called diamond- water paradox in ''The Wealth of Nations'' in 1776. ''Nothing is more useful than water; but it will purchase scarce anything,'' he wrote. ''A diamond, on the other hand, has scarce any value in use; but a great quantity of other goods may frequently be had in exchange for it.'' Smith couldn't figure out why this was so. It would take economists almost a century to answer his question. Carl Menger, Stanley Jevons and Leon Walras showed that prices are determined by supply and demand. And they figured out that what counts in demand is marginal utility, not total utility. What is marginal utility? It's the use we get from one more unit of something. To a starving man, a sandwich has great utility. But after he has eaten that sandwich, a second sandwich has less utility. And if he eats both sandwiches, a third is even less useful. Put simply, prices are determined by the value of the last unit of a good. Because water is usually abundant, an extra unit is cheap. But diamonds are rare, so one more diamond is expensive. The sad thing is that others had figured this out long before Smith. Catholic philosophers had discovered marginal utility almost a thousand years earlier. Smith himself even got the answer to the diamond-water paradox right almost 30 years before ''The Wealth of Nations'' in a series of lectures he gave. But by the time he wrote his most famous work, Smith argued that the price of a good is determined by the amount of labor it takes to make it. So why did he change his mind? Why did he set economics on a dead-end road for 100 years? Those who have studied Smith's thought have an answer: He was a Presbyterian. ''His Calvinist beliefs emphasized the goodness of hard work, useful production, and frugality,'' wrote economist Mark Skousen. The Catholic philosophers who had gotten it right about prices had been greatly influenced by Aristotle, wrote economist Emil Kauder. From Aristotle they learned that enjoyment of physical pleasure, in moderation, is good. From this, they said the goal of work is to make things to consume. John Calvin's followers disagreed. They emphasized ''hard work and labor toil as not only good but a great good in itself, whereas consumer enjoyment is at best a necessary evil,'' noted economist Murray Rothbard. Smith was a mild Calvinist, but still a Calvinist. ''In (Smith's) mind, diamonds and jewels were vain luxury items and relatively 'useless' compared with water and other 'useful' products, and his economic theory reflected those values,'' Skousen said. Smith thought there was unproductive labor and productive labor. He called the work of musicians and actors frivolous. The work of farmers and other makers of goods was productive, he said. Because he didn't value consumption, Smith failed to see it as the root of economic value. And because Smith thought work so important, he felt that labor must be the source of value. Economists say it's no accident that Smith's labor theory of value was central to the work of Karl Marx. Smith's views gave ammunition to ''socialists and other critics of capitalism who complain about the difference in the marketplace between 'production for profit' and 'production for use,' '' Skousen wrote. Modern economics say production for profit and production for use are the same. A firm makes money only if it makes something people want. The father of economics missed this point. By doing so, he detoured the infant science of economics down the blind road to socialism. But we've figured it out since.