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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: LastShadow who wrote (26903)	12/12/1999 8:20:00 PM
From: j g cordes	Respond to of 43080

Sober feedback welcome "...This is all terrible news for future corporate profitability." "Pessimists Are Not Always Wrong By Craig Thomas 12/10/99 11:24 AM ET Now that the holiday season is in full swing, you are likely seeing friends, family, and colleagues that you have not seen since last year around this time. Unfortunately, these reunions may not be full of holiday cheer, particularly if you are an economist that freely dispenses your opinions at holiday gatherings. If you are like most experienced watchers of the economy, you have tried to be the voice of reason across the last two years. As a result, your opinions are now meeting with increasing skepticism. Arguments of technological advances and soaring productivity having nullified the laws of diminishing returns are gaining wider acceptance. Frankly, there may be more recent evidence supporting the repeal of the business cycle than support for previously accepted economic theory. Worst case scenario, you may have made that fateful comment to a parent/friend/colleague telling them, "Now may be a good time to count your profits and get out of the stock market." Whether your advice was followed or not, your credibility has been stretched. Take heart though, for your analysis is grounded in solid, practical theory that is both tested across time and supported by common sense. While economists are accountable for underestimating potential economic growth, there are variables that can explain some of the discrepancies. First and foremost, those that discount the existence of inflationary pressure have quickly forgotten that we are just now emerging from one of the sharpest drops in commodity prices in recent economic times. Sharply lower raw material costs, particularly the cost of oil, helped to offset building cost pressures elsewhere in the economy. Further, the drop in commodity prices was propagated by a significant downturn in what was the fastest developing region in the global economy, and which came very close to enveloping much of the rest of the global economy. To suggest that we can count on falling/stagnant commodity prices such as these in the outlook is to suggest that we can look forward to other major foreign economies hanging on the brink of collapse. Let's hope not. Another bone of contention involves worker productivity and wage pressures. A recent quote accredited a well-known analyst with stating, in effect, that the link between labor markets and inflation has been proven intellectually bankrupt. Recent data certainly seem to suggest that a falling unemployment rate is not pressuring wages. Also, productivity figures firmly establish that worker efficiency is soaring. It seems the best of all worlds. How could the Federal Reserve economists or any economist find fault with current trends, even as the economy shows little sign of strain? They can and do because it is intellectually bankrupt to do otherwise. When reported data suggest something counterintuitive to theory, the knee-jerk reaction is to question the theory instead of the data. In this case, it is the data that needs to be questioned. The ECI is an incomplete measure of labor costs and misses several of the ways in which employees are being rewarded, such as stock options, signing bonuses, and promotions. Also, we can all see that it is very difficult to find qualified workers. It costs more to find them, hire them, and hold them. Further, the deeper we dig into the labor market, the more training will be necessary to maintain productivity growth. In fact, the more you hear about the details of the economy, the worse it sounds. Labor is hard to find, commodity prices are rising, productivity growth will be hard to maintain even with the latest technology, pricing power is almost non-existent, interest rates are rising and imports are soaring. This is all terrible news for future corporate profitability." from dismalscientist.com Jim