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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: re3 who wrote (21867)	7/30/2002 1:21:35 PM
From: calgal	Read Replies (1) \| Respond to of 74559

Mort Zuckerman Getting off the dime newsandopinion.com \| An investor looks out the window of his broker's office and is horrified to see other investors poised to jump off building ledges up and down Wall Street. His broker explains: "Every now and then we have to look at the leading technical indicators in the market." Nothing like a little gallows humor. But seriously, folks, as the stand-up guys like to say, it is actually worth considering some of the technical factors influencing the country's economic health. Besides the financial economy, which has garnered all the headlines of late, there is the real economy. American households are hurting because of the stock market's wild ride, but it's the real economy that generates the income a family must live on. So the question becomes: What will the market do to consumer, business, and government spending, the fulcrum points for moving forward? More than 80 million Americans own stocks either directly or through mutual funds or pension plans. They have lost $7 trillion since the market peaked. Their anxiety comes from the destruction of five years of wealth accumulation, which is particularly hard on the retired or nearly retired. For the typical consumer, however, housing is four times more important than equities, and home values have been going up while mortgage rates have been going down-permitting the refinancing of homes to raise money ($80 billion last year) for American households while lowering mortgage carrying costs. And remember that 68 percent of America's families own homes, far more than the percentage that own stocks. Better prospects. More often than not, rising job pros-pects offset discontent over plunging stock markets. The unemployment rate is still under 6 percent, and new claims for unemployment benefits suggest that joblessness will remain below that. Want more good news? Real weekly paychecks are growing by about 4 percent, thanks in part to President Bush's tax cut. So you're looking at a formula that, absent some monster economic shock, should continue to prop up consumer spending. So far, so good. But then there's the psychology factor. To date, this has been a jobless recovery. Why? The economy is growing too slowly while productivity is growing too quickly to make much of a dent in the unemployment rate. In such a scenario, each job lost could mean a new job may be unavailable. Consumers worry that falling stock prices may mean still more job cuts. So they begin to curb spending and save. The current savings rate is only about 3 percent of income, relatively low. If this climbs to a normal 6 percent or 7 percent level, growth might be depressed well into next year. Payments, wages, and salaries are about eight times the level of pretax earnings. A single percentage-point drop in wage growth, in other words, all other things being equal, translates into an increase of 8 percentage points in earnings growth. So it's not hard to see why companies trying to rebuild profits will remain tightfisted about wage increases. After all, pretax profits, as a share of gross domestic product for nonfinancial corporations, increased to 5 percent from 3 percent in 2001-but this is still well below usual rates and only half of the nearly 10 percent of 1997. Discipline in corporate costs is the only way companies can improve their bottom lines. Beyond that, the weak stock market guarantees deficits for state and local governments, since they are uniquely dependent on consumer purchases by higher-income families and capital-gains taxes. California's revenues from capital gains and stock options last year dropped a staggering 62 percent. The state may now face a deficit of over $23 billion. New York City and New York State combined will have deficits in the range of $10 billion; 45 of the other 48 states face deficits next year, so they'll be cutting public works, programs, and jobs. What is to be done? The federal government has gotten back into deficits, and the Federal Reserve has cut interest rates to the lowest levels in decades. This is not nearly enough. So here are four ideas: First, the United States should embark on a one- or two-year program to aid distressed states so they can avoid cuts in employment, public-works spending, and essential programs. Alternatively, Washington could offer federal guarantees to help states and cities through bond financing that might otherwise be unavailable because of their deficits. Second, the Fed must cut interest rates more-now. This is no time for the Fed governors to keep their powder dry. Third, Congress must support trade-promotion authority for the president so that we can expand exports. Lastly, President Bush must move more convincingly to restore confidence in the way business is run. The federal government must ensure accuracy and fairness in our financial markets. Action is critical; the sooner, the better. jewishworldreview.com

To: re3 who wrote (21867)	7/31/2002 8:01:38 AM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hello retired, I am now at the Hebei Century Hotel, 3 hours by car from Beijing, in a room costing USD 55/night, with in-room fax, 800Mhz PC, constant broadband, CNN, CNBC, BBC, etc, and USD 20 per session (60 min) full-body massage. I will answer your question when I get back to HK tomorrow night, because I have organized something in my palmtop that I can not post via this PC. A question: what is your geographic location? Chugs, Jay

To: re3 who wrote (21867)	8/1/2002 11:11:04 PM
From: TobagoJack	Respond to of 74559

Hi retired, <<why so much in the U.S. dollar ?>> 'I am afraid', is the short answer. I am certain something will whack me during the current cycle of volatility and secular decline, on the active income front, and/or on the asset side. It is only a question of getting whacked where, and how badly. I have deliberately kept away from taking out debt, to remove one source of uncertainty. Longer answer: I live in USD denominated space, here in Money Rock Hong Kong, next to Freedom Mountain Kowloon. I will likely relocate one day, according to me, to the beaches of Thailand, Tobago, or Hawaii; but according to my Canadian citizen wife, to the south of France and Paris, or to New York City. We could of course end up staying on in Hong Kong, since we have a beach below our window, and the city bustle 30 minutes away. In any case, we must be more flexible than those who have hometowns, and arrange our financial affairs to take account of more contingencies. My profit & loss statement, meaning immediate income and pressing expenses, is in USD form. The peg is a potential danger to my balance sheet, meaning savings and liabilities, in that the peg can break within my lifetime, at anytime, suddenly and w/o much warning, sending my purchasing power up or down, depending on my plans at that moment. So, terrifyingly, on the one hand, I take on a risk of loss when I buy stocks, bonds, real estate, precious metals, and any non-USD currency, but OTOH, for me, in the long term, holding the USD is no different than investing in, oh, GE, or Enron. Now perhaps you see more clearly than ever the attraction of gold and platinum to at least one investor, not so much as an investment, but as a hedge, and in a low interest rate and negative equity return environment, as a parking place, and in a high monetary inflation or geopolitically killing era, as a wager. I am prepared to increase my exposure to gold by 4-5% of NAV in the next few weeks and months should it go USD 280-290, using my USD and HKD in exchange. The nature of gold changes with its spot price: Message 17783611 July 23rd, 2002 <Gold, … was, is and will always be forever, and changes phase at these price points: < USD 250 = commodity, used for jewelry making > USD 300 = currency, used for hedge against whatever > USD 360 = trigger, to phase-change notional derivative positions to real 3-D obligations > USD 400 = alarm, for worldwide panic > USD 500 = treasure, more desired than ever > USD 600 = opening bell, for J6P to engage in hard buy > USD 1,200 = philosophy, for Jay to think about selling > USD 1,600 = unbelievable, time to sell, just a little, then a bit more>> Reference last update on allocation: July 27th, 2002 Message 17802216 Reference last update on psychology: July 26th, 2002 Message 17801766 Reference past comments on USD denomination: Message 15691518 April 19th, 2001 …< Most folks I know in HK keep their savings in USD or currency deposits other than HKD. Checking account is mostly in USD, though USD checking is also available. Companies accept payment in either currency, though prefer HKD if the money is meant for working capital ... I am doing the cautious thing when keeping most of my liquid cash in USD denominated deposits. I am, however, moving money very gradually to Euro, maybe eventually to as high as 25-30% of cash. My income is mostly in USD and my base currency is USD (because most of my share purchases occur in USD)>> Message 16217890 August 16th, 2001 <<You have the luxury of not living in a USD denominated geographic space in this most unique of times>> Message 16795657 December 14th, 2001 <<As a heavy USD denominated asset and currency holder, I am concerned about what the Japanese electorates may have to decide for, soon, and as a global investing electorate, I trust democracy of the mob to do me harm, and I am becoming more cautious with each successive passing of the aforementioned hot bubble, taking advantage of it when I can, and decamping when I think the odds are against me>> Message 17449478 May 10th, 2002 <<I am distressed to have to (a) keeping so large a percentage of NAV in cash (unlike Maurice, who just discovered the joys of unrewarding cash), thus (b) necessitating me to flip flop amongst the currencies, aiming to show an absolute USD denominated return. I just had an idea on how to boost my return for the year - I can switch my accounting currency from USD to Argentine Peso, and immediately chortle over a 300% return YTD:0)>> Message 17485199 May 18th, 2002 <<the HKD is pegged somewhat solidly to the USD ... I am getting less nervous about the dollar as time goes by, with increased allocation to non-USD currencies, physical gold, gold and platinum mining shares. I cannot escape the coming USD carnage completely, or avoid the Japanese debt-withdraw tsunami, and certainly not the Chinese manufacturing deflation storm. I have substantial HKD denominated real estate holdings and 100% USD denominated active income. My clients are ultimately, as the entire world, financed by Japan savings. I live on the doorstep of deflation central. I am just waiting for the killing, deluging, and trampling. But I sure as heck will try to escape a little bit. Buy physical gold. When the USD breaks, snaps, crumbles, or otherwise violently diverges from norm, as opposed to gently settles to another exchange rate, SE Asia, Taiwan, Korea will be in deep fertilizer given their consequential reduction of export to the US, and their loss of US-bound export share and manufacturing capacity over time, to China. I believe the Chinese RMB will be tightly embracing the USD as HKD is, especially when the USD starts to devalue. When the USD was appreciating, the RMB was kept in toll as an obligation to China's Asian neighbors, at US encouragement. When the Japanese were mouthing large-step devaluation of the Yen, China warned of consequential RMB devaluation as response, prompting then Treasury Secretary Rubin to encourage the Tokyo crowd to temper Yen devaluation. The connected world is dangerous, but may be not more so than disconnected world. I simply do not know. I am guessing that the US government will soon ask China to revalue the RMB against the USD on behalf of Asia ex-China, and China will do nothing of the sort. I do not know how the script will actually play out, and thus my caution to those who think they know>> Message 17589526 June 11th, 2002 <<My YTD gains resulted mostly, in the majority, from currency allocations (non-USD allocation is money at-risk for this USD denominated traveler), and the gains appear to be holding for now.>> Chugs, Jay