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.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (19105)	7/30/1998 9:44:00 AM
From: Lee	Read Replies (1) \| Respond to of 50167

Hello Ike,..Re: Now markets have been applying the monetary tightening without even Fed interfering. These longterm rates are free from all controls and are better indicator of how market perceives the economy. Excellent observation Ike and one that many fail to take into account. This seems like a good sign for earnings and growth going forward by saying that the slowing economy that everyone is so worried about isn't on the horizon for the next 6 months or so. Also, the S&P made good gains during the first quarter when rates were several times above 6%. Plus Q4 97 also had rates above 6%. chart1.bigcharts.com:80/report?r=chart&onbad=badsymbol&country=us&time=7&freq=1&compidx=aaaaa%3A0&ma=4&maval=9&uf=7168&lf=1&type=2&style=3&size=2&symb=TYX&comp=&sid=11421&sec=x&xyz=11608984&s=7752 bigcharts.com The only problem I have to see lower rates going forward is that the US doesn't have an available work force to continue expanding the economy much above 3%. And finally, the ECI came in at 0.9% which translates to a 3.5% annual rate. Even if the wage pressures are not distributed evenly between manufacturing and services, the pressure on earnings is just more noticeable in the tech/services industries. Regards, Lee

To: IQBAL LATIF who wrote (19105)	7/30/1998 10:13:00 AM
From: James Strauss	Read Replies (1) \| Respond to of 50167

IQBAL: Excellent post!!! The fact that higher costs are not being passed along to consumers because of domestic and international competitive pressures implies the need for greater productivity to maintain profit margins... The recent flood of downward earnings revisions, for whatever reason, implies that companies are reaching their limit of productivity within their current cost/pricing models... Only two things can happen in this environment: 1. Companies don't raise prices or don't raise them enough to be profitable... The result: Falling overall GDP... 2. Companies raise prices to maintain profitability... A domino effect of higher prices is created through the whole supply chain all the way to the ultimate consumer (You and I)... The result: Inflation that induces the FED to raise rates... Given the current paranoia about inflation phantoms the first scenario seems more likely... I believe that the market recognizes this... The GM strike settlement is indicative of a core U.S. industrial giant that cannot make the productivity improvements necessary to keep us out of scenario #1... Jim

To: IQBAL LATIF who wrote (19105)	7/30/1998 10:32:00 AM
From: Brian Fukuba	Read Replies (2) \| Respond to of 50167

Economic Calender: Employment Cost Idx 0.9%, Initial Claims 304K, APICS Survey 49.1%. Details: briefing.com Weekly Summary: moneynet.com Ideas Home Page: come.to Tight labor market=higher labor costs: cbs.marketwatch.com WASHINGTON (CBS.MW) -- Tight labor markets are forcing companies to raise wages and benefits. The cost of keeping an employee on the payroll rose 0.9 percent in the second quarter, the Labor Department reported Thursday. In private industry, wages rose 1 percent in the three months ending in June, while benefit costs rose 0.8 percent. For all civilian workers, wages rose 0.9 percent and benefits rose 0.8 percent. The increases were in the upper range of expectations for the Employment Cost Index. See economic calendar. In the past 12 months, the index has risen 3.5 percent, about 2 percentage points higher than the cost-of-living increases over that time. Unless labor productivity has filled the gap, companies are forced to pass on higher labor costs to their customers in higher prices or to their owners in lower profits. Wages increases in the quarter were about in line with recent experience, but benefit costs have begun to shoot up after many quarters of moderate increases. Benefit costs rose just 0.4 percent in the first quarter of 1998 and have risen 2.6 percent in the past 12 months. In the past 12 months, wages have risen 4 percent. In the second quarter, the ECI rose 1.3 percent in transportation and utilities. The index rose 1.2 percent in construction and finance, insurance and real estate. In the past 12 months, finance employment costs are up 7 percent and at banks, costs are up 10.4 percent. Rex Nutting is Washington bureau chief for CBS MarketWatch. bri Ike, Al always, thanks for your unique and insightful analysis.