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

To: Knighty Tin who wrote (9164)	7/13/2004 12:34:25 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

The Daily Reckoning on GM Wal-Mart reports negligible sales growth while General Motors reports harrowing sales decline. The automaker's sales plummeted more than 12% in June, despite a dazzling array "incentive" programs... could it be that the consumer is simply tapped out? - "Fortunately for GM, July is a new month," Automotive News hopefully observes. Unfortunately, GM's incentives have become so lavish that sales won't necessarily mean profits. "This is getting good," a successful hedge fund manager told your New York editor yesterday. "GM will rebate you $250 if you DON'T buy one of their cars (but 'test-drive' it)! You can't make this stuff up! Oh yeah, also, you get $5,000 back if you're a returning customer. Sort of makes you wonder about the value of GM's 'brand.'" - We also wonder why most of GM's creativity seems to reside in its marketing department. Why not redeploy this talent into the automotive design department? - "In the past few months, the fertile minds at GM have presented three never-before-used types of rebates to the buying public," Automotive News reports. "All three have been noteworthy; all three have been expensive. For example, if you test drive a GM vehicle but buy a competitor's vehicle, GM pays you $250. It makes you wonder whether GM will run out of money before its marketing experts run out of ideas." - Technically, the automotive behemoth is already out of money, at least if one includes its mega-billion dollar pension liability. But those are problems for another day. In the here and now, GM has enough cash sloshing around to fritter away billions at a time. But fear not, based on GM's current rate of profit, the automaker will satisfy its pension liabilities a few years before the global oil supply runs out. - Time will tell if GM's groundbreaking incentive programs are also bank-breaking. - "The first of GM's current innovations was the payment of $250 to anyone who test drives a GM car or truck and then purchases a non-GM brand," Automotive News reports. "That sounds like an open invitation to steal from GM. Drive a GM model that you have no intention of buying and pick up $250 to help with the down payment on the Ford or Toyota or Chrysler of your choice. Paying rebates on the other guy's merchandise is definitely a first in automotive marketing. - "Next came a round of huge bonuses to owners of GM vehicles who buy another GM model," Automotive News continues. "OK, loyalty payments aren't new, but $5,000 loyalty bonuses certainly are. That is the amount GM paid in June to buyers of 29 car and truck nameplates. - Coming soon: Cash rebates on tech stock purchases?

To: Knighty Tin who wrote (9164)	7/13/2004 12:48:45 PM
From: mishedlo	Respond to of 116555

From Heinz Thanks to and compiled by ILD Date: Tue Jul 13 2004 10:25 trotsky (July insider buy/sell ratio) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved note: this is an all time record high in monthly net insider selling. quite a contrast to the bullish equanimity that pervades what passes for analysis on Wall Street these days. Date: Tue Jul 13 2004 10:49 trotsky (the trade deficit) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved apologists usually argue that the huge US trade deficit is a sign of the US economy's 'relative strength' compared to its trading partners, but this is of course nonsense. what it is a sign of is the hyper-active US credit machinery. ultimately, the trade deficit is a COST to domestic producers ( it is probably not too difficult to wrap one's mind around the concept of more funds flowing out than flowing in representing a cost of sorts ) . Americans consume on credit, which the foreigners selling the goods extend to them - it's the ultimate in vendor-financing pyramid schemes. one also often hears the argument advanced that since the current account deficit has its balance sheet counterpart in the capital account, that the deficit somehow is representative of foreign investors urge to invest in the US. well, they don't have much choice for one thing ( what do you do with that flood of dollars? unless they're recycled into US securities, you're apt to crash the dollar and thereby stop the merry-go-round that everybody loves so much ) , and as far as direct investment goes ( i.e. investment into capital goods like plants and equipment ) , that is at a mutli-decade low right now, which is to say that the US is NOT viewed as a great destination for productive investment. the flows are entirely financial in nature - i.e. the foreigners selling their surplus goods to the US are buying US securities ( mostly debt, but also some equities ) with the proceeds. it seems pretty obvious to me that this is the kind of situation practically begging for a meltdown down the road. compare this to e.g. the investment flows into China: the bulk of flows into China is indeed destined toward productive direct investment. to get the money back OUT, you'd have to sell the factory, the land, the machinery - not something that can be done overnight. by contrast, US t-notes and bonds as well as equities can be sold en masse in a milli-second. these days it's a matter of a mouse-click. in short, the current account/capital account situation of the US is the equivalent of being in the middle of a vast frozen lake, on VERY thin ice. Date: Tue Jul 13 2004 11:00 trotsky (Stuart@'87) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved indeed, it proved unsustainable. by late 1990, the US trade account had moved back into balance from the '87 record high deficit. it took a stock market crash, a recession, and the S&L collapse to get there. since the deficit back then was a much SMALLER percentage of GDP than today's deficit, it will be interesting to see what it will take this time. Date: Tue Jul 13 2004 11:17 trotsky (HK@'return of the rentier') ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i don't exactly need to be convinced that Keynes was totally wrong...as for the rest, the reforms suggested would for the most part be positives for the long term structural development of the economy. but when ( when, not if - it will happen, IN SPITE of government machinations to the contrary ) the private savings rate in the US finally rises, it will be accompanied by a series of recessions and the return of deflation. this is not bad - it's in fact necessary. the economy's realignment toward a more sustainable structure will be felt as an economic bust, as various non-wealth generating activities , or malinvestments, are bound to be liquidated. it will be a good thing, but both politicians and the Fed can be expected to fight it tooth and nail ( i.e. work AGAINST a rising savings rate ) , which will unnecessarily drag out the economic downturn and delay the recovery. in short, the proposed reforms to encourage savings are highly unlikely to be implemented. governments rather go with Keynes - he's the chief apologist for fiscal and monetary profligacy.

To: Knighty Tin who wrote (9164)	7/13/2004 12:52:25 PM
From: Tommaso	Read Replies (1) \| Respond to of 116555

RE Bush getting us into Iraq, I keep thinking of the lines from Sam Johnson's "The Vanity of Human Wishes": See nations sink, by darling schemes oppressed, When Vengeance listens to the fool's request. Our nation wanted vengeance for 9/11, and Bush wanted to finish his daddy's war. I had never heard that he could not get into Texas law school. But as a friend of mine said recently, who was herself a straight-A graduate of U-Texas, and is editor of a law journal: "He knows how to read people." And as long as he is not compelled to answer questions, he can just keep pigheadedly making statements that evade the issues. I was just re-reading Samuel Eliot Morison's "History of the American People." His summary of the period 1925-1929 could almost stand as a description of the most recent years; his view is that the Great Depression occurred because economic conditions were rotten and dishonest in the 1920s.