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Crafty_Dog
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« Reply #100 on: August 04, 2011, 05:58:19 PM »


I just came back from a very pleasant day hanging out with a good friend to see the Dow dived 500 today.  Uh oh , , ,
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G M
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« Reply #101 on: August 04, 2011, 06:27:12 PM »


I just came back from a very pleasant day hanging out with a good friend to see the Dow dived 500 today.  Uh oh , , ,

Quick! Somebody get Wesbury to tell us how this means things are really going good now.
« Last Edit: August 04, 2011, 06:39:03 PM by G M » Logged
Crafty_Dog
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« Reply #102 on: August 04, 2011, 06:33:42 PM »

Indeed!  I will be interested to see how he responds.
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Crafty_Dog
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« Reply #103 on: August 04, 2011, 07:02:34 PM »

Research Reports
           
           
            Dow Down 500, But Fundamentals Still Strong To view this article, Click
Here
           

            Brian S. Wesbury - Chief Economist

            Robert Stein, CFA - Senior Economist

            Date: 8/4/2011
             
            Major stock market indices are down 4-5% today as investors move into
panic mode.  There is no single piece of news driving the sell-off;
rather the market seems to be gathering downward momentum on its own.
Selling is creating more selling.
             
            Like 1987, the sell-off does not appear to be driven by fundamental
factors.  In fact, the fundamentals suggest the market is undervalued
and getting more so as it drops.  Many investors assume (or wonder) if
the sell-off is indicating deep economic problems.  However, there is no
evidence that this is true.
             
            The Federal Reserve is still running a very accommodative monetary
policy.  Money supply data shows no contraction – M1 is up 13.8%
and M2 is up 8.3% at an annual rate over the past thirteen weeks.  The
Fed is holding the funds rate near zero, while nominal GDP is rising
near a 4% annual rate recently and “core” inflation is at
3%.  In other words, interest rates are very low in comparison.
             
            If you are worried about a cut in government spending –
don’t be.  Federal spending in 2011 is still rising and according
to the OMB and CBO it will rise each and every year over the next 10
years.  If you are worried about the size of government and think the
budget deal was terrible – you shouldn’t.  Supertanker
America is turning and government spending as a share of GDP is
scheduled to fall by about 2% of GDP over the next 10 years.
             
            Corporate earnings are rising rapidly.  According to Bob Carey, First
Trust’s Chief Investment Officer, with about 80 companies left to
report, S&P 500 earnings are up 20% over last year and the S&P
500 P-E ratio (on forward earnings) is roughly 12.  The market is cheap.
             
            Economic data are not tanking.   Initial claims are at 400,000 (down
from 478,000 at the end of April).  Car and truck sales were up 6.9% in
July (over June) and chain-store retail sales were up 4.6% in July (from
last year) versus 2.8% year-over-year growth in July 2010.  Taken
together, retail sales appear to have increased by about 0.7% in July
even though gasoline prices fell.
             
            Yes, the ISM manufacturing index was just 50.9 in July, but that is the
24th consecutive month above 50 and is consistent with 2% or more real
GDP growth.  Finally, the ADP employment report showed 114,000 new
private sector jobs in July, which was the 18th consecutive monthly
gain.  In other words, there is absolutely no evidence of a recession at
this point.
             
            This leaves us at perhaps the best explanation for the decline: European
debt problems, specifically Italy.  It is clear that hot money is moving
as investors worry about money market funds and bank solvency.  The euro
is falling, European bond yields are rising, US Treasury yields are
plummeting and gold is up.  Italy says that it does not face imminent
default, but the market acts as if it may.
             
            European countries have spent themselves into a corner, but correcting
this mistake will be good for long-term growth, not bad.  While some
financial institutions may take losses, government debt itself is water
under the bridge.  It’s a sunk cost.  As a result, it has little
effect on the economy unless losses create financial contagion.  With
mark-to-market accounting now fixed to allow cash flow to be used to
value assets, the odds of contagion are minimized and the cost of
immunizing America from contagion would be small when compared to 2008.
             
            In the end, the sell-off looks as if it is more of a technical
correction in the market, not a fundamental change in direction.  This
does not mean that it will end soon.  Corrections run their course and
then end.  We wish we could trade each and every move in the market, but
we can’t and we don’t know anyone who can.  We are
investors, and the market is more undervalued right now than it was when
it opened for trading this morning.
             
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G M
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« Reply #104 on: August 04, 2011, 07:05:36 PM »

The black knight rides again!
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ccp
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« Reply #105 on: August 08, 2011, 10:14:36 AM »

I never thought of there being an algorithim.  I always thought it was random.  I guess the scratch offs are different from the lotto numbers?:

****'Lucky' woman who won lottery four times outed as Stanford University statistics PhD
By Rachel Quigley

Last updated at 9:06 PM on 7th August 2011

She was called the luckiest woman in the world.
But now that luck is being called into question by some who think that winning the lottery four times is more than just a coincidental spell of good fortune.
Joan R. Ginther, 63, from Texas, won multiple million dollar payouts each time.
 Luck?: Ms Ginther won four lots of vast sums on lottery scratch cards, half of which were bought at the same mini mart
First, she won $5.4 million, then a decade later, she won $2 million, then two years later $3 million and finally, in the spring of 2008, she hit a $10 million jackpot.
The odds of this has been calculated at one in eighteen septillion and luck like this could only come once every quadrillion years.
Harper's reporter Nathanial Rich recently wrote an article about Ms Ginther, which questioned the validity of this 'luck' with which she attributes her multiple lottery wins to.
First, he points out, Ms Ginther is a former math professor with a PhD from Stanford University specialising in statistics.
A professor at the Institute for the Study of Gambling & Commercial Gaming at the University of Nevada, Reno, told Mr Rich: 'When something this unlikely happens in a casino, you arrest ‘em first and ask questions later.'
 Money bags: First, Ms Ginther won $5.4 million, then a decade later, she won $2 million, then two years later $3 million and finally, in the spring of 2008, she hit a $10 million jackpot
Although Ms Ginther now lives in Las Vegas, she won all four of her lotteries in Texas.
Three of her wins, all in two-year intervals, were by scratch-off tickets bought at the same mini mart in the town of Bishop.

Mr Rich proceeds to detail the myriad ways in which Ms Ginther could have gamed the system - including the fact that she may have figured out the algorithm that determines where a winner is placed in each run of scratch-off tickets.

He believes that after Ms Ginther figured out the algorithm, it wouldn’t be too difficult to then determine where the tickets would be shipped, as the shipping schedule is apparently fixed, and there were a few sources she could have found it out from.

According to Forbes, the residents of Bishop, Texas, seem to believe God was behind it all.

The Texas Lottery Commission told Mr Rich that Ms Ginther must have been 'born under a lucky star', and that they don’t suspect foul play.****
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G M
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« Reply #106 on: August 08, 2011, 02:04:40 PM »

Obama's defeat.

Or maybe pray for his re-election.    grin

The stock market was around 8000 when Obama came into office.  Now it's around 12,000.

That's nearly a 50% increase in three years just throwing darts at the board.  Pretty impressive.

Hmmmmm. Got anything else?
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JDN
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« Reply #107 on: August 08, 2011, 02:30:11 PM »

Obama's defeat.

Or maybe pray for his re-election.    grin

The stock market was around 8000 when Obama came into office.  Now it's around 12,000.

That's nearly a 50% increase in three years just throwing darts at the board.  Pretty impressive.

Hmmmmm. Got anything else?

So far, I don't need anything else.  Even after the recent panic selloff, under Obama that is still almost a 15% annualized return on your investment.  An outstanding historical annual return.  Add in dividends, and the rate of return is even higher.  You were saying?   grin

By the way, if you invested money in the stock market for the duration of the Bush eight years, you lost money.  A lot.
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G M
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« Reply #108 on: August 08, 2011, 02:36:19 PM »

I question your stats. So, you think Buraq's big selling point in 2012 will be his awesome economic leadership?
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JDN
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« Reply #109 on: August 08, 2011, 02:47:48 PM »

The stats are right on; even more in Obama's favor if you start the calculation a couple of months after he was inaugurated.  In contrast, if you invested
with Bush during his eight years, you lost 25% of your money.  shocked

That said, if the economy doesn't improve over the next year Obama's re-election is in jeopardy. 
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Crafty_Dog
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« Reply #110 on: August 08, 2011, 02:50:44 PM »

The market dived precisely when Baraq passed McCain (a pretty hideous candidate in his own right btw) in September.  As a forward looking entity, the market was looking at the prospects for cap & trade, Obamacare and so much more.  As C&T has been capped and it became clear that the Reps/Tea Party were going to take the house and perhaps the Senate, things improved.

Furthermore if you measure the dollar value of that increase in the DOW you need to take into account that the dollar is worth far, far less in terms of gold, silver, a basket of commodities or any other reasonable facsimile of a constant value measuring stick.

Also, as has been noted here, many/most of the most profitable companies are profitable precisely because of their overseas profits-- which they don't repatriate because of our stupidly high corp tax rate (#2 in the developed world and some 50% higher than in Europe)

Also, the Dems demogogued Bush serious efforts at reforming SS and the Dems took Congress in 2006 and that is where spending originates.
« Last Edit: August 08, 2011, 02:52:34 PM by Crafty_Dog » Logged
JDN
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« Reply #111 on: August 08, 2011, 02:57:09 PM »

You can spin the numbers any which way, maybe sunspots are relevant too  grin

I just compared Dow Closing to Dow Closing.  Simple, easy, and straightforward.

As do most statistical comparisons. 
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ccp
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« Reply #112 on: August 08, 2011, 03:16:01 PM »

"As C&T has been capped and it became clear that the Reps/Tea Party were going to take the house and perhaps the Senate, things improved"

In my opinion (out of the 7 billion that exist on Earth) I would suggest the market will not really recover till the Repubs get the WH back and a majority in the Senate - although a fillibuster proof is necessary with the Dems who have proven they can/will block everything in sight.

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Crafty_Dog
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« Reply #113 on: August 08, 2011, 03:41:53 PM »

WOW, that was really ugly today!!!
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G M
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« Reply #114 on: August 08, 2011, 03:47:18 PM »

WOW, that was really ugly today!!!


PRESIDENT DOWNGRADE: Dow Finishes Down 634 Points. Obama’s speech certainly did nothing to slow the drop, though I suppose the White House will argue that it would have been 734 without the speech, meaning that Obama saved or created 100 Dow points . . . .

Posted at 4:42 pm by Glenn Reynolds
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ccp
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« Reply #115 on: August 08, 2011, 04:01:08 PM »

Yes and that it was all due to the Tea Party that dared to hold firm against the expanding ponzi scheme.

If only they compromised instead.   rolleyes

If only increased taxes were included.   rolleyes

If only they didn't hold a gun to the heads of the "American people" who also refuse to face reality while the train goes off the edge into the grand canyon.   rolleyes
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G M
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« Reply #116 on: August 08, 2011, 05:07:38 PM »

I'm eager to see Buraq's economic plan to turn things around. He's been hiding it until now because it's so awesomely awesome that if it was released before now, the stock market would be at 100,000,000 and unemployment at 0.0000001%.

He didn't want anyone accidentally blinded by it's sheer brilliance.

There is no way it's tax and spend. That's like some republican myth.
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ccp
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« Reply #117 on: August 08, 2011, 05:20:05 PM »

http://www.realclearpolitics.com/video/2011/08/02/debbie_wasserman_schultz_weve_really_begun_to_turn_the_economy_around.html
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DougMacG
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« Reply #118 on: August 08, 2011, 06:38:53 PM »

CCP: I love the story about the Stanford trained statistician winning 4 million plus lotteries - "The odds of this has been calculated at one in eighteen septillion and luck like this could only come once every quadrillion years."  I hate the lotteries and maybe this will disrupt some of the enthusiasm.

I can't remember what qudrillion and septinllion mean.  I just remember S. Palin saying 'don't anyone tell Obama what comes after a trillion.'
----
Down down 634: Are people reading these pages this year still in stocks?

Dow up 50% during the early part of the Obama administration?

Things like inaugurations or New Years make lousy benchmarks.  If that is the test, Democrats in reality took control of the domestic agenda Nov 2006 / Jan 2007.  Result was the end of 50 months of growth, stagnation and collapse.  Then they took the White House.  I would assume that the selloff of 2008 was oversold.  People sold everything and had to wait 30 days plus until charts started upward to buy back in, with capital gains paid at the old rate.  I would guess this rise was over-bought. Dow companies like CocaCola and McDonalds have 75-80% of their business outside Obama's jurisdiction.  Did these investors know they were buying into 0.4% growth?  Did they know that 90% of Obama's job growth rate ended the day Obamacare was passed.  Chart below. Obama is not done.  This carnage is on his watch too.  I would estimate approaching 10 trillion is losses just the last 2 market days.

"By the way, if you invested money in the stock market for the duration of the Bush eight years, you lost money.  A lot."

Once again, a FLAWED analysis.  The market crash started with NASDAQ March 2000, 6 monthsw before the election, 9 months before the name changed on the door.  The downturn was going on no matter WHO was in power, until conditions and policies changed.  The attacks of 9/11/2001 were planned and happening no matter whose watch, unless someone else would have prevented it.  The recovery started the day policies changed, the 2003 tax rate reductions.  The recovery ended the day the policy arrow changed with the Nov 2006 election.  Why lump those those 3 distinct periods together and lose all meaning to the pretend analysis?

Instead, look for peak to trough or inflection points and look for causation.  Track the results to policy changes implemented or expected rather than the nameplate on the door.  I would love to see a comprehensive supply-side, pro-growth package passed and signed overnight tonight (impossible).  New flat and simple tax code, regulation rollback, corporate tax rolled back, loopholes gone, cap and trade scrapped, Obamacare repealed, energy projects approved coast to coast, all pending trade agreements passed, states add capital gains preferences, reform all major entitlements .  Obama can take credit.  Chart THAT!  We could have 8% growth tomorrow IMO if people really wanted to solve this.

US Job growth following Obamacare passage:

http://www.heritage.org/research/reports/2011/07/economic-recovery-stalled-after-obamacare-passed
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JDN
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« Reply #119 on: August 08, 2011, 08:53:04 PM »


"By the way, if you invested money in the stock market for the duration of the Bush eight years, you lost money.  A lot."

Once again, a FLAWED analysis. 

 huh
Let's keep it simple. 

It's not a "FLAWED analysis. It's a simple fact. 

How you want to spin it (excuse it) is up to you.

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G M
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« Reply #120 on: August 08, 2011, 09:11:25 PM »

JDN,

The asian markets are plummeting right now. How do you think we'll do tomorrow?
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Crafty_Dog
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« Reply #121 on: August 08, 2011, 09:25:36 PM »

A bubble was created in the market by the Fed with its insane interest rate policies and the monetization of the debt and deficit.  This is not an accomplishment.  It is simply creating a bigger and more disastrous reality than the housing bubble.
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JDN
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« Reply #122 on: August 08, 2011, 09:34:11 PM »

JDN,

The asian markets are plummeting right now. How do you think we'll do tomorrow?

GM; I have no idea what the markets will do tomorrow.  I'ld be rich if I did.

But heck, if it drops another 1000 points, you still have made more than 10% on your money annualized since Obama has been
in office.  Not bad.

What i do know (FACT) is that it can continue to drop another 4000 points and the market's performance during Obama's presidency will STILL be a lot better than the market during Bush's presidency.

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G M
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« Reply #123 on: August 08, 2011, 09:36:05 PM »

Bwahahahaha! Ok JDN. Keep telling yourself that.
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Crafty_Dog
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« Reply #124 on: August 08, 2011, 10:05:35 PM »

Well then putting aside all the other points which you are not addressing, let us list the other facts concerning food prices un and underemployment, indebtedness per citizen and a whole clusterfcuk of other data.
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DougMacG
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« Reply #125 on: August 08, 2011, 10:36:38 PM »

No interest in tying policies to results and results to policies?  My mistake -I thought this was one of the triple digit threads.
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G M
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« Reply #126 on: August 08, 2011, 10:49:35 PM »

No interest in tying policies to results and results to policies?  My mistake -I thought this was one of the triple digit threads.
What we have here is a "bitter clinger", desperately trying to hold on to "Obama as savior" delusions. We're going to see a lot of this as the welfare state dies.
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JDN
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« Reply #127 on: August 09, 2011, 12:06:01 AM »

No interest in tying policies to results and results to policies?  My mistake -I thought this was one of the triple digit threads.
What we have here is a "bitter clinger", desperately trying to hold on to "Obama as savior" delusions. We're going to see a lot of this as the welfare state dies.
Well then putting aside all the other points which you are not addressing, let us list the other facts concerning food prices un and underemployment, indebtedness per citizen and a whole clusterfcuk of other data.

 huh

I'm the one who said unless the economy improves, i.e. jobs, Obama is in trouble.

But all your spin, excuses, and attempts to obfuscate the facts isn't relevant. I'm not addressing the issue of of "food prices, unemployment, indebtedness", or Werewolf's, or Sunspots, or Devils, only that the Stock Market is up during Obama's tenure (way up, even after today) and was down (a negative return) during Bush's.

Is that fact hard to accept?

 evil

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Crafty_Dog
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« Reply #128 on: August 09, 2011, 01:03:20 AM »

Please address then the valuations of the dollar in gold, silver, commodities, and other currencies.
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JDN
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« Reply #129 on: August 09, 2011, 09:20:59 AM »

Please address then the valuations of the dollar in gold, silver, commodities, and other currencies.


Ahhh new subject.  Finally.

What do you want me to say?  Gold is up (I rode it until 3 weeks ago and got out too early), silver is up, commodities are up, although overall inflation
is minimal.  Overall, that's good right?  Inflation is not an issue at this time.  Yes, the dollar has fallen compared to other currencies.  But you know all that.
We could talk about the growing vegetables (I am), riding motorcycles (I'm not) or a multitude of various subjects non having to do with the closing price of the Stock Market.

Let's look at it from the average American.  How does the dollar affect me?  Well, not much, except when I want to travel abroad or if I buy foreign goods.  However, in this international world where manufacturing is rarely done at home, prices are hard to predict.  For example, Japanese cars (the Yen is way up) are often made in American and other countries, so the price of the car has not risen that much.

If you are an American living in let's say MN, I don't think it affects you too much.  If you are an American living in MN and exporting, well a weak dollar gives you a competitive advantage.  That means more jobs in America.  That's good right?

As for food prices, I know flour is up, but is that financial markets, or simply weather or disease?  I don't know.  Or care.  Most prices are flat.

Most Americans don't know or care about the price of gold, silver or the dollar.  They just want jobs.  Americans aren't an international group; most as my father and brother do stay home and never travel abroad.  Who cares they say if the dollar is high or low?

I'm rambling.  This is not my choice of subject nor do I think it is a particularly big issue or one that most American's care about.   I don't think it's a big deal (although I like to travel) the dollar is weak.  And frankly, at this point, given our economy and theirs, I would rather buy dollars than Euro's.  I don't even understand why the Yen is so strong given Japan's debt and their economy.
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DougMacG
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« Reply #130 on: August 09, 2011, 10:53:09 AM »

"...How does the dollar affect me?  Well, not much, except when I want to travel abroad or if I buy foreign goods."

It will affect you more than you admit.
-----
"If you are an American living in MN and exporting, well a weak dollar gives you a competitive advantage.  That means more jobs in America..."

All expressed economic relationships include 'all other things equal' implied, if not spoken or written.

No measurable competitive advantage  for exporting comes from a weak dollar if we chased the last manufacturer out more than 10 years ago with a host of other anti-competitive practices, mostly taxes and regulations.  The remaining successful companies like Target and Best Buy have their products made elsewhere and make the majority of their income in other states.  Even Medtronic was attacked by the latest round of new Obamacare taxation and is tanking.
----
http://solutions.3m.com/wps/portal/3M/en_US/Renewable/Energy/Resources/Press_Releases/?PC_7_RJH9U52308NR50I0NISNKB32G3_assetId=1273681515461
3M to Expand Manufacturing in China for Solar Markets
St. Paul, Minn., Shanghai -- April 6, 2011 – 3M today announced—in conjunction with the Hefei High-tech Industrial Development Area--a plan to build a manufacturing site for photovoltaic solar materials and renewable energy products in Hefei High-tech Park...
The new plant, 3M Materials Technologies (Hefei) Co., will produce a variety of products at the new facility, including 3M Scotchshield Film, an advanced solar backside barrier film used in crystalline silicon solar photovoltaic modules. The project will be 3M’s ninth manufacturing facility in China.

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Crafty_Dog
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« Reply #131 on: August 09, 2011, 12:08:11 PM »

My intended point is the true value of the stock market e.g. if the reference point is gold, or silver, or a basket of commodities, or a basket of currencies.
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JDN
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« Reply #132 on: August 09, 2011, 01:54:20 PM »

My intended point is the true value of the stock market e.g. if the reference point is gold, or silver, or a basket of commodities, or a basket of currencies.
I don't know of anyone, (present company excepted) including the investment community who "values the stock market in reference to gold, or silver, or a basket of commodities, or a basket of currencies."  The bogey is always last year, the most recent quarter, or the competition. 

I mean have you ever heard someone say, the Swiss Exchange is down, but that's better since their currency is stable versus the Dow which is up. but the dollar is week?  Or the price of timber and corn are up, therefore the value of the Dow is intrinsically lower?   huh

Or if the dollar is strong, silver is low, I should be happy that my stocks are down 25% (they were during the Bush years). 

I suppose if you are a foreign investor, there is currency risk, just one risk among many others to consider, but you know that going in and/or you buy and manage currency futures to offset this risk.

So I guess I don't get your "intended point" about the "true value" of the stock market.
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Crafty_Dog
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« Reply #133 on: August 09, 2011, 02:31:12 PM »

"So I guess I don't get your "intended point" about the "true value" of the stock market."

This is true cheesy   
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JDN
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« Reply #134 on: August 09, 2011, 03:02:10 PM »

"So I guess I don't get your "intended point" about the "true value" of the stock market."

This is true cheesy   


As I said, check with Wall Street; I don't think anyone else gets your point either.   grin
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Crafty_Dog
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« Reply #135 on: August 12, 2011, 08:06:15 AM »

I am not a big fan of short sales, which seem to greatly exaggerate volatility, especially in conjunction with the program trading which has become such a dominating % of market transactions.  Also, I do not understand the basis for the claim to increased liquidity.


Four European Nations to Curtail Short-Selling
By LOUISE STORY and STEPHEN CASTLE
Published: August 11, 2011
 
A European market regulator announced Thursday night that short-selling of stocks in several countries would be temporarily banned in an effort to stop the tailspin in the markets.

The move may put pressure on United States market regulators to ban short sales as well. American bank stocks have been volatile all week as global investors expressed concerns that problems in Europe might cross the ocean.

The European Securities and Markets Authority, a body that coordinates the European Union’s market policies, said in a statement that short sales — negative bets on stocks — would be curtailed in France, Belgium, Italy and Spain effective Friday. There is already a temporary short-sale ban in Greece and Turkey.

“Today some authorities have decided to impose or extend existing short-selling bans in their respective countries,” the authority said. “They have done so either to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field, given the close interlinkage between some E.U. markets.”

In France, that country’s market watchdog banned short-selling or increasing short-selling positions, effective immediately, for 15 days on 11 financial institutions. They are: the April Group, Axa, BNP Paribas, CIC, CNP Assurances, Crédit Agricole, Euler Hermès, Natixis, Paris Ré, Scor and Société Générale.

Italy and Spain imposed similiar 15-day bans covering financial shares, while Belgium's was for an indefinite period, according to statements by their market regulators.

The emergency measures are raising comparisons to the financial crisis of 2008, when the United States and many other governments banned short sales on many financial stocks.

European financial regulators have been discussing a Continent-wide ban over the last few days amid fears from governments like France that the short sales were driving a panic. Financial regulators held two conference calls on Thursday to complete the declaration, according to a government official with knowledge of the talks. Britain and Germany are among the countries that did not join the ban.

In short sales, a trader sells borrowed shares in hopes that they will decline in value before he has to buy them back to close out his loan. The difference in price is his profit, or loss.

Critics say short-selling encourages speculation and pushes stock prices down, sometimes feeding on itself in a panicked market. Advocates say it provides important information about investor views on companies, and also maintains liquidity.

Financial historians warned that the bans in 2008 did not work and that such measures were often driven more by political concerns — the need to display some form of decisive action — than by proved market theories.

“The short-sale ban really smacks of desperation,” said Kenneth S. Rogoff, a professor of economics at Harvard. “That’s their plan for solving the euro debt crisis? I mean, this isn’t going to buy them much time.”

The crisis in Europe, Mr. Rogoff said, goes far beyond falling stock prices and has more to do with the state of banks there, including banks in Italy and France. He said the sovereign debt problems were an extension of the stress on the system created by the banking crisis.

The increasing number of European governments that are banning short-selling puts United States regulators in a tricky position. Investors with negative views on bank stocks who are forced to close their negative bets in Europe might shift them to American banks.

On Thursday, stocks in the United States continued their seesaw ride, surging 4 percent, buoyed by hopeful data on initial jobless claims. The cost of insurance on several United States banks like Bank of America and Citigroup has gone up this week, according to Markit, a financial data company, indicating that investors are growing more negative on these companies.

The short-selling announcement in Europe stirred some immediate criticism.

“It is a crisis of confidence, and when you do something like this, it shows a lack of confidence, which is exactly the opposite of what you want to say to the markets,” said Robert Sloan, managing partner of S3 Partners, a firm that helps hedge funds manage relationships with their brokers.

Back in 2008, European and United States officials coordinated temporary bans on shorting financial stocks.

Hedge funds, in particular, were hurt by the ban back then because it interfered with trading strategies that paired negative bets with positive ones.

It is impossible to know whether the panic of 2008 would have been worse without the ban, which protected companies like Goldman Sachs and Morgan Stanley, but general studies of short-selling have found that bans on that activity can lead to more volatility in the market and lower trading volume, according to Andrew W. Lo, a professor at the Massachusetts Institute of Technology.

Mr. Lo said that banning short-selling also removed important information about what investors thought about the financial health of companies, and suggested that the bans served mainly political purposes.

“It’s a bit like suggesting we take heart patients in the emergency room off of the heart monitor because you don’t want to make doctors and nurses anxious about the patient,” he said.

Some investors have been anticipating for months that a short-selling ban might occur and were pre-emptively getting out of their short positions, said Mr. Sloan of S3 Partners. He also said that if there were more short-sellers in the market now, the markets might be falling less than they are. That is because as markets fall, short-sellers often close their positions to cash in profits, and to do so they have to purchase shares to cash out. The markets could use these sorts of buyers now, Mr. Sloan said.

Even with the European countries’ bans on short sales of some stocks, investors who have negative opinions on companies may still find ways to bet against them in the derivatives market, if those sorts of trades remain allowed.

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DougMacG
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« Reply #136 on: August 12, 2011, 10:03:50 AM »

"I am not a big fan of short sales, which seem to greatly exaggerate volatility, especially in conjunction with the program trading which has become such a dominating % of market transactions.  Also, I do not understand the basis for the claim to increased liquidity."

Good question and you make a number of points there.  My 2 cents: Yes vehicles other than buy and hold at times may add to the volatility already in a panicked market but they do add liquidity, day in day out.  Most of today's  volatility IMO comes from the uncertainties that lie outside the market.  In a stable efficient market with companies turning in financial results on a regular basis, the short seller provides some balance and liquidity IMO.  The short seller buys and sells too, just does it in the opposite order. If Microsoft is at 25 or Google at 565 or Apple at 378 and people want to buy, someone has to sell to make that happen.  The buy and hold people don't offer you that and issuing more stock is just a dilution.  When you need to sell, someone needs to buy.  Short selling just turns things upside down.  If they want to sell first predicting a movement down, they need to buy back when they think it gets there.  A floor in a sense.  The scorched buy and hold player doesn't ever need to buy again. 

The point of program trading dominating % of market transactions is a bigger and tougher question.  Small time individuals with limited tools and knowledge playing ball with these guys better either know what they are doing or be prepared take the consequences.

Besides the school of hard knocks in stocks, a lesson came from my grandfather who said don't take on partners in business.  Think of everything that goes wrong in partnerships and that is what is happening here.  You share ownership in companies with people that have entirely different views, goals, reasons for being there and time frames.  On the way up, that can work to your benefit.  When times are tougher, they bail much faster and more decisively than you (hundredths of a second in a computer program?) and greatly damage the remaining value.

More rules on trading in this case might or might not be warranted (deck chairs on the Titanic?) but is not IMO addressing the central problems in these markets.
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prentice crawford
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« Reply #137 on: August 18, 2011, 03:28:54 PM »

Stocks get demolished
By Ken Sweet, contributing writer August 18, 2011: 4:13 PM ET
Click the chart for more market data.

NEW YORK (CNNMoney) -- Wall Street got socked on Thursday as renewed concerns about the U.S. and global economies sent major indexes plunging, pushed gold to a new high and bond yields to a record low.

Stocks were hit with bad news on multiple fronts. Morgan Stanley put out a dismal forecast for global economic growth. A key reading on U.S. housing came in worse than expected. And a report showed a significant slowdown in the domestic manufacturing sector.

70330PrintInvestors rushed to move their money into safe U.S. government bonds -- and the yield on the benchmark 10-year Treasury briefly fell below 2%.

"We had a couple days to stabilize and breathe, but you forget that it's a war zone out there and there's just too much uncertainty about the economy," said Frank Davis, director of sales and trading at LEK Securities.

At the preliminary close, the Dow Jones industrial average (INDU) dropped 418 points, or 3.7%, to close at 10,991. The blue chips fell as much as 528 points.

The S&P 500 (SPX) lost 53 points, or 4.5%, to 1,141; and the Nasdaq Composite (COMP) lost 131 points, or 5.2%, to 2,380.

At the center of Thursday's sell-off were renewed macroeconomic fears about a possibly slowing global economy.

In a gloomy report from Morgan Stanley, the investment bank slashed its global growth outlook for 2011 and 2012, adding that the U.S. and Europe are "hovering dangerously close to a recession."

"The fact that Morgan Stanley has downgraded its global growth forecast really highlights the concerns and problems facing the global economy," said Michael Hewson, market analyst at CMC Markets in London. "It begs investors to question where future growth will come from."

Trading slows afer week of market mayhem
Morgan Stanley's dire commentary was combined with four disappointing U.S. economic reports out Thursday, with investors putting a great deal of weight on the Philadelphia Federal Reserve's regional manufacturing index.

The closely watched index dropped to a reading of minus 30.7 in July, which indicates severe contraction in economic activity during the prior month. The number was far worse than expected, with economists looking for a reading of plus 0.5.

It was the worst figure for the Philly Fed since March 2009 -- when the U.S. economy was still in recession.

"The Philly Fed data was the punch in the stomach that bent this market over," Davis said.

Investors moved into traditional safe havens of U.S.-backed bonds and into gold. The price on the 10-year Treasury jumped, pushing the yield to a record low of 1.99% from 2.16% late Wednesday.

David Levy, portfolio manager with Kenjol Capital Management, call it a "panic move" into U.S. Treasuries.

Gold futures for December delivery rose $28.20 to settle at $1,822 an ounce, a new closing high (not adjusted for inflation) for the precious metal.

The VIX (VIX) -- Wall Street's so-called "fear gauge" -- jumped 35% on Thursday to a reading of 42.7. Anything above 30 is considered high fear in the market.

In other economic data, the Labor Department reported that weekly jobless claims rose by a worse-than-expected 9,000 claims to 408,000 in the week ended Aug. 13.

The National Association of Realtors said existing home sales dropped by 3.5% in July, far worse than the 2% rise that the market was looking for.

To further complicate things, the government also reported that Americans paid more for consumer goods and services in July, as inflation rose more than expected over the month.

The consumer price index, increased 0.5% in the month -- led by a 4.7% jump in gas prices from month to month. Economists expected a 0.2% rise in July, according to a survey from Briefing.com.

On Wednesday, U.S. stocks ended mixed as investors weighed the latest corporate results against global economic and debt concerns.

Euro bonds: Magic bullet for debt crisis?
World markets: European stocks plunged sharply. Britain's FTSE (FTSE) 100 fell 4.9%, the DAX (DAX) in Germany sank 6.5% and France's CAC (CAC) 40 tumbled 5.3%.

"I think we're seeing a bit of a delayed reaction to the Sarkozy and Merkel meeting earlier this week, as investors realize that policymakers are out of ideas," CMC Markets' Hewson said, noting that an unnamed bank tapped the European Central Bank's emergency liquidity fund for $500 million overnight.

Asian markets ended in the red. The Shanghai Composite fell 1.6%, the Hang Seng in Hong Kong dropped 1.3% and Japan's Nikkei shed 1.3%.

0:00 / 1:47 Bloodbath for tech stocks
Companies: Shares of Dow component Hewlett-Packard (HPQ, Fortune 500) dropped 8% after the company cut its full-year outlook and said it was looking to spin off its PC business. The company also said it was in talks to possibly purchase British software company Autonomy.

The tech giant also reported its quarterly results, posting an adjusted profit of $1.10 a share versus the $1.09 that analysts had expected.

Shares of McGraw Hill (MHP, Fortune 500) dropped 6% after a New York Times report said the Justice Department was investigating rating agency Standard & Poor's, a subsidiary, for allegedly overrating mortgage-backed securities. The mortgage securities meltdown led to the 2008 financial crisis.

The stock price for Sears Holdings (SHLD, Fortune 500) fell more than 8% after the retailer reported a disappointing quarterly loss of $1.13 per share.

Currencies and commodities: The greenback gained strength against the euro, Japanese yen and the British pound.

Oil for September delivery fell $5.20, or 6%, to $82.38 a barrel. 

First Published: August 18, 2011: 9:44 AM ET

  http://money.cnn.com/2011/08/18/markets/markets_newyork/index.htm?iid=Popular

 The way I read all of this is that a second worldwide recession is in process.                             

                                           P.C
 
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prentice crawford
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« Reply #138 on: August 18, 2011, 03:32:50 PM »

 second post

 By Hibah Yousuf @CNNMoney August 18, 2011: 9:34 AM ET
The number of first-time filers for unemployment benefits rose more than expected last week to 408,000.

NEW YORK (CNNMoney) -- The number of first-time filers for unemployment benefits rose more than expected last week and jumped back above the key 400,000 level, signaling that the job market remains stuck in the mud.

There were 408,000 initial unemployment claims filed in the week ended Aug. 13, the Labor Department said Thursday, up 9,000 from an upwardly revised 399,000 the prior week.

313PrintThe figure was higher economists' forecasts for 400,000, according to consensus estimates from Briefing.com.

Initial claims have sat above 400,000 for the last 18 out of 19 weeks. The trend began at the start of April, when high oil prices, bad weather and Japan's tsunami were weighing on businesses.

Claims barely broke below that level for the first time earlier this month, a welcome sign amid increasing concerns about an economic slowdown, only to jump right back in the latest week.

While the drop below 400,000 was a positive sign, Wells Fargo economic analyst Tim Quinlan said it is still encouraging to see that claims didn't swing too far above the significant mark in the latest week.

Still, for sustainable job growth and a lower unemployment rate, Quinlan said claims to need break into the 300,000 level and hold there consistently.

Quinlan said he expects claims could experience a drop-off soon, especially as car manufacturers return from their seasonal summer shutdown periods.

Because of the the supply disruptions resulting from the earthquake in Japan, Quinlan said most auto factories started their retooling shutdowns earlier in the year, and should be back online sooner than normal.

Overall, the four-week moving average of initial claims -- calculated to smooth out volatility -- fell by 3,500 to 402,500 in the latest week.

 http://money.cnn.com/2011/08/18/news/econmy/unemployment_benefits/index.htm

                                                 P.C.
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Crafty_Dog
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« Reply #139 on: August 22, 2011, 08:51:06 AM »


By MATT PHILLIPS
Federal Reserve Chairman Ben Bernanke has put the financial world on notice: Brace for two more years of rock-bottom interest rates.

That is great news for borrowers, but it promises rough going for anyone seeking returns from fixed-income investments—from retirees to giant pension funds to companies sitting on record amounts of cash.

It has been almost three years since the Fed cut its key rate to almost zero, and on Aug. 9, the central bank said rates are likely to remain there until at least mid-2013. Rates for everything from Treasury bills to money-market funds are near zero. The yield on the 10-year note briefly slid below 2% last week, a level last seen in April 1950.

\Central banks traditionally use low rates to prompt more borrowing and nudge investors to seek higher returns in riskier assets like stocks, thereby boosting the broader economy.

But the benefits may not flow so easily. Consumers are showing few signs of wanting to borrow, bank and insurer profits are likely to suffer, and, with the stock market sliding, pension and other investment funds face years of low returns.

Some analysts worry the U.S. may be in for a Japan-like scenario of years of low rates, sluggish growth, and poor returns.

View Interactive
."If you do Depression-type studies, then you've seen this pattern before—or Japan," says Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch. "Both comparisons are not great."

Consumers
For consumers, low rates mean cheap loans for everything from a new home to a new car. But with millions of people nearing the end of their working lives, low rates also portend meager returns on fixed-income investments. With the stock market well below its 2007 highs, that could be particularly painful.

"The retiree who doesn't have any debt, but relies on interest income to supplement their Social Security check, they're really feeling the squeeze from lower interest rates," says Greg McBride, senior financial analyst at personal finance website Bankrate.com.

Yields on savings vehicles such as certificates of deposit, or CDs, have fallen sharply. In 2006, the average one-year CD yielded roughly 3.78%, according to Bankrate.com. As of last week, that was down to 0.42%. Average seven-day yields on the more than $2.5 trillion in assets in money-market mutual funds are near zero, at 0.01%, according to data provider iMoneyNet. In 2007 they hovered above 4.5%.

On the flipside, mortgage rates have tumbled sharply. On Friday, Freddie Mac reported mortgage rates hit their lowest level in more than 50 years, with the average 30-year fixed-rate mortgage at 4.15%.

Banks
One of the most basic ways banks make money is by borrowing at low short-term interest rates and lending at higher long-term rates.

While short-term rates have little room to fall, longer-term rates have been in decline.

Banks try to cope by cutting what they pay depositors, but that often isn't enough. One measure showing the pressure is banks' yield on assets, which fell to 4.41% for banks with assets of more than $1 billion in the first quarter, the lowest in at least six years, according to the Federal Deposit Insurance Corp. Exacerbating the problem, demand for loans is low, and customers are still pouring in savings.

Zions Bancorporation of Salt Lake City is cutting rates by as much as two-thirds on certificates of deposit as they mature, in an effort to keep costs down while loan demand is weak.

In Ann Arbor, Mich., small mortgage lender University Bank has few takers for loans. "My customers aren't borrowing, because they are worried about the future," says Stephen Lange Ranzini, the bank's chief.

On the upside: Banks are sitting on $19 billion of unrealized gains, mainly on Treasurys and other bonds that rallied amid the economic uncertainty, according to Nomura Equity Research. But generally, the negatives outweigh the positives.

"The risk is that low interest rates will eat into profits for years," says Craig Siegenthaler, an analyst at Credit Suisse.

Companies
Low rates are a mixed blessing for corporations, which have been raising billions in the bond market at sometimes record-low rates. But companies including Apple Inc. and Google Inc. are also sitting on record amounts of cash. According to Standard & Poor's, the top 500 U.S. companies by market capitalization had almost $1 trillion in cash and cash equivalents at the end of the first quarter. Low rates mean they are earning remarkably little on that hoard.

Data-storage company Equinix Inc. keeps the majority of its $1.2 billion in cash in Treasurys, but the Redwood, Calif.-based company is getting a tiny return of 0.10%, says Chief Financial Officer Keith Taylor. In some cases, it is a negative rate after fees, he says.

In late July, Mr. Taylor began moving cash to higher-yielding assets such as commercial paper, where the company receives about 2%, he says. He is also looking at moving funds into the debt of countries like Canada.

Others are moving to take advantage of low borrowing costs. At Utah-based self-storage company Extra Space Storage, finance chief Kent Christensen's team is working to lock in the lowest interest rates he has seen in years.

Mr. Christensen says the sudden drop in interest rates has emboldened the company to quickly refinance the debt on some of its 820 storage facilities, which could save $2 million to $4 million this year.

"We have more interest and debt than we did three years ago, but we're actually paying a lower amount of interest costs than we were," he says.

Institutional Investors
Pension funds and insurance companies are among the biggest owners of bonds in the U.S., and they face serious headaches as they cut checks to retirees or pay claims to policyholders.

For many pension funds, low yields are one half of what Goldman Sachs analysts call a "double whammy" with lower stock prices. Goldman estimates that the aggregate funded status—a measure of plan assets as a share of estimated obligations—of U.S. corporate-pension plans in the Standard & Poor's 500-stock index was down to about 75% as of mid-August, from 85% at the beginning of 2011.

State pensions face a similar squeeze. The plans are shooting for a return of 8%, the median assumption of 126 plans, the National Association of State Retirement Administrators says on its website. That would be a challenge at the best of times.

Insurers are sensitive to interest rates because premiums that pour in from policyholders are mostly invested in bonds. Some insurers, like MetLife Inc., have hedging programs to help manage the situation, according to Barclays Capital. Still, "low interest rates are pressure points" across the industry, says UBS Securities insurance analyst Andrew Kligerman.

Insurers are likely to raise prices to make up for some of the lost income, though those in highly competitive parts of the property-casualty industry will find it tough to do so, analysts say. As rates have fallen over the past couple of years, some life insurers already have redesigned and repriced products, offering less-generous benefits, and some have exited product lines entirely.

The problem is worrisome enough for Moody's Investors Service to release a report Friday warning that ultralow rates for five or more years would subject some life insurers "to substantial losses that could result in downgrades, some multi-notch."

—Suzanne Kapner, Leslie Scism, Emily Chasan and Dana Mattoli contributed to this article.
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DougMacG
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« Reply #140 on: August 22, 2011, 10:09:04 AM »

Yes, but someone living very modestly later in life on the meager interest from their accumulated savings over their lifetime, as well as someone earlier in life trying to tuck away a little from each paycheck to be self-secure in the future... these are just more examples of unprotected classes called the hated-rich who need to eat their peas, while we more importantly need to monetize trillions to fund government dependency programs.

The lesson my grandfather took the time to spell out for me with written examples of the magic of compounding interest if you save and invest does not work with a savings interest rates at 0.2% and a human life expectancy of under 10,000 years.

A google search of "republican proposal to end dual mission of the fed" took me only to stories from Nov. 2010.  sad
http://www.nytimes.com/2010/11/17/business/economy/17fed.html

The cause of our current stagnation and unemployment is not a shortage of money and the cure is not to print, ease or devalue our currency.
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Crafty_Dog
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« Reply #141 on: August 29, 2011, 03:41:06 PM »

Monday Morning Outlook

--------------------------------------------------------------------------------
Stocks Undervalued by 65% To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 8/29/2011


Market turmoil and a cycle of shrill headlines and worrisome “breaking news” convinced many to evacuate the equity markets. That was a mistake. The odds of recession are low, but the stock market seems to have priced one in, anyway.

We use a capitalized profits model to value stocks, dividing corporate profits by the 10-year Treasury yield. We compare the current level of this index to that from each quarter for the past 60 years to estimate an average fair-value. Not only are 10-year yields low (2.2%), but corporate profits are growing strongly. As a result, and hold onto your hats, this top down model says that the fair-value for the Dow is currently 40,000.

However, we think the Treasury market is in a bubble. So, instead of a 2.2% yield, we use a more conservative discount rate of 5% for the 10-year Treasury. This generates a “fair value” of 18,500 on the Dow and 1,940 for the S&P 500. In other words, the US equity markets are currently undervalued by about 65%.

Obviously, there are many moving parts to this model. Interest rates could go higher than 5%, profits could fall or both could happen. Profits, for example, are now 12.9% of GDP, the highest in measured history (back to 1947) except for one quarter in 1950.

So what does our model say if profits revert to the historical mean of about 9.5% of GDP? Even in that scenario, and assuming a 5% yield on the 10-year Treasury, equities are about 21% undervalued, with fair value at 1430 for the S&P 500 and 13,700 for the Dow.

 The problem with this scenario is that it takes the worst of both worlds: a major decline in profits and a surge in interest rates. In the real world, a large decline in profits would normally be accompanied by a drop in bond yields. In other words, our model says the risk of investing in equities today is very low.

This is the opposite of what was happening back in 1999/2000. Back then, the market was over-valued and an ounce of gold traded for roughly 4 shares of Intel (INTC). Today it is trading for about 75 shares. Stocks look cheap and we think fears about the economy are overblown.

Yes, it would be good to trade the ups and downs of this market, but we don’t know anyone who can do that consistently. Rather, we focus on valuation, risk and reward. And right now, we believe the reward outweighs the risk by more than many people seem to believe. Fear will not disappear overnight, but the model says it is overblown and stocks are extremely attractive.
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Crafty_Dog
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« Reply #142 on: August 31, 2011, 07:55:21 AM »

No mention here of the unusually low margin rates , , ,
===================

By IANTHE JEANNE DUGAN And LIAM PLEVIN
A battle is heating up over whether investors in oil and other commodities markets should be required to lift the veil of secrecy that shrouds their trading bets.

The debate has simmered in the three years since oil prices spiked to record highs in 2008, sparking concerns that speculators were driving the move. But it intensified in recent weeks after The Wall Street Journal published confidential regulatory data that identified some of the biggest players in commodities markets, and big chunks of their positions, during that historic rally.

Unlike the stock market, there are no rules mandating public disclosure of commodities positions held by investors.

Industry groups representing traders in the market have opposed releasing any data that would expose the identities and positions of any firm or individual in the commodities markets because they say it would unfairly give away their trading strategies. They have called for a probe into how the information became public.

Others have seized on the data to push for more transparency, including the release of such information on a regular basis.

Tyson Slocum, a member of an advisory committee to the Commodities Futures Trading Commission and director of the energy group at advocacy organization Public Citizen, is leading a push to force commodities investors to publicly disclose the size and nature of their trading positions.

View Full Image

TKence France-Presse/Getty Images
 
The debate over the role of investors exploded again this year when oil once again topped $100 a barrel and the Obama administration in April launched an inquiry into oil-market speculation. Above, oil pumps in operation near central Los Angeles, Calif, in June.
.On Wednesday, Mr. Slocum plans to release a letter to members of Congress, as well as CFTC commissioners, seeking regular disclosure of data.

"We feel that regular disclosure of this level of data serves a crucial role in keeping markets transparent and providing critical information to decision makers and the public," Mr. Slocum said.

His group is pressing the CFTC and lawmakers to make this kind of disclosure mandatory, similar to how the Federal Reserve releases minutes of meetings within a certain time period.

Chilling Effect
Many people who buy and sell securities tied to oil, however, say that releasing the data could be harmful to their trading strategies and could prompt some to reduce their activity, having a potentially chilling effect on the market.

The Futures Industry Association has said that the release of the 2008 data "poses a serious threat" to the confidence of those in the market, who believed they were reporting their positions to regulators privately. The association said it will ask the CFTC to investigate whether any of its rules governing the handling of confidential data have been violated.

A CFTC spokesman declined to comment.

The CFTC collected the data during a "special call" in 2008, when it was attempting to figure out what was causing swings in the price of securities tied to oil. It used the data as the basis for a controversial report that concluded that supply and demand was behind the gyrations, not investors who neither produce nor consume oil on a large scale—a group critics call "speculators."

Rare View
The list contained more than 200 firms and traders, ranging from Goldman Sachs Group Inc. to Yale University to a Danish pension fund, giving a rare view into the murky world of commodities trading.

Sen. Bernie Sanders (I-Vt.), who has distributed the CFTC information, is among lawmakers pushing regulators to limit investments in oil securities by speculators.

Keeping the names private, some argue, leaves the public at a disadvantage.

Amy Myers-Jaffe, a Rice University professor who co-wrote a report questioning the CFTC's methodology for weighing the impact of speculators, said the names of commodity investors should be made public information. "The only people who don't know who's in the commodities market is the public," Ms. Myers-Jaffe said. "I wouldn't hold my deposit in a bank with a giant position in the oil market. It could change on a dime with a shift in geopolitical position," she added

The debate over the role of investors exploded again this year when oil once again topped $100 a barrel and the Obama administration in April launched an inquiry into oil-market speculation.

Oil prices have since fallen again, and settled Tuesday up 1.9%, at $88.90 a barrel. But prices remain a concern for policy makers focused on how to stimulate economic growth, because of they can act as a drag on economic activity.

Write to Ianthe Jeanne Dugan at ianthe.dugan@wsj.com and Liam Plevin at liam.plevin@wsj.com

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Crafty_Dog
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« Reply #143 on: September 01, 2011, 08:30:05 AM »

http://finance.townhall.com/columnists/larrykudlow/2011/09/01/interview_with_pimcos_bill_gross
I had the pleasure of speaking with Pimco's Bill Gross, one of America’s most famed investors, on CNBC’s Kudlow Report. Mr. Gross has generated big buzz over his admission that betting against U.S. debt was a mistake.

LARRY KUDLOW, host:

And most important, at the top, PIMCO's Bill Gross, one of America's most
famous and successful investors. He's generating big buzz today with his
superimportant and much talked about interview in The Wall Street Journal and
elsewhere. Mr. Gross says he has, quote, "lost sleep," end quote, over a bad
bet on Treasury rates. He acknowledged that selling all his funds, Treasury
holdings last February was a, quote, "mistake." And he went on to say, and I
quote, "We try to be very intellectually honest and honest with the public,"
end quote.

All right, for my part, I just want to say to my old friend Bill Gross that I
have nothing but admiration for his taking ownership and admitting a mistake.
We all make them. And by the way, he's setting a very good example for the
rest of us. That's just my take.

Anyway, it is always a real pleasure, especially tonight, to welcome back to
the show a special Kudlow exclusive, Bill Gross. He's founder and co-chief
investment officer of PIMCO.

All right, Bill. You admit to a big Treasury bond miss. Rates this year went
way down, not up. Can you tell us, please, why the interviews right now and
what message are you sending?

Mr. BILL GROSS: Well, I, you know, I think at PIMCO we always try and be
open with the press and the public. I mean, isn't that what voters want from
their politicians? Mohamed El-Erian, our CEO, write several op-eds a week. I
tweet daily and publish a monthly investment outlook, which came out this
morning, by the way. So we try to give an honest answer to an honest
question.

And by the way, in terms of the interview with the Journal and with the FT,
what I said was that--something that I think all bond and--bond managers would
say if they were honest. They would say, `Wish I'd own more Treasuries.' To
say otherwise would be to say something like you'd wished you bet on the Miami
Heat instead of the Dallas Mavericks. I mean, it's obvious who won, right?

KUDLOW: Obviously wrong. All right, well, anyway, you're very outspoken and
I respect you for it.

Listen, you were here--I looked back--June 8th we spoke. So what's that?
Three months ago. At that point, Bill, you repeated the call to get out of
bonds. Now the bonds rally more or less from 3 percent to 2 percent, today
they're at 2.20. What went wrong? How do you assess what went wrong with
your bond call?

Mr. GROSS: Well, first of all, I didn't say get out of bonds. I said get
out of Treasuries and move...

KUDLOW: Treasuries.

Mr. GROSS: ...and move into Canadian bonds and to Australian bonds and other
alternatives. What went wrong in terms of the Treasury call from 3 percent
down to close to 2 percent? Well, the economy slowed down dramatically. We
had a freeze-up, so to speak, in terms of Washington with the politicians and
policy options. It was recognized that fiscal stimulation, you know,
certainly wasn't going to be something undertaken for the next six to 12
months, if at all. It was recognized that the Fed was running out of policy
options and so the economy was slowing down and was--seemed to be slowing
almost permanently in terms of a 0 to 2 percent growth category.

KUDLOW: Have you basically lost confidence in the economy? You mention, I
think, in the FT article, Bill, you call it, quote, "a new normal minus." Have
you lost all confidence in our capacity to grow the economy?

Mr. GROSS: Well, no. You know, but the problem I have with the free market
capitalism, Larry, which is your philosophy, is not with the concept. In
fact, you know, PIMCO is an epitome of its historical thrust. We're very
successful and because of free market capitalism. But the problem I have is
with its apparent exhaustion in the face of three equally dynamic economic
influences. Let me mention them briefly.

First of all globalization has weakened American and developed economies by
syphoning off investment and, more importantly, jobs to emerging nations at
1/10th the wage cost. Take China, for example, Free market capitalism, in
other words, is working for China, it's working for Brazil, but it's not
working for America or Euroland.

Secondly and just briefly, free market capitalism depends on a balanced market
between labor and capital. And clearly we're reaching a point where
impoverished Main Street cannot afford to buy the goods that capitalism so
magnificently produces. So I think there's an exhaustion here in terms of
free market capitalism that has worked so well for 20 to 30 to 40, 50 years,
but now is reaching structural impediments that prevent, you know, strong
growth that we're used to.

KUDLOW: I want to come back to that towards the back end, Bill, but I just
want to narrow down for a moment. I want to drill down. According to the
reports, you are buying Treasuries. You're accumulating Treasuries. You have
a net positive exposure for the first time. Let me ask you, what if the
bond--the Treasury market has discounted a recession that doesn't happen? Are
you chasing the market? Is there a risk that the rate hikes that you foresaw
this year might still come to pass if the economy surprises on the upside?

Mr. GROSS: Well, that's possible. We read in the Fed minutes today of the
last meeting that the--that the two-year 0 percent or 25 basis point Fed funds
level is conditional, and we know that there are hawks, that there are doves,
and that should the economy recover to a 2 to 3 to 4 percent rate, that, you
know, perhaps inflation looms larger in terms of a threat. So anything is
possible. What I would say at the moment, though, is since the economy is
really moving closer to the zero level, since inflation probably will come
down gradually, you know, the Fed is at 0 percent for the next two years and
perhaps even longer than that, and that determines significantly the level of
Treasury rates in five-year space, 10-year space and even 30-year space.

KUDLOW: But, you know, it's interesting. We had Byron Wein on, a
distinguished investment guru on his own part. He predicted the S&P would
rally to 1400. OK? It's just over 1200 today, as you know, If that sort of
thing happened with better corporate profits, even consumer sentiment, which
tanked today but people are still buying washing machines and cars, retail
sales are holding up. If you had a big rally in stocks, the risk trade is
back on. That'll come out of Treasury bonds, and those could--that could
drive those bond rates back to 3 percent. You're buying bonds now. Are you
worried that there's a potential for whiplash?

Mr. GROSS: Well, I'm suggesting that the probability--that the high
probability is for interest rates to stay low for a long time. I mean, Byron
Wein basically is a a mean reversion cyclical type of--type of analyst. What
we're suggesting is that there are structural impediments to the US economy to
develop market economies that will prevent growth in the 3 to 4 percent
category.

Let me ask you, in terms of consumerism, in terms of the US consumer, if
unemployment stays at 9 percent plus and if wage gains--if real wage gains are
nonexistent, then were is the spending power coming from? It has to come from
the consumer as opposed to businesses. Businesses are waiting on the
consumer. The consumer is waiting on business. We have what we call a
liquidity trap. So what we're suggesting is not a reversion to the mean, not
a cyclical upthrust, but basically a structural impediment that produces
growth in the 0 to 2 percent category for a long time. Not just in the US,
but in Euroland, as well.

KUDLOW: All right. So let me--have you had any trouble with your fund--I
guess the Total Return Fund, because of the bond miss this year, rates went
down instead of up? Have people withdrawn from the fund? What are your
customers saying right now?

Mr. GROSS: We have a $245 billion customer base. You know, that customer
base is growing. We just got a billion dollar contribution from a large
corporation this week. There's been no lack of confidence. You know, to
suggest that a six to seven month timeframe for the PIMCO Total Return Fund,
which has produced results for the last 20, 30 or 35 years, is, you know, a
stretch of the imagination. We continue to produce fine results for our
clients.

KUDLOW: Oh, that's what everybody says. That's--everybody I talked to today
on this story said exactly what you said. Your record down through the years
has been superb.

Let me ask you this, are you still buying some corporate bonds and are you
still buying foreign bonds? You talked to me about that when you last
visited.

Mr. GROSS: Well, corporate bonds of the highest quality, yes. And that
would be A and AA-types of corporates, not high-yield bonds because they don't
do well, you know, if we near the recessionary level of 0 percent. In terms
of foreign bonds, let me just cite the comparison: a five-year Treasury in
the United States at 1 percent, actually little bit less; in Canada 1.7
percent; in Euroland 2.1 percent; in Mexico 5.4 percent; in Brazil 11 percent.
And these are countries, by the way, Larry, which have what we call clean or
dirty shirts. Mexico has half the debt of the United States. Brazil has half
the debt of the United States and has treasury reserves as opposed to
deficits. And so these are countries with higher yields and better balance
sheets.

KUDLOW: All right, last one. I'm going to come back to where you were on the
breakdown of free market capitalism, which is fair enough. I would
acknowledge that America's economy has been on the decline now for about 10
years. But I ask you, Bill, everybody is so profitable. Businesses are so
profitable, so much cash. Banks have more liquidity than they know what to do
with. Is it possible there's a buyer's strike, that there's a capital strike,
that the spending and taxing and regulatory threats out of Washington are
really the problem, not the free market capitalist system?

Mr. GROSS: Well, I'd have to say that that doesn't help. I mean, let's come
together on that point that regulation and too much of it--that taxation in
terms of the necessary reforms that probably lie ahead, you know, don't help
either in terms of the current economic environment. What I would say in
terms of corporate tax reform is, yes, let's reform taxes, let's reform
corporate taxes and let's reform individual taxes. But at the same token,
let's not lower them, because corporate taxes are 10 percent of total federal
revenues. They're at an all-time low, Larry. And to suggest that
corporations are the poor baby in this particular story, I think, is an
absurdity.

KUDLOW: All right. I'm going to leave that for the next discussion we have.
We have much more to discuss on corporate tax reform. But, Bill Gross, thank
you for your honesty. Thank you for your forthrightness.

Mr. GROSS: Thank you, Larry.

KUDLOW: And thanks for coming on tonight. I appreciate it.

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Crafty_Dog
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« Reply #144 on: September 01, 2011, 11:16:39 AM »

Second post of the day

Nonfarm productivity (output per hour) declined at a 0.7% annual rate in Q2 To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 9/1/2011


Nonfarm productivity (output per hour) declined at a 0.7% annual rate in the second quarter, revised down from last month’s estimate of -0.3%. Nonfarm productivity is up 0.7% versus last year.

Real (inflation-adjusted) compensation per hour in the nonfarm sector declined at a 1.4% annual rate in Q2 and is down 0.7% versus last year. Unit labor costs rose at a 3.3% rate in Q2 and are up 1.9% versus a year ago.
 
In the manufacturing sector, the Q2 growth rate for productivity (-1.5%) was lower than among nonfarm businesses as a whole. The faster pace of decline in productivity was mostly due to faster growth in the number of hours worked. Real compensation per hour was down in the manufacturing sector (-0.9%), but, due to a decline in productivity and higher nominal earnings per hour, unit labor costs rose at a 4.6% annual rate.
 
Implications:  Productivity was revised down slightly for the second quarter, consistent with last week’s downward revisions for real GDP growth. Less output and the same number of hours worked means less output per hour.   Productivity is up only 0.7% in the past year, but was up 4.4% in the year ending in mid-2010. This is typical of economic recoveries, where productivity surges at the very beginning of the recovery and then temporarily slows down as hours worked increase more sharply. The growth rate of productivity over the past two years has been 2.6% annualized, slightly faster than the average 2.3% pace in the past 10 years and the past 20 years. In other news this morning, new claims for initial unemployment benefits declined 12,000 last week to 409,000.  Continuing claims for regular state benefits declined 18,000 to 3.74 million.  However, continuing claims in the prior week were revised up by 112,000.  This is the same week when the Labor Department did its monthly payroll survey.  As a result, we are revising down our forecast for private sector payroll growth in August to 105,000.  This is still quite respectable given a Verizon strike that temporarily took 46,000 workers off payrolls.  In other recent news, the ADP national employment report, a measure of private sector payrolls, increased 91,000 in August.

================



The ISM manufacturing index declined slightly to 50.6 in August from 50.9 in July, coming in well above the consensus expected 48.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)

The major measures of activity were mixed in August. The supplier deliveries index rose to 50.6 from 50.4 and the new orders index increased to 49.6 from 49.2.  The production index fell to 48.6 from 52.3 and the employment index fell to 51.8 from 53.5.
 
The prices paid index declined to 55.5 in August from 59.0 in July.
 
Implications: Despite a small decline, the ISM manufacturing index easily beat consensus expectations for August and came in above 50, signaling continued growth. The report severely undermines the view held by some that we are in a double-dip recession. Regional surveys of manufacturing, such as the Philadelphia Fed index and Empire State index, have been beaten down lately by (misleading) headlines about a potential default on US Treasury securities, financial turmoil in Europe, and large swings in the stock market. As a result, expectations were for a soft ISM report. That would have been understandable given how these surveys sometimes reflect sentiment rather than actual levels of business activity. And yet the ISM held relatively firm. The manufacturing index has now shown growth for 25 consecutive months, and correlates with 2.8% real growth according to officials at the ISM. In other news this morning, construction declined 1.3% in July.  However, including huge upward revisions to prior months, construction was up 2.2%.  The upward revisions were due to both home building and commercial construction.  The decline in July was led by fewer home improvements and less construction of public schools. In other recent news, the Case-Shiller index, a measure of home prices in the 20 largest metro areas around the country, declined 0.1% in June (seasonally-adjusted) and is down 4.5% versus a year ago.
« Last Edit: September 01, 2011, 12:07:18 PM by Crafty_Dog » Logged
Crafty_Dog
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« Reply #145 on: September 02, 2011, 12:30:34 PM »

First Wesbury

Non-farm payrolls were unchanged in August To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 9/2/2011


Non-farm payrolls were unchanged in August but down 58,000 including revisions to June/July. The consensus expected a gain of 68,000.

Private sector payrolls increased 17,000 in August.  Revisions to June/July subtracted 3,000, bringing the net gain to 14,000.  August gains were led by health care (+29,700) and professional & business services (+28,000). The biggest decline was in telecommunications (-47,300), due to the Verizon strike.

The unemployment rate remained unchanged at 9.1% in August (9.094% unrounded) from 9.1% in July (9.092% unrounded).
 
Average weekly earnings – cash earnings, excluding benefits – fell 0.4% in August but are up 1.9% versus a year ago.
 
Implications:  The employment report for August was ugly but does not indicate a recession. Private-sector payrolls increased only 14,000 including revisions to June and July and wages fell. Average hourly earnings declined 0.1% and the length of the workweek dipped by 0.1 to 34.2 hours. Controlling for a Verizon strike, now over, that temporarily sidelined 46,000 workers, private payrolls would have been up 60,000 including revisions.   We think August’s weakness was largely due to financial turmoil in Europe and large swings in the stock market.  This has brought much uncertainty to the hiring arena.  In the past year private sector payrolls have still increased 142,000 per month, and this trend will accelerate in the second half of the year as the economy continues to recover, and businesses realize a “double dip” is not going to happen.  The biggest positive news in today’s report was that civilian employment, an alternative measure of jobs that includes start ups, increased 331,000 in August. In other recent news, despite Hurricane Irene, same-store chain store sales were up 4.6% in August compared to a year ago, no different than in July and much better than if the US were entering  recession. Also, autos and light trucks were sold at a 12.1 million annual rate in August, as the consensus expected, down 0.8% from July but up 5% versus a year ago.
========
Now Beck: 

http://www.theblaze.com/stories/august-jobs-report-released-no-jobs-added/
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ccp
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« Reply #146 on: September 02, 2011, 01:06:13 PM »

Crafty,

I don't follow Wesbury but every time I read his analyses they always seem the same.  I think GM alluded to this as well:

Despite any bad news there is really good news.

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Crafty_Dog
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« Reply #147 on: September 02, 2011, 01:10:10 PM »

Agreed, but I continue to post them because:

a) he is a good economist with a very good track record
b) we here tend strongly to the bear camp and we need to hear the bull case
c) contraryianism is often a good way to bet-- "buy when the streets are running red" etc.

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prentice crawford
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« Reply #148 on: September 05, 2011, 02:11:45 AM »

  Dismal jobs data shakes Asian markets
By CHRISTOPHER LEONARD - AP Business Writers,PAUL WISEMAN -     WASHINGTON (AP) — The dismal U.S. job market, which has intensified fears of another recession, may be even worse than the unemployment numbers suggest.

The shockwaves from the Labor Department report on Friday that employers stopped hiring in August have rippled around the world, sparking a steep retreat in Asian stock markets. The lack of hiring in the U.S. last month surprised investors — economists were expecting 93,000 jobs to be added. Previously reported hiring figures for June and July were revised lower.

The jobs picture may even be worse than the 9.1 percent unemployment rate suggests, because America's 14 million unemployed must also compete with 8.8 million other people not counted as unemployed — part-timers who want full-time work.

When consumer demand picks up, companies will likely boost the hours of their part-timers before they add jobs, economists say. It means they have room to expand without hiring.

Fears that the U.S. economy may be stuck in neutral, or worse, slammed Asian stocks. Japan's benchmark Nikkei 225 index fell 2 percent in midday trading to 8,771.90. Hong Kong's Hang Seng was 2.2 percent lower at 19,775.01 and South Korea's Kospi Composite Index tumbled 4 percent to 1,793.13.

"The problem is that there simply hasn't been any meaningful jobs growth, which is precisely why markets are so worried about slipping back into recession," said Ben Potter of IG Markets in Melbourne, Australia.

"The authorities have thrown a lot of stimulus at the problem and to date, it's basically done nothing," Potter said. Markets are realizing "that there probably isn't a lot more authorities can do."

The unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren't counted as unemployed because they've stopped looking for work. Once they start looking again, they'll be classified as unemployed. And the unemployment rate could rise.

Intensified competition for jobs means unemployment could exceed its historic norm of 5 percent to 6 percent for several more years. The nonpartisan Congressional Budget Office expects the rate to exceed 8 percent until 2014. The White House predicts it will average 9 percent next year, when President Barack Obama runs for re-election.

The jobs crisis has led Obama to schedule a major speech Thursday night to propose steps to stimulate hiring. Republican presidential candidates will likely confront the issue in a debate the night before.

The back-to-back events will come days after the government said employers added zero net jobs in August. The monthly jobs report, arriving three days before Labor Day, was the weakest since September 2010. Reaction from U.S. markets won't be evident until Tuesday, when trading resumes after the holiday.

Combined, the 14 million officially unemployed; the "underemployed" part-timers who want full-time work; and "discouraged" people who have stopped looking make up 16.2 percent of working-age Americans.

The Labor Department compiles the figure to assess how many people want full-time work and can't find it — a number the unemployment rate alone doesn't capture.

In a healthy economy, this broader measure of unemployment stays below 10 percent. Since the Great Recession officially ended more than two years ago, the rate has been 15 percent or more.

The proportion of the work force made up of the frustrated part-timers has risen faster than unemployment has since the recession began in December 2007.

That's because many companies slashed workers' hours after the recession hit. If they restored all those lost hours to their existing staff, they'd add enough hours to equal about 950,000 full-time jobs, according to calculations by Heidi Shierholz, an economist at the Economic Policy Institute.

That's without having to hire a single employee.

No one expects every company to delay hiring until every part-timer is working full time. But economists expect job growth to stay weak for two or three more years in part because of how many frustrated part-timers want to work full time.

And because employers are still reluctant to increase hours for part-timers, "hiring is really a long way off," says Christine Riordan, a policy analyst at the National Employment Law Project. In August, employees of private companies worked fewer hours than in July.

Some groups are disproportionately represented among the broader category of unemployment that includes underemployed and discouraged workers. More than 26 percent of African Americans, for example, and nearly 22 percent of Hispanics are in this category. The figure for whites is less than 15 percent. Women are more likely than men to be in this group.

Among the Americans frustrated with part-time work is Ryan McGrath, 26. In October, he returned from managing a hotel project in Uruguay. He's been unable to find full-time work. So he's been freelancing as a website designer for small businesses in the Chicago area.

Some weeks he's busy and making money. Other times he struggles. He's living at home, and sometimes he has to borrow $50 from his father to pay bills. He's applied for "a million jobs."

"You go to all these interviews for entry-level positions, and you lose out every time," he says.

Nationally, 4.5 unemployed people, on average, are competing for each job opening. In a healthy economy, the average is about two per opening.

If work-force dropouts had been counted as unemployed, August's unemployment rate would have been 10.6 percent instead of 9.1 percent.

The Labor Department's report relies on data collected from surveys of households and businesses in the second week of August. That's right after Standard & Poor's removed the country's AAA credit rating and fears mounted that Europe's banking crisis could spread to the U.S. Television screens were filled with images of riots in London.

"I'm not surprised that businesses weren't doing too much hiring in that environment," Jeff Kleintop, chief market strategist at LPL Financial.

___

AP Business Writer Pamela Sampson contributed from Bangkok.

                                P.C.
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G M
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« Reply #149 on: September 06, 2011, 08:03:24 AM »

http://www.powerlineblog.com/archives/2011/09/world-ends-today-markets-to-close-early.php

Posted on September 6, 2011 by Steven Hayward

World Ends Today; Markets to Close Early?


The news out of Europe yesterday and this morning somehow puts me in mind of the long opening sequence in the John Landis feature film rendering of The Twilight Zone, in which Dan Ackroyd says to Albert Brooks, “You want to see something really scary?”

Are you ready?

The head of Deutsche Bank yesterday said that “It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels.”

Oh goody.

And then our friends at ZeroHedge point out an even gloomier assessment out today from UBS predicting possible end-of-days kinds of stuff from the prospective collapse of the Euro:


The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.

And that’s just in the first-page summary. Inside the main text are some wonderfully droll bits like this: “Economic modelling is not good at dealing with something as extreme as the break-up of a monetary event.  It is not really what models are designed for.”

Can’t wait for Obama’s blockbuster jobs speech on Thursday.  And why is Hillary still not answering her phone?
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