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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (3805)	4/7/2004 11:34:39 AM
From: Jim Willie CB	Respond to of 116555

HAT TRICK LETTER: "Politics, Jobs, Trade War" issue#1A by Jim Willie CB goldenjackass.com the full article: gold-eagle.com some key points: - label of "jobless recovery" strikes an insecure worker as petty torment - professionals, if and when they find new jobs, are finding lower paying jobs - the economy has generated fully 6 million fewer jobs than the Bush Administration's 2002 Forecast, and to date already 900,000 below their 2004 Forecast (from October to present) - China amplifies the trade advantage for their domestic producers, by giving them export tax breaks to boot. A battle royal is underway, as China intends to establish its own communication standards. - the fire is the secular deflation underway, with massive damage to the labor sector, punctuated by record breaking bankruptcies totaling 1.6 million in 2003 - The sacrosanct heart of US labor is at risk of job outsourcing. The service sector makes up over 60% of our national GDP. - if the majority of US corporations outsourced most of their operations, then few Americans would have jobs or income - the Wall Street Journal reports that for every 1% rise in productivity, 1.3 million jobs are shed - Cries of job outsource negligence are opposed by accusations of economic isolation. Corporate interests are at odds with labor interests. - Eventually China will succumb to pressures, maybe even at the urging of Japanese leaders. Japan has begun to bear the load for currency adjustment within the Asian region. - Advisors cling naively to the notion that jobs can be restored by either currency shifts or trade protection. They will not. - if Chinese leaders are angered by near-sighted and angry trade sanctions, we will feel the impact of either reduced govt & agency bond purchases, or outright selling - if Americans are forced to purchase domestic goods, then our rising material costs, higher labor costs, and higher overhead costs can result only in end products at an elevated price - Do not be distracted by the two recent rulings against Microsoft. This is not further evidence of trade war. Much hubbub has been made of "comparative advantage" and how the United States benefits in evolutionary leapfrog fashion from round after round of creative destruction. The message rings hollow that in free global trade, both sides win. As the work of John Maynard Keynes has been misapplied (ignoring debt), so now the work of David Ricardo is being misinterpreted. The crew of US economic experts in our nation is the most inept in the entire world. They extend micro-economics to a national level, and deem it valid macro-economic analysis. Macro-economics is our enormous defect among the brain trust. Frustrated voters who suffer job angst are likely to push politicians to take action en route to grand errors. In their view, action off the mark is better than no action. / jim

To: mishedlo who wrote (3805)	4/7/2004 11:54:08 AM
From: yard_man	Read Replies (4) \| Respond to of 116555

I have this saved to disk already. While we are talking about it let me address a couple of items regarding nat gas forecasts -- why I think they are wrong -- both about demand and supply. ELECTRIC DEMAND: 1) Growth in electric generation demand for natural gas. - temporarily we got an overbuild in gas fired generation -- there are "deals" to be had on gas fired capacity which was built on electric price curves that were over-optimistic (this is the near term) -- (capacity factors remain too high in the models for gas fired generation -- they just won't run as much as folks have been saying) - most electric load forecasting -- even from the big assocations is based on flawed macro-economic models -- i.e. they do not anticipate us slipping back into recession -- the recent elecric growth of the past 5-6 years has been above par with longer term historical trends -- -- my own view is that we have 4-5 years of sub-par growth in electric demand coming (which will give us constency with the longer term trends when the whole period is looked at from say 2011-2012) -- mostly owing to the slowing of the construction boom Bottom line: Electric demand growth sub-par for the next 4-5 years at least -- this will clip as much as 1/4 - 1/2 off the rate of growth in nat gas demand which is attributable solely to gas-fired generation 2) On the plus side for demand -- I think industrial "demand destruction" has run it's course -- there is no additional demand to destroy at the margin without significantly higher prices -- I mean several percent higher average prices 3) Something that I have not seen included in demand models -- at least explicitly in the overview is the question of oil prices -- suppose crude hits 60/bl sustained averaged by 2007-2008 timeframe -- what would that mean?? Well it would mean that the demand models for all that cheap LNG and the other new resources would find a LOT more demand than is anticipated currently ... Supply: All the forecasts I have seen have a very large amount of the incremental supply added from unconventional resources -- it seems like the expected contribution to new supply from LNG from 07 forward is more than 1/3 of these new resources ... I think these forecasts -- both for LNG and the deepwater resources are way OVER-optimistic Estimates on additional supply from Canada and other NA regions are probably the least suspect -- but they aren't the lion's share of the "new" gas I think significantly higher prices are in the offing, even if we slip back into recession. A large spike will happen in 07 or 08 if LNG doesn't provide the supply here that has been anticipated -- the market may start to discount this seriously as early as the summer of 05 or winter of 05