Table On-Topic Summary - 14-Oct-2002
A compilation of this board's financial/economic posts From 43594 to 43617

Post  43594  by  pmcw       Reply
star, It certainly looks like you hit the DOW on the screws in your post of Feb 2000. However, was that the only broad brush prediction you made back in 2000? I seem to remember you calling for NASDAQ 6200 and a rabid bullishness in JDSU that followed your DOW forecast, or am I mistaken? Regards, pmcw

Post  43595  by  lkorrow       Reply
ttalknet2, good link. Shows we need to move big time on solar, etc., within 10 years. Utilities are really dragging their feet on that, since it decreases their revenues. I suppose they don't realize it will be offset by increased demand.

Post  43596  by  maniati       OT: Dan: Ethnic Cleansing in Indonesia

Post  43597  by  pacemakernj       Reply
Linda, I just herd quickly on CNBC that 4th qtr GDP numbers are in the 0.5-1.0 range. I don't know who said it but clearly we are slowing down. Third qtr is calling for a 3.0-3.5 range. Pace.

Post  43598  by  pacemakernj       Reply
Stardance, I think that is a possibility and reasonable prediction for the short term. Pace.

Post  43599  by  lkorrow       Reply
Pace, I can believe it, still winding down. Hopefully capex begins to move again with new budgets in 2003, but there has to be some sustomer demand to drive it.

Came across a WSJ special report on China. The graphs show GDP cut in half in 2002 from a 2001 ith an output of almost $1.1 trillion (USD) vs. 2002's $500 billion. Imports had surged to $250B in 2001, now down to $150B. Everyone's feeling this slump, even emerging markets are way down after being the last bastion of a decent return earlier this year.

Opening the Floodgates
Wall Street Journal

For decades, global companies have imagined the day when the Chinese would start buying foreign goods. It's here.

SHANGHAI -- At this city's main flower market, black roses grown in Malaysia are sold to eager passersby directly from cardboard boxes, just hours removed from the refrigerated cargo hold of an airliner.

About a mile down the road, upscale home-decoration stores do a booming business in floor tiles imported from Italy and Spain and toilets and sinks from Switzerland. On the city's outskirts, mom-and-pop shops peddle Turkish and Indonesian fabrics that customers turn into curtains, while imported BMWs and Volvos at auto dealerships roll off showroom floors almost as fast as they are stocked.

Shanghai, a teeming city of about 15 million people and long an engine of China's economy, is witnessing the forward edge of an import boom. And the same change is unfolding across China. Whether it's flowers, autos, natural gas or tourists, the country is beginning to contribute to the world's growth -- simply by consuming -- like never before.

In July alone, port operators in Shanghai handled a record $3.8 billion in imports, putting the city on track to top $40 billion in imports this year for the first time ever, according to city-government figures. Nationwide, imports for 2002 are expected to top $250 billion, also a record.

Going Global

For a country famed for its export prowess, China's suddenly strong demand for foreign goods may seem an odd thing. But, in fact, it's the natural outcome of a handful of emerging trends that are infusing the world's seventh-largest economy (fourth-largest if you count the European Union as one economy) with added vitality: rising incomes and falling import tariffs, a burgeoning taste for things foreign and, most important, bursting corporate demand for raw materials and machinery, which in turn is fueling China's exports.

China's newfound appetite for imports -- part of its wider embrace of the global marketplace -- still pales in comparison with the world's economic leader, the U.S., which imports five times as much as China does each year. But this gathering economic current has important implications. As the trend threads its way into the homes of China's citizens -- thanks, in large part, to the country's membership in the World Trade Organization -- it's a reminder that China is catching up with the likes of the EU, Japan and the U.S. as bastions of private consumption. And that makes cities like Shanghai a tantalizing preview of what could be a profound change in the world economic order in coming years: China, for the first time since its adventurous Adm. Zheng He of the Ming Dynasty plied the oceans in search of foreign goods, is emerging as a major global consumer.

"China," says Chang Qing, a professor at Beijing Technology and Business University, "is well on its way to becoming a driving force in the global economy, a role similar to the one the U.S. now plays."

But China's stunning economic expansion also has raised apprehension and questions among its neighbors. Among them: Is China's growth a good thing, or is Beijing merely sucking up foreign investment and dominating export markets at the expense of its Asian neighbors?

Broad Benefits

The quick answer: Fear of China as a vacuum is overblown. While concern about the rapid rise of such a mighty neighbor is in some ways understandable, the signs these days suggest that China's growth is, in fact, complementary to the vast majority of countries, including the U.S. and Europe.

Indeed, as foreign investment continues to flood across China's border -- it's expected to reach $50 billion this year, according to government forecasts -- the country is fast becoming an integral part of many corporations' global strategies, and even helping some spring to global prominence. And though in some cases the manufacturing relocation to China means fewer jobs at home, it's also boosting corporate profits, creating leaner and stronger companies and dramatically lowering costs for consumers.

For now, though, China remains saddled with a half-reformed economy, an unemployment rate of at least 10% and hundreds of millions of struggling farmers. The result is that the country's consumer demand for imports is now driven largely by elite entrepreneurs and white-collar workers, a group some economists say numbers roughly 50 million people. That figure may seem large, but it's small compared with the country's total population of 1.3 billion.

Thus, China's growth, at least for the foreseeable future, will continue to lean heavily on the twin pillars that have brought the economy to where it is today: dizzying levels of foreign investment and a fiercely competitive export sector -- two areas that have shown scant sign of fatigue despite the recent slowdown in global growth.

With the world's largest supply of cheap labor and a deep pool of college-educated engineers and scientists, China has become irresistible to foreign companies. In the past two decades, the country has sucked up well over $400 billion in foreign capital. Almost every large global company has a presence in China, and many are now expanding. All this has propelled a sevenfold expansion in China's gross domestic product in the past 20 years. And it's leading another round of heady growth this year, with the economy expected to expand by 7% to 8%, according to the Chinese government.

One such company taking advantage of China's new role is Compal Electronics Inc. of Taiwan. A decade ago, Compal was a midlevel player in the global electronics industry and had all of its manufacturing operations in Taiwan. Today, the company has built a large manufacturing and assembly operation in a city outside Shanghai. Because costs are lower in China, Compal is increasing production here. It now produces more than 200,000 laptops a month at one of its factories near Shanghai. As its output soars, so, too, does its global profile. So far this year through September, the value of the company's exports from China, which are sold under such names as Dell, Toshiba and Legend, have reached $850 million. That's already double the total for all of last year, the company says.

The company's low-cost production in China is making new computers more affordable for consumers in Asia, the U.S. and Europe. All the while, Compal maintains a work force of about 4,000 in Taiwan to tend to things like accounting and sales, research and development and the one factory it still has there.

Says an assistant to the company spokesman: "The relationship is beneficial to everyone.... We provide the technology and, in return, we get access to a low-cost production base."

Foreign manufacturers like Compal accounted for nearly half of the $266 billion in exports from China-based companies last year. And the proportion could continue to increase in the years ahead, as more foreign companies take advantage of China's lower costs and more of the country's own 800 million or so farmers quit their fields and look for manufacturing jobs.

Something for Everyone

This type of export-manufacturing business will continue to support China's growth for years to come. But as its economy matures, China's appetite for foreign commodities will only expand, providing a boost to the global economy in a range of other areas.

Natural resources are one example. China, a net importer of oil for almost a decade now, is a major client of many Middle Eastern nations, and much of that trade is routed through Singapore, benefiting the island's economy. China's demand for Mideast crude isn't likely to abate anytime soon, but as its economy gallops forward and its own oil fields dry up, Beijing wants to diversify its energy reliance. That's good news for countries like Australia, which this summer signed a $13 billion deal to supply China with liquid natural gas, a cleaner substitute to oil. Indonesia is now negotiating a slightly smaller liquid-natural-gas deal with China.

The economic gains don't stop there. China is becoming a major consumer of timber, but its forests are depleted -- so Indonesia, with its abundant timberlands, is a natural fit as a supplier, as are Cambodia and Siberia. China's demand for iron ore, meantime, was the reason its biggest steel company, Baosteel, recently paid $670 million for a stake in an Australian iron mine. Even U.S. farmers stand to benefit greatly from future soybean, wheat and corn sales to China, thanks to Beijing's desire to move its farmers out of grains and into more-profitable cash crops, such as mushrooms, garlic and green vegetables.

Eventually, people like Rain Gu could even start playing a large role in the global economy. An office administrator for a U.S. company in Shanghai, Ms. Gu, 25, has never traveled abroad before. But this month, she's using part of her savings to venture to Vietnam, one of a handful of countries that have waived restrictions on Chinese traveling to their countries.

There are millions more like Ms. Gu. Last year, the number of Chinese traveling overseas jumped 16% to 12 million, according to government statistics. Most of these travelers were from China's wealthier coastal region, which suggests the numbers could explode when incomes in the hinterland finally catch up. By that time, though, people like Ms. Gu could be well on their way to becoming regular visitors in foreign lands.

"My real dream," she says, "is to visit the U.S. and Europe."

Jobs Are Key

Of course, the greatest beneficiary of all this potential economic activity will be China and its citizens.

For all the fantastic forecasts of Chinese growth, the country's economic future rests largely on its ability to create jobs. Unofficial estimates put the number of unemployed at more than 100 million, and jobless benefits are meager. Failure to create new jobs could lead to social dislocation and throw a wedge in China's ambitious development plans.

That's why even the smallest areas, like the flower market in downtown Shanghai, make a difference. Says Hou Weifa, a 22-year-old flower vendor who moved to Shanghai from a small farming village five years ago: "With import tariffs coming down, we're hoping we can make an even bigger profit in the future."


Post  43600  by  Decomposed       OT: Table ON TOPIC SUMMARY Oct 13, 2002

Post  43601  by  lkorrow       Reply
Pace, more on the economy.

Recession, Part II?

If recent trends in employment and industrial production continue, it could mean a "double dip."
October 10, 2002: 4:15 PM EDT
By Mark Gongloff, CNN/Money Staff Writer

NEW YORK (CNN/Money) - For months, most U.S. economists have been saying the economy is in little danger of "double dipping" back into another recession, and for months economic data have been supporting that view -- until recently.

The National Bureau of Economic Research, a private economists' group that is the most respected arbiter of the nation's economic cycles, examines a small set of data before calling the start of a recession: the number of employees on non-farm payrolls; industrial output; sales by manufacturers, wholesalers and retailers; and real personal income.

Of those four, the most critical is the employment figure, according to the NBER. During a recession that began in March 2001, payrolls fell for 13 straight months. This year, beginning in May, employment grew slightly for four straight months.

But payrolls fell by about 43,000 jobs in September. Meanwhile, another number followed by the NBER, industrial production as measured by the Federal Reserve, fell in August, the first decline since December 2001.

It's early yet, and these numbers could be revised, but if they are the start of a trend, then the economy might already fallen back into recession in September.

"If we hadn't had a recession a year ago, and we were watching the fall in employment, a stalling manufacturing sector, falling bond yields and falling stock prices, many people would think we were entering a recession," said Rory Robertson, interest-rate strategist at Macquarie Equities (USA). "There's an assumption that the recovery will continue and get stronger next year, when in fact it's possible the economy's tipping over again."

"It's too early to say with great confidence that things are definitely getting worse, but if we get another month or two of payrolls declines, there won't be any shortage of people saying a double dip has started," Robertson added.

Most economists aren't convinced of that yet.

They acknowledge the economy is facing risks, particularly the reluctance of businesses to hire new workers and increase production until uncertainties about the economy, a possible war in Iraq and falling stock prices clear up.

But they also point to continuing strength in consumer spending, which probably drove gross domestic product (GDP), the broadest measure of the economy, up at a 3 percent rate or better in the third quarter.

Though GDP growth is expected to slow in the fourth quarter -- especially since a lot of the third quarter's strength was driven by automobile sales, which won't contribute much in the fourth quarter -- it's still not expected to fall off the table.

"It's appropriate to characterize our situation as on the bumpy road to recovery," Treasury Secretary Paul O'Neill said at a Washington news conference Thursday. "It's not a rocket shot, but it's not terrible, either."

O'Neill and Commerce Secretary Don Evans joined a chorus of voices in the Bush administration, including White House economic advisor Glenn Hubbard, who have tried to reassure nervous Americans that the recovery is still breathing, however blue its face might look. Fed Chairman Alan Greenspan and other central bank officials have made similar comments.

But are they all just whistling past the double dip?

"For the [Bush] administration, Hubbard is a good soldier, he's out there being a cheerleader; and the Fed says everything's OK," said Northern Trust economist Paul Kasriel. "But you can't see their hands behind their backs, with their fingers crossed."

This is an especially sensitive issue for Bush, considering his father lost a bid for re-election in 1992 mostly due to charges that he gave the economy short shrift.

Kasriel and other economists point to high levels of consumer debt as a major threat to the current economy, with household debt loads at record highs relative to disposable income and Americans spending $1.22 for every dollar they earn.

With personal bankruptcies and mortgage foreclosures at record levels and delinquency rates rising on credit cards, auto loans and other debts, consumer spending, which fuels two-thirds of the total economy, is endangered.

"Maybe the economy's just going to bump along the bottom for a while or have sluggish growth. But given the state of consumer finance, I don't see how there can't be major problems if unemployment goes up," Kasriel said.

And there are even deeper problems in the corporate sector, which has a glut of excess production capacity following the boom in technology spending at the end of the 1990s.

That spending fell off a cliff in the second half of 2000, after the stock market bubble burst and businesses woke up from the late 1990s party. Most were left with a splitting hangover, reflected by the bunch of shiny computers and gizmos for which they had little use.

What followed was a prolonged slump in the manufacturing sector, setting the stage for a grim labor market. During the height of the 1990s boom, between 1993 and May 2000, payrolls expanded by about 250,000 jobs a month.

But payroll growth hit a brick wall in June 2000, growing by just 38,000 jobs, and it's been pretty much downhill ever since.

"We've basically been in one long recession that started in the fall of 2000," said Lacy Hunt, chief economist at Hoisington Investment Management in Austin, Tex.

If that's the case, then any head-scratching about "double-dipping" is moot.

Continuing stock-market weakness could be one sign that the economy's downturn still hasn't ended, according to Hunt, who said that, in every one of the last 19 recessions, there was a meaningful upturn in the Standard & Poor's 500 stock index that took place about six months before the recession ended. That obviously hasn't happened yet.

"The stock market has given off false signals in terms of anticipating recessions, but it has never given off a false signal about recovery before the recession ended," Hunt said.

Source (also contains unemployment and mfg graphs):

Post  43602  by  lkorrow       Reply
Here's a story that echos my view that telco wholesale prices are way low! I think pmcw has also expressed this view and has certainly blasted the Telecom Act in past posts! Providing lines to competitors below cost has inspired the likes of AT&T to enter into local markets and use resale as an interim strategy until they build their own facilities-based local business, but has also enabled all the mom and pop telcos to capitalize on resale while doing little work, siphoning off business from the incumbents and weakening this capital-intensive industry. jmho.

Get off the line

Baby Bells, rivals spar over telecom rules

By Peter J. Howe, Globe Staff, 10/14/2002

Two years into a deepening debacle for the US telecommunications industry, some of its few strong survivors, the Baby Bells, are warning Capitol Hill and federal policymakers that regulations meant to promote competition are instead starting to drag them into the meltdown.

With aggressive public relations and lobbying, companies such as Verizon Communications, SBC, and BellSouth have in recent weeks been cranking up pressure to roll back rules they say are forcing them to give competitors access to their phone networks at well below true costs.

Critics, from small phone companies all the way up to AT&T and WorldCom, call the charges wildly overstated, noting that the Bells continue to present themselves to Wall Street as cash cows. They say incumbent carriers that never lost the soul of a Bell System monopoly see an irresistible chance to crush what little competition they still face after waves of bankruptcies. The Baby Bells' real problems, they say, are the sputtering national economy and innovative challenges from wireless and cable broadband companies that are drawing millions of customers away from flat-footed Bells.

But from a public policy standpoint, companies like Verizon and SBC seem to be spending most of their time now complaining that regulations spawned by the landmark 1996 federal telecom act are coercing them to transfer wealth to competitors. Bells say the situation is driving thousands of layoffs. And, they say, it has forced them to cut billions of dollars from their capital spending, helping choke the high-tech economy and driving once-soaring network equipment makers like Lucent Technologies and Nortel Networks to penny-stock status.

In a recent interview, Verizon chief executive Ivan G. Seidenberg said: ''The deal was we would make our network open to competitors on a nondiscriminatory basis. Nobody ever said we'd give it away at below market prices.''

Verizon spokesman Eric Rabe said the company estimates that forced subsidies to competitors are now costing Verizon $350 million a year, including, in Massachusetts, an average $11 a month for every phone line rivals such as MCI WorldCom, Allegiance, Broadview Networks, and others rent through the most popular regulatory scheme. Rabe said Verizon thinks the situation could become a $500 million problem within two years.

SBC, the second-biggest phone company after Verizon, goes much further, saying bad regulations that force it to sell 4 million lines below cost are a major reason it will lay off 21,000 employees this year. And a top BellSouth executive blasts current access rules as ''a perversion'' of the 1996 act.

Rivals hotly dispute these claims. They say the Bells drastically overstate their costs and refuse to accept regulations and accounting systems that have been upheld by the Supreme Court.

Moreover, critics say, the Bells conveniently leave out the fact that the local competition measures they complain about are part of the 1996 grand bargain allowing them to sell long-distance service. In just two years, Verizon has seen its long-distance traffic boom into a $1 billion business.

''They're doing everything they possibly can through the regulatory process to try to kill us,'' said Rob Shanahan, chief executive of Conversent Communications, a Marlborough-based company that serves 30,000 business customers in Verizon's New England and mid-Atlantic territories. ''They see that the [competitive phone] industry is very weak right now, and they're trying to put the final nail in the coffin.''

Much of the debate gets conducted in an incomprehensible lingo like UNE-P and TELRIC. But the stakes for the economy, the stock market, and consumers are vast, including:

Future Bell profits and the value of their stock, some of the most widely owned investments in America.

Thousands of possible layoffs for Bell workers, including some of the best-paying blue-collar jobs in the nation.

How soon if ever Bells restore tens of billions of dollars in reduced capital spending on their networks, the lifeblood for Lucent, Nortel and other gear makers.

Whether the handful of surviving Bell competitors formed since 1996 survive, or whether they go the way of dozens of companies, including CTC Communications of Waltham and Network Plus of Randolph, in filing for bankruptcy protection.

Whether AT&T, Sprint, and WorldCom can continue to provide consumers a competitive local and long-distance calling bundle. Those include WorldCom's innovative Neighborhood phone plan, a $50- or $60-a-month ''all you can eat'' all-distance calling plan offered in parts of Massachusetts and 36 other states, and AT&T local/long distance packages in eight big states, including New York, California, and Texas.

And whether, as some analysts warn, the Bells are allowed to resume being the monopoly carriers they were before the 1984 AT&T breakup, depriving telecom consumers of choice and innovation.

Locally and nationally, two regulatory proceedings account for why the issues have boiled up this fall. At the FCC, officials are expected to complete by winter a congressionally mandated every-three-years review of the 1996 act. It will include deciding which parts of their networks - phone and data lines and switches - the Bells must continue to make available to competitors.

In Massachusetts, the Department of Telecommunications and Energy is grinding through a proceeding aimed at determining just what the rates for ''network element'' rentals should be. The DTE hopes to act by the end of the year and expects many rates to be reduced, but the decision has been delayed several times by requests for new information by Verizon, AT&T, WorldCom, and smaller carriers.

One of the biggest complaints of the Bells involves a way for competitors to use Bell lines to serve their own customers, a method called ''unbundled network element-platform,'' or UNE-P.

Throughout the United States, competitors are allowed under the 1996 act to buy Bell-provided phone service at a discount to retail prices and resell it. But UNE-P, which is functionally identical, allows competitors to get even bigger discounts by, in essence, buying the same phone service as three separate, even cheaper pieces.

In Massachusetts, the straight ''resale'' discount is 29 percent, or 25 percent if competitors use Verizon for operator and directory-assistance services. But competitors can exploit UNE-P to get a 46 percent discount, according to Michael Glover, the Verizon senior vice president and deputy general counsel. On high-end residential and business lines, Glover said, the discount can be as much as 70 percent off Verizon's retail cost.

Over the last 18 months, the number of lines Verizon is providing to competitors has held steady at a little over 3.6 million. But the share of those sold at more advantageous UNE-P rates, rather than traditional discounted resale, has jumped from 1.6 million to nearly 2.4 million

Figuring out how much it really costs a company like Verizon, with 175,000 employees, $60 billion in annual revenues, and 26 million phone lines to provide a competitor a phone line in Cambridge or Quincy is impossible, a matter of hundreds of accounting opinions.

Although it was upheld earlier this year by the Supreme Court, an FCC-prescribed method for measuring costs, called ''total element long-run incremental cost,'' or TELRIC, continues to infuriate the Bells, which say it is based on a theoretically purely efficient, state-of-the-art network, not the actual properties they have cobbled together over 125 years.

''That's true, but it doesn't make it wrong,'' said Paul B. Vasington, chairman of the Massachusetts DTE. ''The whole premise of TELRIC is what would the costs be for someone today who was going to build a new network from the ground up. It's not a science, it's an art ... and our job is to implement the FCC's policies. [The Bells] have made their argument to the highest court in the land, and they lost.''

Vasington added: ''Prices equal costs' is our mantra. We haven't been focused on margins. Our job is to set prices relative to costs as the FCC has defined costs.''

Nancy Kaplan, a vice president of the Boston-based consulting firm Adventis, said she thinks the Bells have some valid complaints. ''The TELRIC pricing generally assumes that the company is run in an efficient manner,'' Kaplan said. ''They are essentially pricing the network elements below cost.''

Vern Kennedy, chief executive of Broadview Networks, which bought most of failed Network Plus earlier this year for $16 million and serves 260,000 phone lines in the Northeast, said: ''They're selling at below their cost of having them as retail customers. But they're not selling them at the cost of having them as an incremental customer.'' In Kennedy's view, TELRIC defines the marginal cost of, for example, the 10,000th customer on a network that already has 9,999 - a cost most observers agree would be close to zero.

Michael Morrissey, the Northeastern regional vice president for law and government affairs at AT&T, likes to ask: ''If these rates are such a great deal, how come you, Verizon, aren't running into SBC's territory and taking advantage of them to sign up new customers'' at what are supposed to be profitable rates?

''Either it's not the walk in the park they say it is, or there's a tacit agreement among the Bells not to compete with each other, and I would like to think that would be of interest to the Justice Department,'' Morrissey said. ''After all, here is supposedly a legal way to make money in the telecommunications business, and you won't do it.''

Rabe said Verizon is, in fact, building networks in some areas of the country, including Dallas, Los Angeles, and Seattle, to pick up business customers in areas now served by SBC and Qwest. But, he said, ''It's a matter of priority setting or us. The first priority is to compete in the areas we're already serving, and we have a major challenge there.''

Broadview's Kennedy scoffed: ''I have trouble when they're crying poverty. They're generating $20 billion a year in cash flow.''

Rabe acknowledged that, for all Verizon's complaints, ''We can absorb this. We do not think Verizon is going to go out of business because of this. But it's as if the FCC said, `We're going to fine you $500 million for doing nothing.' Our view is this is a serious problem. Even for a big company, $500 million is a big number. The question isn't, `Is this going to sink Verizon?' The question is, `Is that a fair deal for the people who invested in the company?'''

Peter J. Howe can be reached at


Post  43603  by  srudek       Reply
maniati: re AT isn't scientific.

Is this what you meant when you said AT wasn't scientific and used "a priori" principles? This passage is disturbing but, mainly, I think it obligates one to seek further -- perhaps reading Human Action -- to get more insight as to the "logic" of this position which seems rather illogical.

Here's the link I referred to above:

The Nobel Committee's selection of Vernon Smith (who shares the prize with Daniel Kahneman--more on him later), however, does present a bright spot. Smith admits to being strongly influenced by Ludwig von Mises' treatise, Human Action, and for that Austrians can be grateful.

. . .
Furthermore, in a very wide sense, Smith's research has demonstrated time and again that the Austrians are correct regarding human action in the marketplace and the mainstreamers are flat out wrong.

Smith, who is on the George Mason University faculty, specializes in "Experimental Economics," which is research based upon individuals simulating economic exchange within a controlled environment. As one can imagine, Austrians are not exactly enthralled with "Experimental Economics," as they think the whole thing to be rather silly.

The idea behind EE is this: individuals observed in the ordinary marketplace are not necessarily behaving in a "random" fashion, so the data needed for formal statistical studies may be biased, which then can render the hypothesis testing worthless. (This does not stop economists from engaging in such studies, but that is another subject for another time.) When individuals who serve as EE subjects operate under stylized conditions, however, supposedly that makes the data nonbiased, which then serves as a basis for proper studies.

. . .
Smith writes, however, that he discovered soon into his research that individuals actually could trade in an "efficient" manner, provided that free market prices and private property rights were permitted to be in effect. Furthermore, things like "externalities" and all of the other problems that supposedly blocked the reaching of "efficient" solutions turned out not to be the problems that the mainstream literature was claiming them to be.

All of this is well and good, of course, but it does not "prove" that free markets are best for society at large. That is not because Smith's work is slipshod or biased, but rather because it violates a central premise of Austrian methodology, that laws of human action cannot be "tested" for falsification.

Laws of economics in and of themselves cannot be set up for testing, as if they are found to be invalid in one place, by their very nature they would have to be invalid everywhere.
For example, when David Card and Alan B. Krueger published their notorious 1994 paper that claimed that increases in minimum wage in New Jersey and Pennsylvania actually led to more employment in fast food industries, what they were saying was that there can be exceptions to the law of demand.[ii]

However, if the law of demand is not valid for labor in New Jersey and Pennsylvania who can say it is valid elsewhere? Likewise, setting up the law of demand for falsification in a controlled laboratory setting might produce some interesting results, but "successful" results cannot mean that somehow the law of demand is actually true, since there is always the probability that a future experiment might negate the law of demand and send us back to the drawing board.

The law of demand is true, not because it has been demonstrated as true in a controlled setting, but rather because of the understanding that human beings act within time and space, and the implications of purposeful action lead us towards, not away from, the law of demand. Laws of human action are immutable; they are not products of probability or hypothesis testing, but rather exist because of the very nature of humanity.

Post  43604  by  clo       Reply
Power Poll: Pitt under fire

SEC Chairman Harvey Pitt has found himself caught in the crossfire in Washington. Do you think he should be allowed to keep his job? Take part in Monday's Power Poll.
In addition to renewed concerns over global terrorism, the flailing economy and corporate malfeasance, investors now cast a wary eye toward controversy at the Securities and Exchange Commission. Two top Democrats are calling for the resignation of Chairman Harvey Pitt because of the way he handled the creation of a national board to police corporate accountants. Congress ordered the SEC to set up the board this summer and TIAA-CREF pension fund chief John Biggs was seen as the front-runner to become chairman of the accounting board. But that may no longer be the case. The controversy began when Biggs' supporters accused accounting lobbyists of trying to block him. In addition, two new commissioners complained Pitt kept them out of the loop on the appointment. And in another case of internal strife, commissioner Harvey Goldschmid has criticized Pitt for working with New York's Attorney General Eliot Spitzer to settle conflict-of-interest probes with the major Wall Street firms. Goldschmid thinks the SEC should handle the situation. So do you think Pitt should keep his job as Chairman of the SEC? Tell Power Lunch what you think. Register your vote on the left of this page, and e-mail us your rationale. We'll discuss your thoughts on Monday's show.

Post  43605  by  srudek       Reply
maniati: need some feedback.

Geez, "economics" is awful confusing -- no wonder it's so seldom useful. :-Q I've begun reading Soros' The Crisis of Global Capitalism. He says economics is a "social science" and, as with other social sciences, is not really scientific at all, as human behavior is "reflexive" (his term): thinking changes reality even as reality changes thinking in a non-equilibrating feedback loop. That makes sense to me and explains that saying "history doesn't repeat . . . but it rhymes". Have you read much Soros?

As long as I have your attention, I could use some help in attempting to understand money/currency impact on prices and, specifically, economic thought about things such as "credit". Obviously, if all we had was money (dollar bills and coins) the impact of inflating money would be easy to follow. With checking accounts and long-term deposits (what I usually call "currency" when aggregated with money), the picture clouds a little, but is still pretty straightforward.

But what about credit and quasi-"currency" such as stock options.

It seems to me such instruments would be similar enough to money that they should be included in any thoughtful analysis of "inflation". I have a hypothesis that enabling money market funds, vastly increased credit access, and wide-dissemination of stock options is equivalent to the private printing of VAST quantities of "currency" by "private parties" (not much different than the private printing of money in the 1800's, which caused such a mess).

If this is so, then -- combined with A.T. models as I currently understand them -- I believe it would explain most everything we've been going through recently. If this is so then there has been ENORMOUS inflation. The inflation has already occurred. Why don't we see it? Well, AT covers that pretty well. ;-)

Let me know how full of beans I am -- but be gentle, ok?

Post  43606  by  spirare       Reply
Gold Poised To Jump To $400. Probably Higher$^^^^^

Gold is currently trading around $320/oz.
Its many fundamentals which will push gold higher, regardless of what happens in the Middle East.
A few of them are:

First one of the major gold mining companies -
American Barrick; announced it will no longer sell
gold in the futures markets.
For years they sold their gold to fixed prices.
So long as gold was falling, they made money.
But those heavy sales at fixed prices also helped
put a lid on the gold price.

Now the fundamentals are so strong, gold is rising.
But Barrick (and some other mines) are forced to
sell at the lower prices they already committed to.
They are losing hundred of millions of dollars.
So they are going to stop selling their production
forward on the futures market.
This removes one big negative from gold.

A second fundamental is driving gold prices higher.
People are seeing the world's economic/political crises.
They are watching the dollar fall, their stock market
investments all wipe out, exception is gold stocks.
They are selling their other assets and turning more and
more to goldstocks.

Gold accumulation is soaring.
Both in the U.S. and around the world.
Arabs are buying huge amounts.
Why? Because gold keeps their money safe.
The U.S. government may be able to freeze their bank
accounts. It can't touch their gold.

China is also accumulating large amounts of gold. So is
The two nations with the most people in the world.
On fundamentals alone, gold should reach $375 to $400 an
ounce in the next two to four months.

Then there's the war. When the Iraq makes U.S. to attack,
I see gold going to $500.

If the Arabs, embargo oil, if Iraq uses WMD, if the Middle
East oil fields go up in smoke; Gold could easily reach
$1000. Practically overnight.

Years ago, you personally saw gold shoot up from $250 an ounce to nearly $900.
Mostly on oil tensions.
Now we have oil tensions, terrorist attacks, a possible
war in Iraq, and as you will see in the next reco, a flight
out of the dollar.

I will try to buy a new strategic position in CALVF, every time I sell something else or at least when gold rises a few dollars an ounce, to try to make up for all other investments which goes down and hasn't been sold yet, incl. the real estate.

The House of Representatives and the Senate have
both now voted to give President George W. Bush authority to use force against

***The low gold price still gives one an opportunity to accumulate gold stocks to add to the insurance portion of one?s

Update: Gold Super Cycle to $1,257 Gold

Caledonia Risning from oversold conditions - Bullish*^*^*^*^*^

Current price of Gold

( (Voluntary Disclosure: Position- Long; ST Rating- Strong Buy; LT Rating- Strong Buy)

Post  43607  by  jeffbas       Reply
Re: "dollar's inflated position"

uponroof, I do not concede that point. Considering Japan's balance sheet and the potential cost of dealing with its catastrophic banking problems, its currency is possibly significantly overvalued versus the dollar. As far as the Euro is concerned, their social policies in general and toward layoffs in particular stand in the way of long term competitiveness. I wouldn't bet against the dollar there either (long term, anyway - just look at the Canadian dollar).

As far as gold is concerned, I will stick with my belief that IFF we have deflation, I see no reason why gold, platinum, diamonds et al will be able to be exchanged for more of other goods and services (by maintaining their prices when others fall), rather than possibly less. Aside from temporary influences, I do not find gold appealing to own except when the major risk is inflation. As a corollary, if gold were to become pervasively strong both as to price and time I would be inclined to conclude that inflation had become a major risk.


maniati, as far as Indonesia not being tough on terrorism goes, "money talks, and tourists walk". If these countries wish to enjoy stone-age economies and blame it on the West that is their choice. The outlook is poor in my opinion. Since the Crusades or longer, when those peoples generally were superior to the West in art, culture and militarily, they have done little but go backward - both absolutely and relatively. With a culture/society/government that looks to blame others (the Infidel, with a different religion) why should things change now?

I frankly think that the ONLY case for attacking Iraq is that they have little at stake to protect. The Cold War worked because the USSR had something worth losing. Most of these countries do not, and certainly have no motivation whatever to avoid giving terrorists weapons to be delivered at a time of their choosing, without any "signature" as to where they came from. The USA and other (Israel) military and civilian casualties may be bad now. However, only a dreamer like Gore would think that after 9/11 they would not be far worse as some future date if we do nothing.

I do think Bush deserves criticism for failing to paint the picture in an honest way - as it might be 50,000 lives lost now versus a much greater certainty of 3 million in the future, if we do nothing. There isn't any no-cost solution.

Post  43608  by  PinzaTodd       Reply
stardance: Spectacularly right and wrong

You made a truly great call on the DOW in February, 2000.

And you made a truly terrible call on the NASDAQ in August, 2000:

Win some, lose some. For chartists same as everyone else.

Buoan fortuna

Post  43609  by  pacemakernj       Reply
Linda, I have said we were in recession since the 2nd qtr. So this is no news here to me. But that said if this 3rd qtr. comes in at 3% GDP it will be the first time in my 13 years in business that the economy DID NOT correlate to my business. As for the 4th qtr. I've already said that companies will shut down any spending plans they had so as to conserve cash. My guess is the first qtr. will be a strong one again just like this year. But this back and forth stuff will wreak havoc on everyone and everything, including the stock market. But this is not my official forecast yet I am still waiting until November to get a feel for '03 spending plans. The only thing I can accurately predict is uncertainty. It is literally week to week and month to month right now and I don't see that changing yet. Regards, Pace.

Post  43610  by  srudek       ot: spirare-why are you such a broken record on &q

Post  43611  by  lkorrow       Reply
I see what you're saying, Pace. Sure is a rough situation. Well, we have some heavy hitters reporting this week. Good luck on INTC tomorrow, seems like they should do well on Dell advertising alone! I'm wondering how GM will do, seems like car sales should be tapering off. And there's Citigroup and Chase Tues and Wed, respectively. THAT should be interesting. . . .

• Tuesday: Bank of America, Bank One, Caterpillar, Citigroup, Delta Air Lines, General Motors, Intel, Johnson & Johnson, L-3 Communications, Motorola, State Street, U.S. Bancorp, Washington Mutual, Well Fargo.

• Wednesday: Advanced Micro Devices, Apple Computer , Allstate, AMR, Bank of New York, Boeing,, Coca-Cola, Delphi, FleetBoston Financial, Ford Motor, Honeywell International., I.B.M., J.P. Morgan Chase, Kraft Foods, Merrill Lynch, Schlumberger, Wachovia.

• Thursday: America West Holdings, Colgate-Palmolive, Continental Airlines, Fortune Brands, Gateway, Georgia-Pacific, Hershey Foods, KeyCorp, Liz Claiborne, Nortel Networks, Northrop Grumman, Northwest Airlines, Mattel, Microsoft, Philip Morris, Sears Roebuck, Southwest Airlines, Sprint, Sun Microsystems.

• Friday: Merck, UAL, Biogen, First Financial Bancorp.

Post  43612  by  tinljhtkh       Reply

I got a kick out of your post! It looks to me that we may have elements of all of these economic theories at play as we try to figure out the world trade and technologically driven economic model that faces us as we enter the 21st century.

"Exogenous shocks"

They do tend to upset the economic apple cart! What fascinates me is that we tend to install various hedges after each new one to mitigate any further damage. Trying to deal with this terrorist threat seems to be a big hedging challenge because of the continued unpredictability as to severity and location of the next event! It is interesting to note that insurance is supposed to play a key role in this type of hedging! With Travellers Insurance lending Bernie Ebbers over 700 million dollars, it might be interesting to look into the efficiency of a lot of potential hedging instruments!

"Keynesian theory. John Maynard Keynes blamed recessions on the inherent instability of investment caused by “animal spirits”: swings in the mood of producers, from optimism to pessimism."

It is interesting to note that the caution exhibited by this nation's CEO's has swing from positive to negative in the wake of the Enron scandals! Many individual investors have also pulled out of the markets after an many multi-trillion dollar bath! This wouldn't be as important except that there has been an increasing convergence between spendable wealth and the perception that it is acquired by investing instead of other forms of productivity. I don't know if anyone has tried to apply the law of perpetual motion to economics, but it has never worked very well otherwise! When an economy begins to exist on investments instead of productive labor you have to wonder what the friction drag factor is and how long it is before it kicks in! Perpetual motion machines, although sometimes very impressive and elaborate Rube Goldberg type inventions always fail because they simply begin the process of slowing down! The more complicated they are, the greater the chance that something will break down!

It is possible to introduce the idea that each new human being becomes another motion machine with new energy that must be expended. To do that, you must also introduce the biological term "osmosis" into the mix! Osmosis will not tolerate any sort of imbalance and tries to equalize it! If there are imbalances in the return for energy expended, this term will eventually equalize/average them until a happy medium is achieved! For example: If you have a portion of the human population making more money than another part, eventually the two parts will meet--on average--somewhere in the middle! This is particularly true when those making the higher wage wish to trade across the whole existing structure of economies (world trade), thereby removing their insulation from the phenomenon of visible wage differences!

"Real business-cycle theory"

""Mike Mussa, a former chief economist at the IMF, and now at the Institute for International Economics, describes it as “the theory according to which the 1930s should be known not as the Great Depression, but the Great Vacation.”"

This theory tried to explain the stagflation that was just ending when it came out! One of the biggest problems here is in a definition of terms, particularly productivity! During the 1970's, the rise of labor unions had gotten to the point where some workers who were not all that productive were protected from termination due to an imbalance between the power between management and labor. We are still seeing this today in the public school systems due to tenure and the inability to get around it in so many instances! The "great vacation" came in two parts in the 1930's--people put out of work due to the vacation taken by so many who controlled the money supply! 2002 is disturbingly similar to 1932 because there is a great deal of wealth sitting on the sidelines at very low interest rates for various reasons!

We have people out of the workforce, either voluntarily or otherwise, due to displacements caused by technology, excess wealth accumulated because they were net winners in the go-go 1990's, displacement caused by lower cost immigrant workers entering the American labor force who are taking jobs that Americans feel that they can not afford to stoop to doing anymore, and a host of other factors! If we look at the social security system and broaden that concept out to include the entire workforce, we are asking fewer workers to support an increasing more idle population--look how fat they are getting--who are living on investments and contributing little else to the economy other than to the leisure sectors who are now threatened by terrorists such as snipers and bomb throwers! It got so bad during the Depression that make work programs were created by government in order to put people back to work! It is interesting to note the labor fights going on out on the west coast involving the long shoremen and the Boeing employees, among others! The Boeing union refused to authorize a strike out of fear of job losses and Boeing still lost a large contract to Airbus today because Airbus discounted the aircraft more than Boeing was willing to do simply to keep their capacity in use! The longshoremen have gone from 60 K employees in 1960 down to 10.5 K in 2002 as they fight the battle against automation.

"Policy mistakes" "Almost every recession since 1945, with the exception of last year's, was preceded by a sharp rise in inflation that forced central banks to raise interest rates."

If you buy into this one, then raising interest rates in 1999 was a huge error simply because the reason for doing so has not materialized and we are facing a potentially deflationary situation! There is little price stability right now in any sector where raising prices is necessary to generate profits. The ability to raise prices is what creates inflation and we are certainly not meeting that definition at this time. It probably was different in the late 1990's because we were creating a second economy based on technology that was going to logically follow the second stock exchange--the NASDAQ! Few would say that the NASDAQ is not in a depression and many workers are now doing things other than what this new economy defined their jobs would be! If you look back at Keynesian Theory, this has not done the "animal spirits" of many workers much good! Many workers had found "fun" jobs in the new economy that they enjoyed doing and we will have to live with those memories in a generation of workers for the rest of their lives! It is interesting to note that the examples of parents and grandparents going to work at the same place for many years are still fresh enough in so many minds that those examples may be enough to keep worker dissatisfaction within manageable limits! There is also a "third economy" out there consisting of displaced corporate workers who are now self-employed or simply in the underground economy! It is ironic that the IRS is now turning its attention back toward the higher income earners after the outrages of Enron. This will allow the barter and underground economies to further flourish as limited resources are repositioned to fight the latest outrage!

Collection of taxes does two things--it raises money for the government and creates a statistical base that helps to understand what is really going on in the economy! Since the states are not allowed to print money, they are suffering financially to a great degree because they depend on the IRS to provide the infrastructure for tax collection in most cases!

"Austrian business-cycle theory" " "these economists put (recessions) down to excess supply brought about by overinvestment."

"the “natural” or equilibrium interest rate—the rate at which the supply of saving from households equals the demand for investment funds by firms."

Of all of the theories mentioned in your piece, the Austrian theory probably holds up the best in our current situation.

"If central banks hold interest rates below this rate, credit and investment will rise too rapidly, and consumers will not save enough. This creates a mismatch between future output (which will increase as a result of higher investment) and future spending (which will fall as a result of lower saving today). Cheap credit and inflated profit expectations cause both overinvestment and “malinvestment” in the wrong kind of capital. The mismatch between saving and investment will eventually push up interest rates, making some previous investments unprofitable. Too much capacity will also reduce profits. Investment collapses, ushering in a recession. As excess capacity is cut, profits rise and investment eventually recovers."

The thing that bothers me the most is that we now have "cheap credit" at levels not seen in forty-years and, although the savings rate in the average American household is going gradually up, so are the levels of foreclosure and delienquent credit card payments. It is interesting to note that CNBC reported in a survey today that the favorite payment to delay these days is the utility bill! Does that feed into an economic model as the Enron factor because of the supposed advantage that they took of California consumers?

It also is of concern that much of the national savings is being created out of borrowed home equity monies. This phenomenon is not really saving at all, but depending on the continual rise in home prices. That rapid rise is, unfortunately, also the definition of another economic term--the bubble! When we look at the housing situation and all of the refinancing that has gone on, two things come to mind. One, it may be difficult for certain sectors of the financial sector to expand profits simply because there is going to be this huge bubble of low interest fixed-rate home loans that people may not be willing to give up, even if it means, two" not selling their home! If we are looking at a fundamental shift in how people view mobility--they aren't traveling as far by fare paying treansportation any more--then they may not be selling those homes at the rate that they once were! I saw one of those ladies magazines on the rack at Wal-Mart yesterday! It showed a prominent country music star who said that she was living in a two-bedroom condominium and liking it! That could lead into a discussion of free-downloading of copyright protected intellectual music rights but then I'm not sure that the Austrians, Keynes, or anybody else included that level of efficiency in any of their economic models!

We live in very interesting times!




Post  43613  by  clo       Reply
Largest U.S. Meat Recall Made

PHILADELPHIA, Oct 14, 2002 (AP Online via COMTEX) -- Dom Spatano, who runs a
deli in the Reading Terminal Market downtown, said Monday he has changed what he
puts in his kids' lunchboxes because of the biggest meat recall in U.S. history.

"I stayed away from the turkey," Spatano said of a weekend trip to the grocery

Pilgrim's Pride voluntary recalled 27.4 million pounds of sliced deli poultry
Sunday over concerns about possible listeria contamination. The parent of
Wampler Foods announced its decision after a strain of the potentially fatal
bacteria was found at a Wampler plant in suburban Philadelphia.

The nationwide recall covers meat processed at the Franconia plant from May 1
through Oct. 11. The plant, which has about 800 employees, was expected to be
closed for at least several days for cleaning and tests.

Earlier this year, a listeria outbreak in eight Northeast states killed at least
20 people and caused 120 illnesses. Tests thus far have not linked the strain at
the plant to the one that caused the outbreak.

Much of the meat involved in the recall already has been eaten, officials said.

Outside a stand in the terminal Monday, Jerry Hahn, a snow-shovel salesman, bit
into a turkey sandwich with bravado. He said he had been assured the stand
roasted its own turkey.

"So I'm taking their word for it," said Hahn, 55, of Monticello, Iowa. "But I'm
also the type of guy that would have flown on Sept. 12."

The recall covers deli meat primarily sold under the Wampler brand, though it is
also sold under Block & Barrel, Bonos, Golden Acre, Reliance and a variety of
private labels. The products include poultry sold freshly sliced or made into
sandwiches at deli counters, and sliced meat sold in individual packages.

"It's all about ready-to-eat product. It just happens to be that sliced deli
turkey meat is a product that a lot of people eat," said Steve Cohen of the

Consumers were urged by the company to return any affected meat to the store or
deli where it was purchased for a full refund. Because consumers might not have
access to the meat's original packaging, the best way to know if a product falls
under the recall is to ask if it comes from a package that bears the plant
number P-1351 inside the USDA mark of inspection.

Listeria can cause high fever, severe headache, neck stiffness and nausea,
according to the USDA. It can be fatal in young children, the elderly and people
with weak immune systems and can cause miscarriages and stillbirths.

The Centers for Disease Control and Prevention recommends cooking leftover or
ready-to-eat foods until steaming hot before eating.

The largest previous meat recall in U.S. history was in 1997, when Hudson Foods
recalled 25 million pounds of ground beef after 15 people in Colorado fell ill
from E. coli after eating hamburger from its plant in Columbus, Neb.

The Wampler recall comes less than three months after ConAgra Beef recalled
nearly 19 million pounds of ground beef because of E. coli contamination at its
plant in Greeley, Colo.

Shares of Pilgrim's Pride fell nearly 25 percent Monday to close at $5.28, down
$1.73 on the New York Stock Exchange. Pilgrim's Pride, based in Pittsburg,
Texas, is the nation's second largest poultry seller behind Tyson Foods.

The company has not yet estimated the cost of the recall, but said the product
lines being recalled represent less than 2 percent of company sales.


EDITOR'S NOTE - Consumers with questions can call the company at toll-free at
877-260-7110 or the USDA Meat and Poultry hot line at 800-535-4555.


On the Net:

Recalled products:

USDA Food Safety and Inspection Service:


Associated Press Writer

Copyright 2002 Associated Press, All rights reserved


APO Priority=r
APO Category=1310
(CO:Tyson Foods; TS:TSN; IG:FOD;)

Post  43614  by  danking_70       OT: Clo re meat recall
Post  43615  by  clo       OT: danking, on Monday's I do books & banks & inve
Post  43616  by  rdb14       OT: Could the authorities have their man in Baltim
Post  43617  by  srudek       ot: War on the Constitution -