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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (3095)	7/22/2003 4:26:34 AM
From: maceng2	Read Replies (1) \| Respond to of 4904

Some recovery to the tech sector anticipated, while California economy stays in the doldrums asia.reuters.com Budget Woes Seen Hurting Calif. Economy Into 2004 Mon July 21, 2003 02:31 PM ET SAN FRANCISCO (Reuters) - California's giant budget shortfall, the effort to recall Gov. Gray Davis and rising workers' compensation costs will crimp the economy of the nation's most populous state into 2004, according to a forecast issued on Monday. The report from the Los Angeles County Development Corp. said that while the national economy will pick up steam in the second half of 2003, California will lag behind with potentially little or no job growth. "California's economy will struggle to get traction over the balance of 2003 and into 2004," the report said. The main problem for what is one of the world's largest economies is a $38 billion state budget shortfall that lawmakers have so far been unable to bridge due to partisan differences over proposed tax increases and spending cuts. The difficulty in approving a new budget for the fiscal year that began on July 1 has also been compounded by the Republican-led recall effort to oust the Democratic governor, the report said. The huge costs of workers compensation insurance -- already the highest in the nation -- will also hurt the state's economy by spurring businesses to hold back on hiring or even let workers go, according to the report. The survey forecast California's unemployment rate would hover above the national average at 6.7 percent through the end of the year before easing to 6.2 percent in 2004. The current U.S. jobless rate stands at 6.4 percent. Yet the report saw a few bright spots. The technology sector looks set for a modest recovery in 2003 that will gain momentum in the following year while international trade should also improve, the report said.

To: Box-By-The-Riviera™ who wrote (3095)	7/22/2003 10:02:47 AM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 4904

counter point to inflation: the relative external value of the dollar is way overrated as an influence on all this imo. note in this context that the largest trade imbalance is with China, the currency of which is pegged to the dollar. so there won't be any import inflation (and as a matter of fact, there isn't any). 'bailed out Japan's currency'??? that's not what happened imo. what happened was that the yen carry trade went belly-up....it had become a too large one-sided bet. what gold is telling us imo are two things: 1. the Fed IS printing a lot of money in its misguided fight 'against deflation'. 2. it's possible that it will fail, and a wave of defaults will ensue. in that case, gold will be the only refuge, so people are already buying some as a hedge. 3. IF the Fed wins this battle (which is the inflation bet), gold will be a good hedge as well. note that last financial year, Japan's narrow money supply expanded at 35% annualized. at one point it actually expanded at a 45% rate. at the same time, Japan recorded its worst year of price deflation in 13 years, and bank credit fell for the 6th consecutive year. and THAT is the major thing to focus on imo: the CBs can print all they want, once they run out of willing borrowers, the money just sits there doing nothing. meanwhile, debt defaults keep destroying money that was issued earlier in the game. note: i don't think we'll get a deflation rivalling the 30's, i.e. 10% falls in CPI in one year. but i'm expecting something along Japanese lines...steady deterioration from the current 50-year low in core CPI inflation of 1% to something like 0.5% next year, and then a decline below the zero level...aggregate declines of 1 - 3% at worst per year.

To: Box-By-The-Riviera™ who wrote (3095)	7/22/2003 11:58:30 AM
From: Perspective	Read Replies (2) \| Respond to of 4904

Yes, I believe in the stagflation outcome. And I think we might be set to learn a couple lessons I've been harping on for some time. 1. Price stability should be redefined such that all price movement is bad. There should be a PSI (Price Stability Index) used with the CPI that is computed on an RMS (root-mean-squared) basis, where all change - up or down - is considered bad. Kinda like shooting for the hole in golf - you miss either direction and it's bad. 2. The concepts of inflation and deflation vs. the K-wave are slightly misguided. Ask anyone making a living in a commodity-based sector is the last couple of decades have been inflationary. Life has become steadily more difficult for them. The "inflationary" phase of the K-wave is actually just the period where producers of discretionary and high capital intensity items gain pricing leverage at the expense of the producers of necessities (food, energy) and low capital intensity items. In our present "deflationary" phase, pricing power reverses to the commodities. Absent the Fed's monkey business, it would produce generally rising or falling prices per the inflation/deflation monikers, but with an underlying tide of devaluing dollars, the effects are easier seen as shifts in pricing power. BC