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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Lizzie Tudor who wrote (9127)	2/20/2003 3:01:48 PM
From: GraceZ	Read Replies (1) \| Respond to of 306849

It could go there considering that the Fed is still holding a negative cost of funds. What they haven't been doing, that they did in the 70's is adding permanent to any great extent. In the absence of loan demand it's hard to see how rates can start rising. This could change rapidly if we start to heat up a bit. The thing that is holding it in check is that the labor unions don't have the kind of monopoly power they had in the 70s due to the fact that US companies will hire lower cost labor in other countries or move whole operations overseas to countries that are less socialist then the US. Where you see the kind of wage inflation we had in the 70s is in places where the labor unions have some sort of stranglehold, like in the West Coast dock workers, BART workers, etc. What we don't have yet is an expectation of generally rising price levels. We have lower price expectations in place for a lot of goods, higher price expectations for services like medical and education (although judging from the uptick in marketing efforts of my clients which are educational institutions, healthcare and hospitals, this may finally be cracking). Basically anything which can't be reduced to being done by a computer or shipped overseas is going up and everything where computers and cheap labor is involved are going down. The efficiencies that can be achieved using computers and high speed communications networks are just starting to have an effect in the healthcare industry. This is barely keeping ahead of the explosion in medical procedures that are being added to health coverage. That said, there are some similarities. The 70's wage increases in excess of productivity were more then simply a monetary phenomenon. What drives wage inflation is the perception on the part of labor that they are somehow being left out of some sort of huge bonanza, that someone else is doing far better then they are and regardless of productivity levels they want their "fair" share. I can't think of anything that fosters this kind of thinking more then the kind of "corporate fat cat" stories we've had no end of in the last two years. Wage inflation starts with a resentment that someone else has more than you. It also is fed by the move towards requiring employers to add this or that social benefit to wages. Having lived through the seventies I can tell you there was a very different feel. What made us so cynical was that it seemed like everything we bought back then was costing more and looking cheaper. In other words, "new and improved" was a code word for more plastic and fewer quality parts at a higher price. Try to compare that to now! The consumer goods I buy are multitudes better then the same good was just a few years earlier and cheaper by half or more. Basically anything with a chip or that can be manufactured using CAM is rising in quality while falling in price. Food might be the exception (perhaps because commodities have bottomed). It continues to deteriorate even while the sheer quantity and variety explodes. You can get all the manufactured food you can kill yourself with. The real stuff continues to rise in price. I have a hard time understanding why everyone is so negative. I'm sitting here working on a bunch of digital images. Actually this computer is churning them out, as I write this. I'll deliver them on a CD that costs me less then a dime, or I'll deliver over the high speed line that comes to my rural paradise (snowy rural paradise). What would have taken me and a few other professionals days and hundreds of dollars of consumables, produced in a facility costing 100k is now done at home on a state of the art Dell costing $1200 with about $2 worth of consumables. So much for excess capacity. I bought this computer while I have four computers sitting unused because none would do what I needed them to do at the speed that it needs to be done. I have about six printers sitting unused yet I needed a new one. The diff is that the costs for these two items was less then a single accessory back five years ago. The future looks very, very good to me. I'm back to the gross margin sweet spot in that I'm getting paid for my time and I'm almost completely free of escalating facility expense that was strangling me just two years ago. Just getting rid of the damned plumbing is a major milestone. My product has been vaporized and I love it. I've been shipping atoms for years that always, without fail, got turned into bits. It's about time I started working with bits from start to finish. The future we used to talk about is here and the big question is, is there anyone left to actually welcome it? Very few, they're all sitting around talking about how baaaaad it is and how bad it will get. Ha!