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To: Mike M2 who wrote (252393)	7/26/2003 12:52:12 PM
From: mishedlo	Respond to of 436258

Debate on outsourcing: In Italics from Jedi with my reply. This trend is irreversable. Cheaper labor and better talent is too much to pass up for American business. Also, American social values, discipline, and academics will take so much time to turnaround, that foreign labor/outsourcing will become firmly entrenched IF America ever achieved that turnaround. I believe this to be true. Jedi ============================================================ From Mish: Macro trends, one they start always run to conclusion no matter how absurd at the time it seems. Let's consider a few. The stock market bubble reached far greater heights that anyone thought possible. At the very top, individual companies were talking of $1T valuations as being normal. Unfortunately, regardless of what anyone thinks, this secular bear market is not over and we are going to break those lows we set. Macro trends do not reverese with PEs as high as they still are, with this much overcapacity and this little pent up demand. The Long bond sunk to lows a month ago that very few could have figured as little as two years ago. 5-10 years ago you would have been laughed at if you suggested these rates. The bull market in the long bond is probably over, if it's not over it is in the bottom of the 9th. It lasted 20 years. The conclusion of this bull market was a home refiancing bubble that is still underway but about to slow rapidly. The bear market in gold lasted 20 years. True to form, central banks that had it at 800 started unloading it at 250 right at the bottom. England unloaded tonnes of it at 250-270 and bought the US$ with it. Go figure. Now back to outsourcing. Has this trend just started or is it nearly over? I would say that it is closer to just getting started (first or second inning in some fields such as accounting, perhaps in the 4 inning in tech, and perhaps in the 7th inning in manufactoring. Unlike Jedi, however, I do not think the root cause of this has anything whatsoever to do with US social values, abortion, work ethics, or liberalism (unless you mean extremely loose monetary policy under both republicans and democrats). It started with the overcapacity blowout stock market bubble and in a way to get back to profitability it was necessary to cut costs. No more no less. The problem is that there is still overcapacity, and demand is being propped up by artficially low interest rates. When will the manufactoring export trend end? At the end of course. But that might be another 10 years. Just as soon as all the plants are in China and there are no more to move, China will jack up wages and any businesses that went there will start to see real costs rise. Perhaps in the future, there will be an exodus of jobs from China to Brazil or someplace else. If this sounds preposterous, think about what has happened here. We lost auto manufactoring business to Mexico who was willing to do it cheaper than the US. Now Mexico is losing manufactoring jobs to China. At any rate please take a look at some more of the current macro trends and see what if any good can come from it. Bonds have topped but perhaps there is one more test of the highs. People on fixed incomes are getting hammered by Greenspan's artificially holding interest rates low for now and into the forseeable future. Social security, medicare, and medicaid are in serious trouble. The long term macro refinancing boom is in the 8th inning and the collapse of that bubble (or the slow death of it) is not looking good for our economy. The US is spending as much on military spending as the next 100 nations put together. Or something like that. We have troops at enormous cost all over the place. Can this trend continue? For how long? At what cost? At what cost to security if it stops? Look back at some of the great empires of the past. Right before their decline, imperialism reached its peak if I am not mistaken. Is the next trend a political move towards protectionism in an attempt to tide the outflow of jobs? We will see as it is not in place yet. Perhaps it will start when accounting jobs are in the 4th inning. ================================================================= Look carefully at those macro trends. Almost all the macro trends in place today seem to indicate a USA that is at its very peak (with nowhere to go but down) in terms of economic might jobs standard of living How fast the decline is debatable. That the macro trend is in place, starting with the death of manufactoring and rolling over into other sectors, is IMO undeniable. Japan hit its peak about 15 years ago. Demographics and the global economy suggest we have recently peaked here. It's a long way down before this macro trend reverses, and the standard of living of a huge portion of the US will suffer as a result. M