To: excardog who wrote (71 ) 10/23/2000 7:24:49 PM From: quasar_1 Read Replies (3) | Respond to Rock Breaks Scissors...so many sectors of our economy are still tied to the price of oil and not just transportation. Procter and Gamble reported lower guidance due to rising oil prices all those soaps and plastic bags we use each day are affected. Textiles manufacturing uses oil and on and on. As long as the manufactures absorb these costs you are right it won't have any effect but how long do you think shareholders are going to buy that? less important than it was in the 70's. This is due to a host of reasons, the main being energy efficient technologies and operational efficiencies created by information technology. Oil, in real dollar terms, is far lower than the price shock prices in the late 70's (the last gasp for inflation?). This is very important to realize. This tells you that this time oil can not command the real dollar price premiums even in a weakened supply state that it once could. One other thing, if growth really slows oil prices will fall. They will be very sensitive to demand slackening. The wild card is an emotional market reaction to ME turmoil. I believe the Saudis will do anything they can to avoid supply disruption. The oil producers, more than ever, are critically dependent on their oil income. We are both junkies, the demanders for energy, the suppliers for the cash. This is another sign of world growth, not recession.Labor must now compete with labor pools all over the world, not just in one country. Software can be produced anywhere. Information technology and the efficiencies it applies eliminates jobs. Manufacturing can easily go offshore. Trade barriers are falling. That goes for goods and labor. The main reason we are seeing an increase in strikes is because of falling equity prices, not tight labor markets. As workers no longer see the unlimited wealth effect in continuously rising stock prices, they look to leverage with their employers to make up the difference. Unions have been effectively crushed, for better of worse. The bargaining power of labor is surprisingly weak given the strong employment environment. If they can't strike now, they have a big problem. What do you think will happen if the employment picture weakens. You will see wage/benefit concessions faster than you are seeing the obverse now.Although I'd like to believe in your deflation scenario the reality in my opinion is just the opposite. When and if Mr. Market takes notice and the US Dollar as you say starts to roll over that's the time one might pick up their chips and walk away from the table. Either that or one may not have any chips left should they stay too long. Markets move on psychology and investor's belief structures. They also move on liquidity. Can we go down to DOW XXXX or Nasdaq XXXX? OF course we can. Just as we can go up. But the fundamental flaw in the super bear argument is this:Once 'wealth' is created it isn't destroyed. Nominal values can fluctuate (markets) but the wealth stays. We are not going back to leeches in medicine or steam locomotives for transportation, or rotary phones in communications. These are permanent infrastructure improvements or efficiencies. They can only be de-created through global thermonuclear war or environmental collapse. Since we are farther from the former by way of the end of the Cold War, I would say score one for the super bulls. The only long term super bearish argument now lies with environmental collapse.Barring disaster scenario one or two, over the long term the world is always getting wealthier, labor is always getting easier, people are living longer, devastating conflict is getting farther apart, life is getting better for everyone.
