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  • The End of the Expense Cutting Rope [View article]
    There is a converse situation which is also true. I work at a capital-intensive manufacturing facility. In our industry, an individual facility will usually have multiple production units with different manufacturing capacities. In a healthy economy, each of these production units will often operate 7 days / week and 24 hours / day.

    However, the smaller capacity units need almost as much labor to operate as the larger capacity units. (Usually the larger units are the newer ones.) Consequently, the larger units are generally more efficient with respect to labor utilization.

    During an economic downturn,...
    ...the smaller production units (which are less efficient in labor utilization) will get "turned off" for weekends (or longer periods), while, at the same time, the larger production units will continue to operate 7 days/week and 24 hours/day. Thus, within our facility, our labor productivity is slightly higher at those times.

    During a recovery (at least with respect to our industry)...,
    we reverse the situation and allow those smaller, less labor-efficient production units to run additional days. {This is the situation we have right now.}

    Thus, the labor efficiency within our facility will rise as we reduce our output and fall as we increase our output again - because of how frequently we operate our less labor-efficient production units.

    Right now, capacity utilization in our industry is rising.
    Aug 11 06:53 PM | 9 Likes Like |Link to Comment
  • Inflation vs. Deflation: Pick Your Poison [View article]
    Hmm... if only the real world could operate according to this theory.

    I don't recall my own salary increase last year (or the year before) being large enough to compensate me for paying dramatically higher prices for gasoline and groceries.

    Consequently, like many other Americans, I compensated for this inflation by reducing my spending on less important things. Unfortunately, a substantial number of Americans also responded to this inflation by defaulting on their debts.

    Your theory about wages keeping up with inflation would be more true if every human were a commision-paid employee, an entrepreneur, or an independent contractor. Unfortunately, a very large portion of the workforce is not employed in any of those categories.

    In response to what I have just described, one might offer the theory that, over time, existing companies and entrepreneurs will respond to commodity inflation by expanding capacity and, consequently, beginning to compete with each other for more labor - thus, driving up wages and salaries.

    Unfortunately, it didn't work that way last year.

    The business media has not given sufficient coverage to the impact that inflation had on the economy last year. Instead, they hyped the "credit crunch". I don't dispute that the credit crunch was, indeed, a critical issue. However, it was only part of the whole story.
    Jul 23 11:49 AM | 7 Likes Like |Link to Comment
  • Why Goldman Sachs Isn't Evil [View article]
    Even though Goldman Sachs has already repaid the US government loans which were made to them directly, I wonder if they could also be so kind as to repay the American taxpayer for those AIG Credit Default Swaps which the US Government chose to guarantee for them?
    Jul 15 12:05 PM | 7 Likes Like |Link to Comment
  • How Should We Improve Seeking Alpha's Comment Rating System? [View instapost]
    I have read several excellent comments / ideas in this discussion. Among those that have "resonated" well with me are the following:
    1) Having separate ratings for (a) article quality and (b) one's personal agreement / disagreement with the conclusions. (as was described by Shaw and Lounsbury)
    2) As was stated by Ergo, I, too, have learned much from some of the comments in various articles.
    3) In support of Mikebrah's comment, the ratings from the well-respected commentors and contributors should, perhaps, have more weight.
    4) I am intrigued by "31October"s weighted average solution. It appeals to me.
    5) This leads me to an idea: I would be very interested in how Geoff Considine might approach the rating question. I hope the staff will seek his input / ideas.

    Even though I have been reading this website for many months, this is my first comment on this website. Since, I don't consider myself an "expert" on the various topics covered, I merely read and try to learn. (Incidentally, my favorite contributors are Richard Shaw and Geoff Considine.)


    May 13 07:53 PM | 7 Likes Like |Link to Comment
  • Wealth Disparities in U.S. Approaching 1920s Levels [View article]
    By 2006, the damage had already been done. (Nevertheless, I will grant that the damage was a bi-partisan "effort".)

    Also note that, by 2006, today's crisis was already showing up in the yield curve. See the following article from
    Feb 23 06:23 PM | 5 Likes Like |Link to Comment
  • The End of the Expense Cutting Rope [View article]
    You are correct, "DigDeep".

    To elaborate, within North America, the paper industry has been reducing capacity since the early 1990's. These capacity reductions have tended to occur in "clusters" - often as a reaction to either (1) a spike in the price of key raw materials or (2) a reduction in product prices due to capacity expansions occurring in Asia or South America.

    Presently, our segment of the industry is in a slow-motion "dead-cat" bounce. In the past 2 years, some mill and/or machine closures have occurred as a reaction to the reduction in demand caused by the recession. Now, however, we are seeing enough uptick in demand to see an increase in the utilization of that (now smaller) capacity.

    Certainly, digital data storage has reduced or eliminated certain key end uses for paper. Newsprint is a prime example where that has occurred.

    However, for other segments of the paper industry (especially the bleached segment), it has been a little easier to adapt to a trend of that nature than it has been to adapt to the other factors I mentioned above (which typically are more abrupt). An individual paper machine can often make multiple products for multiple markets (without retooling).

    I hope this is helpful insight.
    Aug 12 01:47 PM | 4 Likes Like |Link to Comment
  • Dividend Investing Works in All Markets [View article]
    Some helpful perspective on this can be gained by examining the bond market.

    In particular, if one were to compare the bond "duration" (sensitivity to the market interest rates of other bonds) of a "coupon" bond to the bond "duration" of a non-coupon bond, it would be observed that "coupon" bonds are less senstive to interest-rate fluctuations. This is because the investors in coupon bonds will still get their coupon payments regardless of the bond price (assuming no defaults). Whereas, investors in non-coupon bonds depend solely on the future sale (or eventual redemption) of their bonds for their investment return.

    Similarly, stocks with RELIABLE dividends and healthy dividend yields will have less volatility and, thus, less downside risk. (Less volatility also implies less upside potential, too.)

    Next, consider that, in a situation where the general equity market appears to be inflated in value, would that not be a good time to shift some of your portfolio to assets with lower downside risk? (assuming that you can still find some with attractive yields.)

    Conversely, if the market appears to be near a bottom, the greater upside potential will be with those assets which tend to be more volatile (perhaps small caps, for instance). (Such assets often don't pay dividends.) (On the other hand, you probably can find some equities with reliable dividends at unusually attractive yields, too.) (Of course, it is difficult to predict a market bottom.)

    Naturally, when considering an individual asset for purchase, one would prefer to buy it at its "bottom". However, when managing a portfolio of various asset classes, one should consider the effect upon the whole portfolio of one's investment decisions.

    Meanwhile, because of the difficulty in predicting market tops and bottoms, a portfolio of "healthy" dividend stocks with dividend re-investment can be very attractive for long-term investors.

    Jun 2 08:57 PM | 4 Likes Like |Link to Comment
  • Was the AIG Bailout a Goldman Bailout by Proxy? [View article]
    Here's some additional background from "Tyler Durden"...

    Jul 27 05:06 PM | 4 Likes Like |Link to Comment
  • How Wall Street Manipulates the News...And Investors [View article]
    Just a few more items...

    The general theme of these links is that (1) the FOMC is inflating the various markets by buying Treasuries and (2) the Bureau of Labor Statistics is deliberately being overly optimistic with its data reporting.
    Sep 20 10:00 PM | 3 Likes Like |Link to Comment
  • How Wall Street Manipulates the News...And Investors [View article]
    Those of you who have been followers of Seeking Alpha for a couple of years might remember the former contributor "Tyler Durden" (a pseudonym inspired by the movie "Fight Club").

    His (or perhaps "their") website, is filled with various data-supported blog entries which describe various indicators of apparent market manipulation as well as the the activities of the Plunge Protection Team (led by Brian Sack).

    That site covers other economic topics also.
    Sep 20 09:13 PM | 3 Likes Like |Link to Comment
  • The Great ‘Deflation Lie’ [View article]

    It's sounds like you actually live in the real world.
    Aug 12 12:47 PM | 3 Likes Like |Link to Comment
  • Four Reasons to Fear Deflation [View article]
    Actually, those individuals who have credit card debt also "cheer" deflation (assuming, of course, that they can stay employed).

    - When wages are constant, deflation in consumer goods will increase a person's disposable income (which can be applied to debt reduction).

    - Conversely, as we saw in 2007-2008, inflation will reduce disposable income (for most people) and lead to an increase in debt defaults. [Not many people saw their wages rise with inflation during that time period. Rather, many had a pay freeze as their employers tried to compensate for rising raw material costs.]

    For those few whose income actually rises during times of excess inflation [without a long time lag], consider yourself lucky.

    Of course, price stability is better than either [significant] inflation or [significant] deflation.

    My real point is that...we should not assume that moderate deflation is "totally evil" and moderate inflation is "completely benign".
    Jul 20 07:37 PM | 3 Likes Like |Link to Comment
  • Tax Break on Mortgages May Disappear [View article]
    Actually, the economic instability of the last 4 years (inflation followed by unemployment) has already compelled the poor and many of the middle-class to utilize "group living arrangements, growing your own food..." One could also add to that "transportation without the use of a private vehicle" (via walking, bicycle, or the bus).
    Jun 11 12:42 PM | 3 Likes Like |Link to Comment
  • Thoughts on the 0.00% Yield [View article]
    Solar works well for drying clothes, too.

    (Sorry...couldn't resist the opportunity for some humor today, albeit truthful humor, in this case.)
    Mar 16 06:56 PM | 3 Likes Like |Link to Comment
  • The Grip on Consumer Credit Finally Loosens [View article]
    The raw data from the Federal Reserve actually supports the comment from "j-dub".

    I visited the website today and found this interesting article from "Tyler Durden" (title: "The Primary Source Of January's Surprising Boost To Consumer Credit? Why, The US Government Of Course")

    He provides a link to the Federal Reserve's website to support his claim. Here is that link again:

    Take note that... the ONLY column for which January is higher than December is the column labeled "Federal Government".

    Mar 5 08:35 PM | 3 Likes Like |Link to Comment