Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (6640)	2/1/2004 10:16:25 AM
From: russwinter	Respond to of 110194

<answer the other pt, though -- it is real economic capacity that was brought online with a certain expectation about its longevity, unlike your old car -- shutting the capacity has a undeniable depressive effect --it is real capital.> Ok, but I like to use real life examples to keep you guys on task, in this case Levi Strauss plants. cbsnews.com I would offer up several points. First I don't consider these shuttered plants to be "excess capacity", nor do I think they should be counted in the bogus output gap, any more than I would consider unused retail on some boomed out strip mall to be excess space. This stuff is just junk now, really more a liability than anything, much like my old car analogy. Nor do I really consider auto plant closings like these to be excess capacity/output gap, although maybe it's debateable at the margin? Nah, don't see it, do you? On the depressive effect of capital being lost in such closures? It's depressive in the communities involved, and I suppose technically capital was lost for Levi. But so what as far as Levi goes, as cheap, easy finance (provided by the Wizards of Oz) has just allowed this capital to be cheaply and easily replaced in Asia like mushrooms sprouting in a forest. And in the Asian communities the effect is highly STIMULATIVE. And I would imagine closing this plant allows Levi and others to reduce their tax bill to Uncle Sam, state and local govt to boot. Then the Asians, use even MORE commodities, and energy, and material than US plants ever did. That's because higher labor costs in the US forced goods production to be efficient in areas like energy use, or material procurement. Cheap labor in Asia however, encourages inefficient use of energy and commodities. What do they care? Labor is their comparative advantage not commodity use efficiency. In fact the currency turmoil and bottlenecks involved even encourages inventory hoarding. And that's why I've been arguing that the one percent fed funds ENCOURAGES this outsourcing process, which in turn ENCOURAGES maladjustments and inefficiencies that in turn ENCOURAGES the train wreck. It's no different than what happened in France in the late 1780's when they liberalized trade and capital flows with England and then got hit with their subsistence crisis. History is repeating itself.

To: yard_man who wrote (6640)	2/1/2004 12:53:52 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Self-employment may mask US job growth tinyurl.com ==================================================== My reply: "Mask" may be the wrong word here. Actually let me change the sentence to the way it should read: Self-employment may mask US job LOSSES. How many self employed people had a contract two years ago and no longer have any money coming in? I bet there are literally tens of thousands of "self employed" computer consultants and the like, that can not file for unemployment benefits, but are still technically "self-employed". Also, how many people just do not want to admit they have no job, and when benefits ran out, now claim they are "self employed". Perhaps there are some new jobs here. Are there enough jobs to offset those that have not had a contract for over a year? Remember, none of these people show up in any statistics anywhere. Now, of those newly "self-employed" who recently hung out their shingle or whatever, how many of those have any real income coming in as a result of it? Perhpas some responded to newspaper ads for "stuffing envelopes" or the like. How many "self employed" are involved in out and out scams like that? Finally, how many "self-employed" are now making $5,000 when they were making $30,000? $60,000? $80,000? Of course $5,000 is better than nothing but...... Personally I think all this BS talk on "self employment" being a big boon is a crock of sh*t. In fact I believe it masks JOB LOSSES, not job growth. M

To: yard_man who wrote (6640)	2/1/2004 12:58:43 PM
From: mishedlo	Respond to of 110194

HE REMORSE PRICE OF GOLD The Daily Reckoning The stock market entered January like the proverbial lion and exited it like a lamb... a slightly crippled lamb. For the final week of January, the Dow fell 80 points, but still managed to exit the month with a slim gain, up a little less than a percent. The Nasdaq, which fell about 2.7% last week, closed out the first month of the year with a respectable 3.1% gain. The written word stole the spotlight, or more precisely, the RE-written word of Alan Greenspan. His monthly FOMC statement deleted the promise to holds interest rates low "for a considerable period" -- replacing this ambiguous phrase with an even more ambiguous promise to be "patient" about raising rates. "With inflation quite low and resource use slack," the statement read, "the committee believes that it can be patient in removing its policy accommodation." As we noted in this column Thursday, "Investors reacted swiftly and decisively to the semantic bombshell: the dollar soared, while stocks and bonds tumbled... If the Fed will no longer promise to hold interest rates low for a considerable period, the lumpeninvestoriat reasoned, then surely the Fed is preparing to raise rates, which is good for the dollar but bad for stocks and bonds." The gold market served up a delayed reaction to the Fed's new wording by plummeting $16.40 on Thursday to $399.40 an ounce – the yellow metal's biggest one-day drop since 1977. And voila, the gold price finally dipped below $400 an ounce, the "remorse price" at which the Paris editors of the Daily Reckoning have been promising to buy more of the shiny metal. "Gold hit our 'remorse price' Thursday, falling below $400," the remorseful correspondents reported Friday. "It dropped $17... Unfortunately, in this morning's trading it has bounced back above our remorse price. What the heck; close enough. Buy!" James Grant agrees: "In 2004, gold and silver will appreciate against the so-called strong currencies as well as the weak," the editor of Grant's Interest Rate Observer predicts. "The metal's best friend in 2004, we predict, will turn out not to be Alan Greenspan, but Jean-Claude Trichet. When -- not if -- the president of the European Central Bank announces a reduction in the prevailing 2% ECB repo rate, it will be seen that his purpose is to cheapen the euro. So seeing, investors will call the thing by its name, 'competitive devaluation.' Some investors, reflexively, will take that opportunity to buy the dollar, reasoning that it is the dollar's turned to be 'strong.' Others, correctly, will reflect how small a monetary role the 'store-of-value' function plays in the councils of our central bankers. With this understanding, they will buy more of those monetary assets listed in the Periodic Table of the Elements." One reason to trust Grant's forecast is that the dollar's fundamental underpinnings continue to rot away day after day, which means that the rationale for buying gold becomes stronger buy the day. Notwithstanding the dollar's sharp rally last week, the troubled U.S. currency still faces an extremely unforgiving monetary climate. But gold -- like wild buckwheat – thrives in a harsh environment. That's why we're still inclined to keep our bets on the ancient currency, rather than the revitalized greenback. For one thing, the current account deficit grows wider by the day, necessitating ever larger dollar purchases by foreign investors in order to keep the dollar's value from falling. Consider that holdings of U.S. debt by foreign central banks jumped to a new record high last week. As of January 21, the Federal Reserve's total holdings of Treasury and agency debt for foreign central banks soared $13.86 billion to $1.108 trillion. Can this massive global dollar-support scheme continue indefinitely? We think not... and we have come to learn that any phenomenon which cannot continue forever, won't... Again we suggest: Buy gold! Eric Fry, The Daily Reckoning