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

To: ThirdEye who wrote (19455)	12/23/2004 2:25:25 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Discussion with RodgerRafter on the FOOL on the US$ and goods Mish: (in reply to France bitching about the US$ today) You know it would help if you guys didn't keep yapping about how low EU interest rates are and just shut your mouths for a change. Rodger: Seems like yapping is all the EU politicians are willing to do. If the Euro is overvalued, then they should do themselves and everyone else a favor and sell it. Somehow I think all the talking down of the Euro is really just making a buying opportunity for big investors who understand how overvalued the US dollar is and what will happen when China cuts it loose. Forget all the nonsense you've been hearing recently about the dollar being undervalued. Internationally available goods are priced to sell at whatever rate they'll sell in a local economy. (I've watched Apple rip off and overcharge foreign consumers for years.) Using the price of consumer goods to value currencies is a mistake. Prices haven't changed fast enough at the retail level to reflect the relative changes in currencies, thus making Hussman's and similar methods make the Euro look overvalued (math and example provided below). The dollar is overvalued because of Asian intervention and becoming more overvalued with every month of continuing trade deficits. Period. With the US as the world's sucker-born-every-minute consumer, there's a desire to talk down the Euro to boost sales to Americans (and continue the transfer of wealth out of the US) until the overstimulated US market finally breaks down. However, long term the EU should realize that Asia is the main competition for the world's resources and job opportunities. They should be selling Euros to purchase Yen if they wanted to restore balance to the currency markets. Unfortunately, that sort of competitive devaluation might cause an unravelling of the whole status quo ahead of schedule and governments just aren't ready to deal with that yet. In the politicians mind a steadily deteriorating status quo is better than dramatic, constructive change and economic upheaval. Equivalent Value Bogocity Example: October 1 Euro = 1.23 USD 20 GB iPod = $299 US 20 GB iPod = $349 Euro Based on iPods, the Euro should be worth 85.67 cents and appeared to be about 43% overvalued in early October. December 1 Euro = 1.34 USD iPod = $299 US iPod = $349 Euro Based on iPods, the Euro appears to still be worth 85.67 cents and is now 56% overvalued. Side note: Most international companies like Apple hedge currencies so that they don't benefit from favorable or unfavorable changes for several months, and have little need to change prices rapidly. As businesses and consumers adjust to the new currency levels, prices will eventually adjust appropriately. The result will be significant inflation pressure in the US and deflationary pressure in Europe. We'll likely also see a flood of Asian goods moving toward Europe where the consumer's purchasing power is increasing, and away from the US where most consumers are getting SQUEEZED. US and French Apple stores: store.apple.com store.apple.com Mish: We'll likely also see a flood of Asian goods moving toward Europe where the consumer's purchasing power is increasing, and away from the US where most consumers are getting SQUEEZED. We will huh? That assumes unemployed aging European customers will go on a spending spree. Data does not suggest that is likely, just as it does not suggest that Japan is about ready to go on a spending spree either. Otherwise that was a nice piece. Mish

To: ThirdEye who wrote (19455)	12/26/2004 12:51:06 PM
From: GraceZ	Read Replies (1) \| Respond to of 116555

Essentially what you are saying is that unions allow labor to demand compensation in excess of what a free market would afford them. This might be all well and good if the free market doesn't assert itself somewhere else. You wind up with situations where labor takes so much that there is little capital left to go back into improvements (the air traffic controllers or the steel industry) and the efficiency is diminished to the point of collapse. Or the industry could simply slowly die out as other places in the world where labor has a smaller share take that work away. Maybe you fear that without unions the free market rate would not be enough to live, but that isn't possible unless the government comes in and subsidizes the living expenses of those with low income jobs as it does now. I work indirectly for some of the largest US companies, never have I needed the benefit of collective bargaining in order to receive the market rate for my services, nor have my employees, we were paid in excess of what our unionized counterparts where paid primarily because those inefficiencies were never introduced in to our working situation, so our collective profit was higher and we both benefited as a result. This is true even in my husband's biz, commercial construction. He has a lot of friends in the biz who belong to the carpenters union, while he does not and they have always made less than he does. They work less and have long periods of unemployment so their aggregate wages, over a long period, are considerably lower even if they primarily work on jobs where the scale hourly rate is on average higher. If the carpenters union was designed to keep wages low, they have done a good job. You assume it is government interference which has caused the unions to lose power but it is simply the free market asserting itself, as it will always do. People will eventually act in their own self interest and disregard the current political rhetoric.

To: ThirdEye who wrote (19455)	12/26/2004 4:56:51 PM
From: GraceZ	Read Replies (1) \| Respond to of 116555

Monopoly power of one branch of government reduces democratic efficiency BTW all three branches of government were in agreement as to the illegal nature of the PATCO strike. As federal employees the controllers were violating the no-strike clause of their employment contracts. In 1955 Congress had made such strikes a crime punishable by a fine or one year of incarceration -- a law upheld by the Supreme Court in 1971. eightiesclub.tripod.com The courts supported the action of the president and the union leaders were fined and some were hauled off to jail. So your assertion that one branch of government usurped the democratic process by imposing it's will on the other two is false. Not only that, Reagan received wide spread public support for his actions as personified in his re-election where he swept every single state except Mondale's home state and the District of Columbia, much to the chagrin of almost everyone I knew at the time. BTW the president who leads all others, by a very wide margin, in issuing executive orders which superceded the power of the two other branches of government is FDR. archives.gov