Why Does The Stockmarket Keep Going Up ?

[anabolicrhino]

Dow climbs over 280 points to end at record high in N.Y.+

Does it bother anyone else that the stockmarket keeps going up without any economic factor that might justify trader confidence???

The only factor i see is that the US national debit was cut in half
since 2004 but...

 

[Dwight Schrute]

Retail figures were up.



NEW YORK — Wall Street soared Thursday, propelling the Standard & Poor's 500 index and Dow Jones industrials to record highs as bright spots among generally sluggish retail sales allowed investors to toss aside concerns about the health of the economy.

The rally, which included the Dow's biggest one-day gain since March 2003, was perhaps surprising given the fact that there was no extraordinary announcent or other catalyst usually seen with such a huge gain, and that it came before most companies have announced their second-quarter earnings. The rise also marked a sharp contrast to the start of the week, when stocks fell sharply amid concerns that some hedge funds could buckle under ill-placed bets on the housing sector.

But investors, heartened by signs of a happy and spending consumer, clearly decided to put some bets on the table. Though retail sales generally appeared to be crimped last month by higher gasoline prices and a tepid housing market, and the outlook for the coming months was difficult to ascertain, the overall reading wasn't as dour as some investors expected.

Several reports beat Street expectations -- notably that of Wal-Mart Stores Inc. (WMT), the world's largest retailer, which posted a better-than-expected 2.4 percent jump in sales at stores open at least a year.


"It's relief that things weren't as bad as people expected," said Bill Schultz, chief investment officer at McQueen, Ball & Associates, referring to the retailers' reports and the economy at large. "We're maybe getting slower growth but not the fall-of-the-cliff economic scenarios," he said of investors' reading of the economy.

But, Schultz said, "I think it is, over the near-term, a little bit over done, certainly on a two-day basis," he added, referring to the rally.

According to preliminary calculations, the S&P 500 rose 28.94, or 1.91 percent, to 1,547.70, above its record close of 1,539.18, set June 4.

The Dow shot up 283.86, or 2.09 percent, to 13,861.73; its previous record close is 13,676.32, also set June 4.

The Nasdaq composite index rose 49.94, or 1.88 percent, to 2,701.73. The index, bloated by the late 1990s tech boom, is nowhere near its closing record of 5,048.62, set in March 2000.

 

[EasyEJL]

Dow climbs over 280 points to end at record high in N.Y.+

Does it bother anyone else that the stockmarket keeps going up without any economic factor that might justify trader confidence???

The only factor i see is that the US national debit was cut in half
since 2004 but...

Highest percentage of home ownership in history, lowest unemployment rates in how many years? lots of factors out there, just democrats choose to ignore them so they can bash bush and his policies.

 

[CDB]

Ain't quite that simple. Prices go up in inflation, that includes stock prices. We might have record home ownership but last I saw despite that record and despite the fact that the housing market is still doing okay average equity is low because people keep refinancing and spending. Monetizing a notional asset gain by increasing your leverage against it and disapating the proceeds on instant gratification isn't a good idea. It will keep consumer spending going for a while which is necessary to support inflationary policy.

In short the stock market is nothing special, and as Henry Hazzlett was fond of doing you can break out the traditional stats the government likes to air and show how they can support quite different conclusions than most are lead to believe.

 

[Squeaks4ver]

our market and buisness world isn't hurt but the political lies of the left!!!! lol

 

[zbtboy]

Foreclosures are at there highest levels in years, consumer debt continues to get deeper, and the cost of college continues to go through the roof. This economy is not as good as the Bush administration says it is, and its not as bad as the Democrats think it is either.

 

[CDB]

Foreclosures are at there highest levels in years, consumer debt continues to get deeper, and the cost of college continues to go through the roof. This economy is not as good as the Bush administration says it is, and its not as bad as the Democrats think it is either.

Yup. You can BS all you want, the stats can be cast in many different ways. If you understand inflationary bubbles, they usually don't look as pretty as the current admin, be it Republican or Democrat, would like you to believe.

 

[zbtboy]

Another factor as to why the stock market is doing well is due to the fact companies are doing everything they can to show a "profit" so their stocks hold value. The companies that I'm directly involved with are simply laying people off to make the bottom line. Their revenues haven't gone up, their spending has been cut, and they save money by letting go of good workers, leaving more work for those left to do.

Another thing these companies are doing is outsourcing work. My group is lucky that we're not losing our jobs and just new work will be hired from abroad (Brazil in this case). The bad thing about that is now I cant get a promotion cause it will be going to some Brazilian. Raise increases have been flat for a long time too. And 90% of the manufacturing jobs that were around in the mid-90's are now gone.

I talk to a lot of people working at other companies around the country and they tell me similar things.

 

[CDB]

And 90% of the manufacturing jobs that were around in the mid-90's are now gone.

Oh they're not gone, not conceptually at least. While manufacturing payrolls dwindle the jobs move conceptually if not literally on to the government payrolls, where they usually earn higher salaries and get better benefits. It makes the stats look good at a glance, but when you realize the jobs are dependent on tax revenue and that the higher compensation both monetary and otherwise requires a concurrent increase in productivity from the remaining privately employed workforce just to cover the switch, much less advance their own standard of living, things become far less rosy.

 

[spunkles182]

Dow climbs over 280 points to end at record high in N.Y.+

Does it bother anyone else that the stockmarket keeps going up without any economic factor that might justify trader confidence???

The only factor i see is that the US national debit was cut in half
since 2004 but...

the artlicle is flat out wrong if it says there is no economic factor. like bobo said retail sales are up. a good indicator is Abercrombie and fitch. their sales went up 2% in june. so people either have excess money to spend or they were holding back and now have more confidence in the economy to start spending money.

also the stock price is determined by alot of other arbitrary factors as well. for instance a company could take on debt to buy back stock and thus increase the stock price and they could also issue more stock to pay back debt and thus lowering the stock price.

 

[CDB]

the artlicle is flat out wrong if it says there is no economic factor. like bobo said retail sales are up. a good indicator is Abercrombie and fitch. their sales went up 2% in june. so people either have excess money to spend or they were holding back and now have more confidence in the economy to start spending money.

Exhausted spending isn't inherrently good or bad, it depends what spurs it. If the government printed a nice cool few million and handed it out and that jacks up sales that's inflationary, and leads to problems down the road.

Last I saw capital goods spending, especially ex military spending, is flat. When you couple that with increased obselescence of a lot of new capital that's a bad thing.

 

[Squeaks4ver]

i also think it has something to do with me and my moods. When i am in a really good mood, the market breaks into new highs and the sun comes out! I have noticed this, i wonder if I some how was emotinally involved with the murder of JFK back in my past life

 

[spunkles182]

Exhausted spending isn't inherrently good or bad, it depends what spurs it. If the government printed a nice cool few million and handed it out and that jacks up sales that's inflationary, and leads to problems down the road.

Last I saw capital goods spending, especially ex military spending, is flat. When you couple that with increased obselescence of a lot of new capital that's a bad thing.

not following ya. High end clothing, such as abercrombie and fitch, has a high income elasticity of demand. they very high sensitivity to economic upturns and downturns (there are many cheaper substitues), so if people are feeling good about their future income they will buy more if there is uncertainty, they will buy less.

 

[zbtboy]

Oh they're not gone, not conceptually at least. While manufacturing payrolls dwindle the jobs move conceptually if not literally on to the government payrolls, where they usually earn higher salaries and get better benefits. It makes the stats look good at a glance, but when you realize the jobs are dependent on tax revenue and that the higher compensation both monetary and otherwise requires a concurrent increase in productivity from the remaining privately employed workforce just to cover the switch, much less advance their own standard of living, things become far less rosy.

While I dont argue your point,the instance I was referring to (the company i work for) is different. Two major companies in this city sent manu jobs to either mexico and/or china. Once this happened, the area went down the toilet. Both companies had very good unions and these people were making very good money with great benefits and as a result, the middle class here was very strong. Now the jobs are gone; replaced with retail, fast food, or non-union manu jobs that pay crap. The population is shrinking every year. College grads are going elsewhere for employment and these two companies where were doing great when the union jobs were here are now struggling.

 

[anabolicrhino]

the artlicle is flat out wrong if it says there is no economic factor. like bobo said retail sales are up. a good indicator is Abercrombie and fitch. their sales went up 2% in june. so people either have excess money to spend or they were holding back and now have more confidence in the economy to start spending money.

also the stock price is determined by alot of other arbitrary factors as well. for instance a company could take on debt to buy back stock and thus increase the stock price and they could also issue more stock to pay back debt and thus lowering the stock price.

this just in...http://online.wsj.com/article/SB118432946704865897.html?mod=googlenews_wsj

..I believe the market is currently correcting on the new data

 

[anabolicrhino]

Another factor as to why the stock market is doing well is due to the fact companies are doing everything they can to show a "profit" so their stocks hold value.

The accounting and auditing methods that were relaxed in terms of actualities versus speculation and led to the Enron / Worldcom fiascos were never changed in practice.

The CEOs took the fall but the speculative accounting process rolls on creatively showing profits wherever possible !

 

[spunkles182]

Another factor as to why the stock market is doing well is due to the fact companies are doing everything they can to show a "profit" so their stocks hold value. The companies that I'm directly involved with are simply laying people off to make the bottom line. Their revenues haven't gone up, their spending has been cut, and they save money by letting go of good workers, leaving more work for those left to do.

Another thing these companies are doing is outsourcing work. My group is lucky that we're not losing our jobs and just new work will be hired from abroad (Brazil in this case). The bad thing about that is now I cant get a promotion cause it will be going to some Brazilian. Raise increases have been flat for a long time too. And 90% of the manufacturing jobs that were around in the mid-90's are now gone.

I talk to a lot of people working at other companies around the country and they tell me similar things.

wow you mean companies are just trying to become more efficient?

American companies generally outsource work that requires little skill or training. The high-end work and wages stay here; but in fact, they might not be retained if the stateside work were not augmented by outsourced functions in lower-cost countries. Furthermore, workers freed up from routine tasks that have been outsourced are often redeployed within the company to higher paying jobs, or on projects that generate greater value-added services or products.

"There is no denying that the number of manufacturing jobs has fallen dramatically in recent years, but this has very little do with outsourcing and almost everything to do with technological innovation. As with agriculture a century ago, productivity gains have outstripped demand, so fewer and fewer workers are needed for manufacturing. If outsourcing were in fact the chief cause of manufacturing losses, one would expect corresponding increases in manufacturing employment in developing countries. An Alliance Capital Management study of global manufacturing trends from 1995 to 2002, however, shows that this was not the case: the United States saw an 11 percent decrease in manufacturing employment over the course of those seven years; meanwhile, China saw a 15 percent decrease and Brazil a 20 percent decrease. Globally, the figure for manufacturing jobs lost was identical to the U.S. figure -- 11 percent. The fact that global manufacturing output increased by 30 percent in that same period confirms that technology, not trade, is the primary cause for the decrease in factory jobs. A recent analysis of employment data from U.S. multinational corporations by the U.S. Department of Commerce reached the same conclusion."
http://www.foreignaffairs.org/20040501faessay83301/daniel-w-drezner/the-outsourcing-bogeyman.html

 

[CDB]

not following ya. High end clothing, such as abercrombie and fitch, has a high income elasticity of demand. they very high sensitivity to economic upturns and downturns (there are many cheaper substitues), so if people are feeling good about their future income they will buy more if there is uncertainty, they will buy less.

The question is what brought about the 'upturn', genuine investment or a currency devaluation? People may feel good about their future income. That doesn't mean they're right or that their future income, when it's finally in their hands, will be worth what they thought it would be. You see generally higher prices in one area of the market mean a shift in demand that requires other areas deal with lower prices as production schedules shift, that is absent inflation. If however the money/credit the people feel good about is simply conjured up through the Fed's fiddlings, concurrently lower prices elsewhere don't necessarily follow and real wages fall or stagnate once the money/credit has filtered through the system.

Also keep in mind again that consumer spending or exhausted spending, while overemphasized in GDP and other such aggregates, often accounts for a minority of the bills and invoices raised and settled in the market in any given time period. The majority of the flow of money through the market is from business to business. Mutual nonautomatic entrepreneurial productive spending basically. Even during the great depression retail sales generall only took a 10-20% hit, while capital goods took an 80-90% hit, sometimes more, and well before the fall in retail. So concentrating on retail sales as a market indicator is like only looking at the foothills of a mountain range to get an idea of what a hike will be like.

The reason exhausted spending is so emphasized is because it is exhausted spending that is needed to keep an inflationary boom going. As long as you can keep people spending out the ass and stop a drain/devaluation of reserves through various means you can expand the money supply massively and generally without direct consequence for some time. This means more government spending and wealth transfers are possible without direct taxation, which is why politicians like the idea so much.

 

[zbtboy]

wow you mean companies are just trying to become more efficient?

ummm..no. They were much more efficient when they had the jobs here and profitable. Also, your theory on Americans moving up in the ranks and the outsources getting the lower end jobs is untrue. You just have to look at the IT sector. IT companies that use to outsource service desks are now outsourcing Engineering jobs as well.

 

[spunkles182]

The question is what brought about the 'upturn', genuine investment or a currency devaluation? People may feel good about their future income. That doesn't mean they're right or that their future income, when it's finally in their hands, will be worth what they thought it would be.

you are correct that they may not be right in their future income, but the stock market doesnt really care if they are right or wrong.

The upturn is about becuase the sales and earnings numbers that are coming in are better than what were expected. I dont think inflation is much of a concern because most of these compaines are MNC's. Like I beleive Exxon had high earnings but 70% of their revenue comes from outside the us, coke, ibm, intel, hp all get 60% etc etc

 

[CDB]

you are correct that they may not be right in their future income, but the stock market doesnt really care if they are right or wrong.

The upturn is about becuase the sales and earnings numbers that are coming in are better than what were expected.

Which is exactly what happens during an inflationary boom.

I dont think inflation is much of a concern because most of these compaines are MNC's. Like I beleive Exxon had high earnings but 70% of their revenue comes from outside the us, coke, ibm, intel, hp all get 60% etc etc

Then one would need to know where the increases were happening. Either way increased spending and better consumer numbers really mean nothing until they're cast in a much larger context.

 

[spunkles182]

ummm..no. They were much more efficient when they had the jobs here and profitable.

if that was true then they wouldnt export the jobs. other countries have a competitve advantage on low skilled labor.

Also, your theory on Americans moving up in the ranks and the outsources getting the lower end jobs is untrue. You just have to look at the IT sector. IT companies that use to outsource service desks are now outsourcing Engineering jobs as well.

its not my theory. its just what i learned in international finance.
Outsourcing creates jobs in U.S., industry study finds - Mar. 30, 2004

 

[spunkles182]

Which is exactly what happens during an inflationary boom.

true, and inflation is slightly up compared to the last month or two. I think that people were expecting lower revenues and sales due to rising fuel costs and the poor housing market. but i guess people kept on spending regardless.

Then one would need to know where the increases were happening. Either way increased spending and better consumer numbers really mean nothing until they're cast in a much larger context.

true. but in reality stock prices are only loosley tied to a companies profits/earnings/revenues. Some are perceived to be under/over valued. but the price is only set by what someone is willing to sell and buy it for (supply and demand). i think right now people are really over-reacting untill all the information comes in over the next few weeks.

 

[CDB]

true, and inflation is slightly up compared to the last month or two. I think that people were expecting lower revenues and sales due to rising fuel costs and the poor housing market. but i guess people kept on spending regardless.

The standard measures of inflation aren't really reliable. For increases in credit and money stock I think in the last eight years more was issued into existence than in the entire history of the US up until Bush's term. No matter what the subjective price indexes may be doing, that's an increment to say the least.

true. but in reality stock prices are only loosley tied to a companies profits/earnings/revenues. Some are perceived to be under/over valued. but the price is only set by what someone is willing to sell and buy it for (supply and demand). i think right now people are really over-reacting untill all the information comes in over the next few weeks.

Yes, stock prices are like all prices. People evaluate and buy or don't. But when you see things like hikes in the price when yields are **** and what not, then you have to wonder what's driving the price hike. And it just could be a nice infusion of credit.

Edit: Check this article by Sean Corrigan, basically a transcript of one of his speeches. It's a nice eviceration of common macro economic indicators even though it's based on year 2001 figures.

 

[spunkles182]

The standard measures of inflation aren't really reliable. For increases in credit and money stock I think in the last eight years more was issued into existence than in the entire history of the US up until Bush's term. No matter what the subjective price indexes may be doing, that's an increment to say the least.

yeah i guess i dont really know how they come up with the number.

Yes, stock prices are like all prices. People evaluate and buy or don't. But when you see things like hikes in the price when yields are **** and what not, then you have to wonder what's driving the price hike. And it just could be a nice infusion of credit.

what yield are you talking about? stock, bond, mutual fund?

 

[anabolicrhino]

if that was true then they wouldnt export the jobs. other countries have a competitve advantage on low skilled labor.



its not my theory. its just what i learned in international finance.
Outsourcing creates jobs in U.S., industry study finds - Mar. 30, 2004

History of Global Insight: 2001 to January 2005
2001—Global Insight, Inc. is formed. Global Insight, the privately held company formed by Dr. Joseph E. Kasputys, Michael R. Kargula, and Vicki Van Mater in March of 2001, brought together the world's premier economic and financial information firms: DRI and WEFA. WEFA (formerly Wharton Econometric Forecasting Associates) was founded in 1963, and Data Resources, Inc. (DRI) was founded in 1968. The formation of Global Insight also included the acquisition of DAFSA, a European market-research company; and GlobalInTech (formerly Primark Poland), a software company specializing in time-series data management, as well as an interest in Decision Economics, Inc.

Dude, these are more than theories they are agendas!

CNN? Time/Warner/AOL are "Good Shepherds" that help formulate
the execution of outsourcing labor.

That "theory" is disinformation cranked out by Global Insight. Yes its true because they make it true!

Bad news is more good news

 

[spunkles182]

History of Global Insight: 2001 to January 2005
2001—Global Insight, Inc. is formed. Global Insight, the privately held company formed by Dr. Joseph E. Kasputys, Michael R. Kargula, and Vicki Van Mater in March of 2001, brought together the world's premier economic and financial information firms: DRI and WEFA. WEFA (formerly Wharton Econometric Forecasting Associates) was founded in 1963, and Data Resources, Inc. (DRI) was founded in 1968. The formation of Global Insight also included the acquisition of DAFSA, a European market-research company; and GlobalInTech (formerly Primark Poland), a software company specializing in time-series data management, as well as an interest in Decision Economics, Inc.

Dude, these are more than theories they are agendas!

CNN? Time/Warner/AOL are "Good Shepherds" that help formulate
the execution of outsourcing labor.

That "theory" is disinformation cranked out by Global Insight. Yes its true because they make it true!

huh? its just common sence. basic economics

http://www.mises.org/story/877
http://blogcritics.org/archives/2004/04/02/105944.php
http://news.com.com/2008-1022-5142597.html

i could go on and on with articles.

 

[spunkles182]

Bad news is more good news

I dont see any "bad news"
I see GE sold off its unprofitable sub-prime morgage business, which would increase revenues. and it terminated a merger with Abbott Laboratories, which freed up 12billion dollars in which its going to buy back outstanding equity which will raise share price.

I see that Alcan wanted too high of a price for Alcoa to purchase it. And investors believed that there are better options for delivering additional value to shareholders. Alcoa is a more attractive takeover target.

I see energized is buying playtex.

I see markets all over the world are also up. while the key economic indicators of the us economy are certainly important to look at dont over look the fact that all of the 30stocks in the djia receive over at least half of their revenues out side of the united states. pfizer earns close to/ over 100% of their profits from overseas. certainly the stock exchange does not just stop at the boundries of the united states.

 

[spunkles182]

Which is exactly what happens during an inflationary boom.

efficent valuation hypothosis asserts that financial markets are "informationally efficient", or that prices on traded assets, e.g., stocks, bonds, or property, already reflect all known information and therefore are unbiased in the sense that they reflect the collective beliefs of all investors about future prospects. This is espeically true in the Dow jones due to these are the largest and most highly looked at companies. efficient valuation theory says that rational investors should discount real cash flows using real interest rates. so known and expected inflation should not have on expected earnings. After looking at the movements that went on due to mergers and non-mergers (where value can be made out of thin air due to companies synergies), selling off of non profitable businesses (GE selling of its sub prime loan business) and GE announcing that it will repurchase 12billion of stock by the end of the year. its basically just the market adjusting for information.

 

[Dwight Schrute]

Foreclosures are at there highest levels in years,

Thats because you had the biggest real estate boom in modern history in the last 10 years and the crash of the sub prime market (which is a good thing IMO). Investor money shifted form real estate to the market. Mortgage criteria are more strict (which they should be) and people aren't buying houses they can't afford (which you had a lot of from 2002-2005).

This is more of a 5 steps forward, 1 step back scenario.

 

[anabolicrhino]

Thats because you had the biggest real estate boom in modern history in the last 10 years and the crash of the sub prime market (which is a good thing IMO). Investor money shifted form real estate to the market. Mortgage criteria are more strict (which they should be) and people aren't buying houses they can't afford (which you had a lot of from 2002-2005).

This is more of a 5 steps forward, 1 step back scenario.

Wow, I think I agree with you almost!

The correction and subsequent elimination of the "sub primes" is a great thing for the market and the stability of the economy as well. It is similar to the elimination of the 80's "junk bond" market. There will always be speculative investments, but when deep speculation becomes an acceptable market strategy there will always be a correction.

The reality is that the people who were hurt the most by this shift were the mortgage brokers and specialized market traders who pushed the "sub primes" through the banks.

While some people lost their dreams of home ownership, most did not put down any real money, and at least they got to feel the American Dream was real for a few months !

 

[anabolicrhino]

huh? its just common sence. basic economics

http://www.mises.org/story/877
http://blogcritics.org/archives/2004/04/02/105944.php
http://news.com.com/2008-1022-5142597.html

i could go on and on with articles.

Huh ? uh huh... I was not challenging the mechanism of the economic factor. I was stating that the major players are exploiting
that same factor.

While this current trend is good for corporations and the Market in general, it could lead to American having to go abroad to find work!

Lets face it Walmart is "the business model case study" in how to exploit this economic factor. Walmart is basically the distribution network for China!

China will become the most dominant economic force in the world because of the exploitation of the labor factor. 1.3 billion people with no laws to prevent their exploitation. This will eventually be the factor that leads to some Americans not finding jobs in America.

You are quite correct, Its basic economics !

 

[DougMan]

Lets face it Walmart is "the business model case study" in how to exploit this economic factor. Walmart is basically the distribution network for China!

I don't think the major problem with Walmart is that sells cheap stuff, the major problem with Walmart is that they abuse the public health care system. I have read of stories describing how new employees are given forms to file for state sponsored health care at the same time they get their job offers. It is the manipulation of the system, and then subsequently the lower prices they can offer because of this manipulation that is unfair. Costco sells cheap stuff and no one complains because at least in the poll of public opinion Costco treats their employees well. A few years back I read an AP article that put starting salaries around 10-17/hr, compared to 7-10/hr for Wal-mart. Not sure if that applies to all Costco jobs though.

If we got rid of state sponsored health care then it would go away, good luck with that. Once the government starts handing money out to people it is hard to take it back. It is ironic that Walmart abuses a socialist program in the name of capitalism which is now leading people to cry for more socialist policies and state regulation.

China will become the most dominant economic force in the world because of the exploitation of the labor factor. 1.3 billion people with no laws to prevent their exploitation. This will eventually be the factor that leads to some Americans not finding jobs in America.

Adapt, migrate or die. There are still tons of oppurtunities left for people with the right degrees in higher education. Companies will only treat their workers as well as they have to. This is nothing new. It is the responsibility of the worker to make themselves more valuable. You don't owe your company anything, and likewise your company doesn't owe you anything. At some level it is all just business.

IMO the factor that leads to Americans not finding jobs is likely going to be run away government spending. I think you mentioned that as a concern already.

If you are confident the market is going to tank soon then invest in it. You can make just as much money when the markets are heading down if you invest correctly.

 

[spunkles182]

Huh ? uh huh... I was not challenging the mechanism of the economic factor. I was stating that the major players are exploiting
that same factor.

While this current trend is good for corporations and the Market in general, it could lead to American having to go abroad to find work!

Lets face it Walmart is "the business model case study" in how to exploit this economic factor. Walmart is basically the distribution network for China!

China will become the most dominant economic force in the world because of the exploitation of the labor factor. 1.3 billion people with no laws to prevent their exploitation. This will eventually be the factor that leads to some Americans not finding jobs in America.

You are quite correct, Its basic economics !

the evidence does not support your claim, free trade benefits both parties involved. the unemployment rate is currently 4.5% which is the lowest that it has been since sept 2001. Average weekly earnings rose by 4.1 percent, seasonally adjusted, from May 2006 to May 2007. After deflation by the CPI-W, average weekly earnings increased by 1.4 percent. where are these "lost jobs" where is the "lost income".

 

[CDB]

While I dont argue your point,the instance I was referring to (the company i work for) is different. Two major companies in this city sent manu jobs to either mexico and/or china. Once this happened, the area went down the toilet.

And? Not to be heartless, but where is it written you're guaranteed a job, a house, a life, or anything? Our lives ar ein flux, I've lost jobs before and had to deal with major **** because of it. That's life.

Both companies had very good unions and these people were making very good money with great benefits and as a result, the middle class here was very strong. Now the jobs are gone; replaced with retail, fast food, or non-union manu jobs that pay crap. The population is shrinking every year. College grads are going elsewhere for employment and these two companies where were doing great when the union jobs were here are now struggling.

Your confusing causes here though. Those companies that outsourced do not have the power to suck up and destroy other opportunities for those they fired. No company does. The key question is where is the opportunity? The answer is the government has flushed it down the drain.

 

[CDB]

efficent valuation hypothosis asserts that financial markets are "informationally efficient", or that prices on traded assets, e.g., stocks, bonds, or property, already reflect all known information and therefore are unbiased in the sense that they reflect the collective beliefs of all investors about future prospects.

Efficient valuation hypothesis is contingent on no one ****ing with the indicators and means of transferring information, ie. prices. When the government inflates the money supply that is exactly what it does. The choices people make are only as good as the information that informs them.

 

[anabolicrhino]

the evidence does not support your claim, free trade benefits both parties involved. the unemployment rate is currently 4.5% which is the lowest that it has been since sept 2001. Average weekly earnings rose by 4.1 percent, seasonally adjusted, from May 2006 to May 2007. After deflation by the CPI-W, average weekly earnings increased by 1.4 percent. where are these "lost jobs" where is the "lost income".

No, not lost jobs or lost income, but...lost job opportunities, yes you can have a job, hell Walmart is always hiring

but it will become more difficult to find jobs outside the retail distribution networks, which Walmart dominates.

...the income is there but what about actual buying power.

The average worker could afford to own more things 30 years ago than todays worker.

There are more workers and more jobs and more money in the economy, but inflation and interest have devalued lifestyles.

The ability to outsource labor increases production, profits and
directly leads to inflated prices for devalued goods.

So again the outsouring of labor is great for ownership but not so much for Americas working class.

Which brings us complete to a complete circle and once again proves that it is better to own than to be owned!

 

[spunkles182]

The ability to outsource labor increases production, profits and
directly leads to inflated prices for devalued goods.

So again the outsouring of labor is great for ownership but not so much for Americas working class.

absolutely not. it leads to lower prices for higher valued goods.


Imagine yourself an entrepreneur planning a new business. After extensive market research, you decide to manufacture some sort of bodybuilding suppliement in pill form. You begin selling them for five cents each. Your accountants have determined that it costs you two cents to cap each pill—40 percent of your selling price. Another firm can cap each pill for you for only one cent each (a 50 percent savings on caping). Do you continue to cap them yourself or do you farm out this operation?

now imagine that you sell 500 pills per bottle and cap them inhouse for a selling price of $25 per bottle and your competitor outsoruces the caping process and and with the savings can sell the suppliments for $20 bottle while making the same profit as you can off 1 bottle. you would go out of business. Outsourcing makes good sense. By outsourcing, companies can achieve improved levels of efficiency. More efficent companies have lower production costs. Lower production costs lead to a decreased price for the consumer in a competitive market. That frees up more of the consumer’s income to purchase other goods and services. its win-win.

 

[spunkles182]

Efficient valuation hypothesis is contingent on no one ****ing with the indicators and means of transferring information, ie. prices. When the government inflates the money supply that is exactly what it does. The choices people make are only as good as the information that informs them.

but expected inflation is built in to their earnings estimates. there is nothing unexpected when the gov says that it will increase the money supply. from the latest reports the current "upswing" in the market is just from companies becoming more efficient by some restructuring.

 

[spunkles182]

While I dont argue your point,the instance I was referring to (the company i work for) is different. Two major companies in this city sent manu jobs to either mexico and/or china.

the reality is that workers have to compete against each other from all over the world. there was just someone with the same skill set in Mexico/china and was willing perform the same job for less pay. and you cant really blame the company becuase if they didnt take advantage of the low cost labor another company would have and would have put your company at a disadvantage. If they didnt outsource those jobs, you would have had a greater chance of losing yours as well.

 

[anabolicrhino]

absolutely not. it leads to lower prices for higher valued goods.


More efficent companies have lower production costs. Lower production costs lead to a decreased price for the consumer in a competitive market. That frees up more of the consumer’s income to purchase other goods and services. its win-win.

Way back in the old days, pre-global market economies, a nation's economy could control inflation by manipulating their import / export ratios.

Todays global multinational corporations are immune to this factor so when these companies introduce cheap goods into a national economy the result is more income directed toward the retail market and more money in the system, which you know causes inflation and devalues the money system.

When products were produced domestically by domestic workers and purchased by the same pool of domestic workers inflation was held in check.

Domestic products were less profitable for the owners, but the workers got more for their money specifically when not buying in the manufacturing sector.

The had more money to buy property and other non disposable goods.

They had more savings and less debt

Now all of this is easily dismissed if you just forget about the USA as a sovereign economy and think in terms of the domestic US worker as part of a worldwide labor pool !

Which is what the multinational corporations want to accomplish.

The whole Global economic movement is in reality a socialization of the world politic and will completely eliminate competition from the market,....which any good "free trader" will tell you is not a good thing !!!

You can ponder the futures market or you can ponder the reality of a one world corporate dictatorship

 

[spunkles182]

Way back in the old days, pre-global market economies, a nation's economy could control inflation by manipulating their import / export ratios.

Todays global multinational corporations are immune to this factor so when these companies introduce cheap goods into a national economy the result is more income directed toward the retail market and more money in the system, which you know causes inflation and devalues the money system.

When products were produced domestically by domestic workers and purchased by the same pool of domestic workers inflation was held in check.

Domestic products were less profitable for the owners, but the workers got more for their money specifically when not buying in the manufacturing sector.

The had more money to buy property and other non disposable goods.

They had more savings and less debt

absolutely not. when the united states outsources its an outflow of american cash which decreases the total supply in the us and helps keep inflation down. you couldnt be more wrong.

The whole Global economic movement is in reality a socialization of the world politic and will completely eliminate competition from the market,....which any good "free trader" will tell you is not a good thing !!!

You can ponder the futures market or you can ponder the reality of a one world corporate dictatorship

again you could not be more wrong. its common sence. when you open up to other markets you open up to other sellers, ie competition.

 

[anabolicrhino]

absolutely not. when the united states outsources its an outflow of american cash which decreases the total supply in the us and helps keep inflation down. you couldnt be more wrong.





again you could not be more wrong. its common sence. when you open up to other markets you open up to other sellers, ie competition.

I bet that I could be more wrong if I just had the chance !:toofunny:

The point I was trying to express is that it is not the United States who is outsourcing the labor costs, but it is in fact the multinational corporations who are outsourcing the labor costs!

These corporations interact with each other on a global market but do not deffer to the US national economic cycles.

These corporation will trade dollars just to clip our domestic markets, so while there may be a competitive advantage to outsourcing labor for the multinationals, that competition does not help the American worker / consumer.

Capitalism and free trade are two different things!

The global market is anything but free or open !

 

[CDB]

but expected inflation is built in to their earnings estimates. there is nothing unexpected when the gov says that it will increase the money supply. from the latest reports the current "upswing" in the market is just from companies becoming more efficient by some restructuring.

The problem with that is that it is demonstrably false. If people were able to factor government meddling into prices there would never be shortages or surpluses due to price controls or other types of meddling which affect prices. It's even harder to predict in terms of inflation because the control is not direct or uniform.

In theory knowledge should flow. In practice the price is the embodiment of all the available knowledge. Messing with it, while it doesn't destroy the availability of information and make everyone's decisions incorrect, it does seriously hinder the flow of information and basically amplifies what would be normal market 'noise' or minor errors into a wave of errors. Those errors occur, as with everything else, on the margins.

I have to admit I have not looked at the current trends and, to be blunt, I don't want to. What I can say is everyone should have a massive mistrust of macro economic indicators and stats. They are subjective in the extreme and can be cast in a majorly different light given who is doing the analysis.

 

[spunkles182]

The problem with that is that it is demonstrably false. If people were able to factor government meddling into prices there would never be shortages or surpluses due to price controls or other types of meddling which affect prices. It's even harder to predict in terms of inflation because the control is not direct or uniform.

In theory knowledge should flow. In practice the price is the embodiment of all the available knowledge. Messing with it, while it doesn't destroy the availability of information and make everyone's decisions incorrect, it does seriously hinder the flow of information and basically amplifies what would be normal market 'noise' or minor errors into a wave of errors. Those errors occur, as with everything else, on the margins.

I have to admit I have not looked at the current trends and, to be blunt, I don't want to. What I can say is everyone should have a massive mistrust of macro economic indicators and stats. They are subjective in the extreme and can be cast in a majorly different light given who is doing the analysis.

well to answer the question on why the market is going up you would kind of have to look at the market to see whats going on.

and as far stock prices going up in inflation is wrong. its just the opposite. as inflation goes up, stock prices go down. people leave the stock market in anticipation of the fed rasing interest rates. If inflation is a growing problem, investment analysts become suspicious of high economic growth or good job reports. they fear that it reflects an inflationary boom, an artificial recovery created primarily by "easy credit" by the government, due to high federal deficits and an expanding money supply. Under inflationary conditions, analysts do not think strong job creation and economic growth are sustainable, and the stock market falls in price because they think that the Fed will need to tighten in the future.

 

[anabolicrhino]

well to answer the question on why the market is going up you would kind of have to look at the market to see whats going on.

and as far stock prices going up in inflation is wrong. its just the opposite. as inflation goes up, stock prices go down. people leave the stock market in anticipation of the fed rasing interest rates. If inflation is a growing problem, investment analysts become suspicious of high economic growth or good job reports. they fear that it reflects an inflationary boom, an artificial recovery created primarily by "easy credit" by the government, due to high federal deficits and an expanding money supply. Under inflationary conditions, analysts do not think strong job creation and economic growth are sustainable, and the stock market falls in price because they think that the Fed will need to tighten in the future.

The stock market is traditionally a hedge against inflation. When trading on speculation the market is technically unaffected by real price inflation, but once a stock price is realized as a dollar value( liquidated ) the inflation factor attaches itself to the realized value.

So, ultimately while the market is technically unaffected by inflation, the market price for stocks is based upon trade speculation, which would include some inflation factor.

The inflation factor would be specific to the estimated longevity
the trader anticipates holding the stock versus selling it for cash value, which kicks in the inflation.

 

[CDB]

well to answer the question on why the market is going up you would kind of have to look at the market to see whats going on.

Indeed, but you don't need an in depth knowledge of current events when you've seen past cycles.

and as far stock prices going up in inflation is wrong. its just the opposite.

Only if you make the mistake of defining inflation as a general rise in prices as opposed to the increase in money/credit which often but doesn't always necessarily lead to a general rise in prices. In actuality new money/credit flows into the market mainly as bank loans to business which causes an over investment in capital goods as opposed to consumer goods. Since stocks and real estate are basically just titles to capital goods the first effect of inflation is a stock and real estate price boom, with consumer prices not necessarily showing any trend at first. Last I'd checked capital goods prices were trending upward, slightly in the US and heavily in China.

as inflation goes up, stock prices go down. people leave the stock market in anticipation of the fed rasing interest rates. If inflation is a growing problem, investment analysts become suspicious of high economic growth or good job reports. they fear that it reflects an inflationary boom, an artificial recovery created primarily by "easy credit" by the government, due to high federal deficits and an expanding money supply. Under inflationary conditions, analysts do not think strong job creation and economic growth are sustainable, and the stock market falls in price because they think that the Fed will need to tighten in the future.

See above. Technically inflation has not stopped for over a hundred years, and most noticably so since the end of any gold standard. There is no incentive for the government to price money/credit at or above market, only to raise it occasionally to avoid hyperinflation.

 

[spunkles182]

Indeed, but you don't need an in depth knowledge of current events when you've seen past cycles.



Only if you make the mistake of defining inflation as a general rise in prices as opposed to the increase in money/credit which often but doesn't always necessarily lead to a general rise in prices. In actuality new money/credit flows into the market mainly as bank loans to business which causes an over investment in capital goods as opposed to consumer goods. Since stocks and real estate are basically just titles to capital goods the first effect of inflation is a stock and real estate price boom, with consumer prices not necessarily showing any trend at first. Last I'd checked capital goods prices were trending upward, slightly in the US and heavily in China.



See above. Technically inflation has not stopped for over a hundred years, and most noticably so since the end of any gold standard. There is no incentive for the government to price money/credit at or above market, only to raise it occasionally to avoid hyperinflation.

im lost. I was talking more about how investors value their required rate of return in the capital asset pricing model. As the Fed adjusts interest rates, the risk-free rate will change. If the Fed raises rates, the risk-free rate will rise also. the stock’s target price should drop because the required return is higher.
If key rates fall, then the stock’s target price should rise because the required return has dropped.

 

[CDB]

im lost. I was talking more about how investors value their required rate of return in the capital asset pricing model. As the Fed adjusts interest rates, the risk-free rate will change. If the Fed raises rates, the risk-free rate will rise also. the stock’s target price should drop because the required return is higher.
If key rates fall, then the stock’s target price should rise because the required return has dropped.

We're talking about seperate things. You're talking investing strategy, I'm talking economics. My point generally would be that what most people think of as inflation really isn't, because over the years they've confused symptoms with cause.

Maybe this will help. And I say maybe because I just skimmed it, and my memory of CAPM is hazy to say the least. I checked the wiki and it may as well be in French at this point. But I notice you're not averse to citing from mises.org yourself, so it might be in terms that join the two approaches, art and science, nicely for you.

And me too. I need a refresher.

 

[spatch]

And imagine how good it would be if instead of working for their wallet, people worked for the advancement of humanity itself.