JWG

Stock Prices and Unemployment Peaks

Cam & Old Trader,

I agree, but as with a lot of market commentary that I see,
I feel the perspective ought to be globalized.

The very phrase "jobless recovery" suggests an US-Centric point
of view to me (at least I feel it's read that way here in the US;
maybe Canadian readers have a more global perspective).

I don't think that the current recovery is jobless, unless you
confine your view to the high-wage economies.

It has been endlessly pointed out, especially back when things
were coooking along nicely, that a billion new workers [pick
your sensational statistic] were entering the global workforce.
This process is continuing, and law of supply and demand suggests
something about its consequences: wages should fall.

Of course, the new workers don't see falling wages, they see it
as a rise from zero. But if the overall level of wages falls,
somebody has to see their wages go down. Any guesses who?

This global leveling of wages is a long-term process, probably
decades, but it does not proceed at a constant rate. The whole
economy has its cycles, and on the up cycles, the US worker more
or less holds his own, and on the down cycles he gets killed.
That's exactly what we've been seeing at least since the Asian
financial crisis of '97.

And I think it will continue like that, unless and until the US
learns to work a lot harder and educate its people a lot better,
and the new Asian workers begin consuming more of their new
income and saving less of it. And I don't see many signs of that
at present.

So I don't like the phrase "jobless recovery" much; it tends to
focus one's thinking on national and cyclical trends, whereas
the focus ought to be on the global and secular trend.

I haven't got a better phrase though.

/Jim G.

Is This the Long Awaited Correction?

Cam,

I don't follow this bit: "If individual investors are convinced that the economy is truly turning around (and never mind the snark) and buy, then it could truly be a sign that we may have seen a multi-year top for the S&P 500."

If the buying broadens (from the pros to the general public) why do you think that would mark a top? I'm either one level of contrary thinking behind you, or you meant "bottom" not top, or...?

Money Supply: The Myth of Hyperinflation

On Sep 03 12:01 PM Johnny Oxygen wrote:
> ... you don't understand that the definition of inflation
> is an increase in the money supply. Higher prices are a symptom of
> inflation not a definition.

Johnny O, you are the one who doesn't understand and you have it exactly backwards. The Wikipedia entry on inflation begins:

"In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time."

Any first year econ textbook will say the same thing.

The issue is not whether the Fed printed a lot of money, or increased the velocity of money. The issue is whether the
increase by the Fed is greater than the decrease by the private
sector.

Any discussion of the inflationary impact of Fed activity
is just blowing smoke if you don't consider the other end of the
seesaw. It's all about balance. About 98% of the blatherskite
about the risk of inflation, on SeekingAlpha and elsewhere,
only compares Fed money creation to earlier time periods.
That is nonsense. What you have to compare to is the other
money creation/destruction processes going on in the same
time period. Very few writers understand this -- and looking at the rubbish in the comments on this article, very few readers get it either.

/jg

Why Apple Should Buy Twitter

Rot.

There's no revenue model.

China's Graduates

Ma-lin: Pettis didn't say it was hard to start up a business in China. He said not very many young Chinese wanted to try.

Michal P: you wrote of "the latte 70's". That's a typo, right?
You meant "the latte 90's", right? OK, maybe you've been out of the country....
/jwg

China: From Crony Capitalism to Geopolitical Mercantilism?

Cam, You wrote "then we will see a reflationary boom in the next cycle followed by a deflationary collapse." I'd like to know more about your rationale/source for anticipating a second deflationary collapse after the intervening reflationary boom.

Thanks
Jim G.

E*Trade: A Bet Worth Making

Steven F: Here's a question that has put me off buying ETFC. Citadel owns a bunch of stock and a whole bunch of senior debt. They effectively control ETFC. So now: is it more advantageous to them that the company recovers, or goes bankrupt? If it goes bankrupt, they lose on their existing stock (goes to zero) but their debt would be swapped for new stock, and they'd end up owning a *higher* percentage of the company. They might make out a lot better that way. Any thoughts?
/jwg

Bears and Big Gains

Betting on the VIX is betting on a derivative of a derivative of a....

This isn't investing, it isn't even speculating, it's just gambling. I'm not opposed to somebody gambling, but they ought to be clear about it.

And there is more, that Roger did not mention: ETN risk. An ETN depends on the issuing bank. It's *NOT* an ETF.

If Barclays rolls over and croaks, your investment is gone, as far as I understand it. There are no underlying assets; you're just placing a bet at the casino, and if the house goes bust, you don't get your winnings, or even get your stake back.

Like all banks in the UK, and indeed elsewhere, one has to ask whether Barclays will be around and honor their commitments. These are perilous times, for banks.

JWG

First Call of a Double-Dip Recession: Setting Up a Market Bottom?

Never mind. If you use double-quotes around the "Great Depression" you don't get the news results. Soon Google will be as opaque to use as Windoze.

First Call of a Double-Dip Recession: Setting Up a Market Bottom?

When I repeat the Google Trends search on "Great Depression", I don't get the news-volume graph at the bottom (it reports "no news stories found") nor the flags to access top news stories at key points.

Anybody have any idea why I don't get that?

TIA
jwg

Would a Trade War Help Solve the Problem of Excess Capacity?

Michael,

Thanks for another excellent article.

A question. Suppose China actually did dramatically stimulate its domestic consumption and imports. How would that affect the value of the dollar?

One might argue that taking a trillion dollars out of the Chinese mattress and restoring them to circulation would increase the world supply of dollars and would be inflationary.

Or one might argue that it would choke the gusher of uneconomic dollar debt at the source (the US current account deficit), and shift US lending away from consumption and toward investment in real productive assets, stabilizing the dollar.

I can't see an argument that it would be outright deflationary, but maybe I lack imagination.

Any opinions?

Thanks

Microsoft Online Store May Drive Another Nail in Retail Coffin

Eric S wrote: "You always have the option of copying the downloaded products to physical media if you want to have it available longer than the mainstream support lifetime."

Well... no, you probably won't ALWAYS have that option.

As soon as the ESD model is established and customers have no remaining alternatives, it is in the interests of vendors to take that option away, which they can easily do. Just make the installer a bootstrap program that interacts with their download server. This is already widely done, even where the software is free, for convenience' sake (java.sun.com for example). But then you can't re-install without their server, where they can establish their toll booth if desired.

Europe's Bank Nationalization Fever

Paul,

Glad you showed up on Seeking Alpha. Keep writing.

Two questions.

1)
"While I personally think the dangers of derivatives are seriously overstated, ..." That could be a subject for another post.

2)
If you can write about the investment perspective in Russia, please do so. I have always wondered how some investors, who appear to be sane in other respects, can send their money to Russia.

/jwg

The Bear Market Ain't Over Till It's Over

Macro Man wrote:

"That today's cheap dollar funding in Europe ... hasn't prevented European equities is another ominous sign ..."

"Prevent European equities"?? One hopes this is a typo ...

/jg

Why Bubbles Can't Be Stopped

PARETO’S CIRCULATION OF ELITES covers this quite well.
ocw.mit.edu/NR/rdonlyr...

We're seeing an inflection point where the foxes overreached, got into trouble, and must now surrender initiative for a time to the lions. Holes in the regs will be plugged, life will resume, the public will go back to sleep, and very quietly the innovation by the foxes will begin again and slowly begin to accelerate...

None of which means that efforts at reform are pointless. It would be really stupid not to plug the holes that have been uncovered ("fool me twice...").

JWG