Passing The Devalued Buck (http://www.newsweek.com/id/91629)
Bush's mortgage-freeze plan sets a disturbing precedent. What's next, a moratorium on car payments?

In this article the author talks about how Morgan Stanley and Citigroup recently sold large chunks of their businesses to sovereign-wealth funds in Asia and the Middle East and Merrill Lynch is still looking abroad for capital despite a recent $5 billion sale of stock to the government of Singapore.

The author terms this: Selling the cow to buy milk.


I don't get it? If the companies are doing so poorly then wouldn't it be more like: sell a diseased cow before it dies to some suckers that don't know just how sick that cow is?


I am again wondering, with all this doom and gloom, what is in store for the US economy in 2008? It seem like it should be a better year for some people - manufactures spring to mind. Also, what about high-end jobs? My friend in CA insists there are sooo many vacant jobs in the top-end of the market (he's an enzymatic chemist/biochemist, he does directed evolution on enzymes).

So? What do you guys think 2008 hold for the US economy?

So? What do you guys think 2008 hold for the US economy?
More US borrowing from the Chinese to finance more death and destruction for the enemies of the Israeli lobby.

Well that's one prediction.

I was thinking more along the lines of: Will manufacturing jobs increase and will jobs that require a high level of technological expertise continue to grow?

I was thinking more along the lines of: Will manufacturing jobs increase and will jobs that require a high level of technological expertise continue to grow?
The US continues to be a world leader in high tech, while simultaneously losing more employment in other forms of manufacturing to nations with dirt cheap labour.

This was Alan Greenspans usual defense of his policies...that 5% of the US economy was producing the world's most advanced technology.
The other 95% going down the tube didnt seem to concern him.

Both China and Japan have taken great pains to keep their currencies undervalued to this end.

US politicians continue to scream about it...and these asian governments continue to ignore them.

So where does that leave the USA in 2008?

I mean, I was thinking that as the value of the USD is kind of tanking (I hope it really really really tanks) then manufacturing should be better off for it. BUT, I'm also wondering about my friends comment in terms of high-tech jobs in CA. He seems pretty bullish.

I was thinking more along the lines of: Will manufacturing jobs increase and will jobs that require a high level of technological expertise continue to grow?

The USA is relatively doomed until the next President changes policy. We still are a 13 Trillion dollar economy. But, if nothing is done, like the elephant, we can die overnight.

While everyone says that we still have a lot of technology, we are selling them faster than you can count. For years, the Japanese scan the patent office and buy off patents from items developed in US Universities. Mind you, patents produced in University labs are usually paid for by the government and state tax dollars. Then the Japanese manufacture it and sell it to us. Now, the Koreans and Chinese are in that game.

Even if you can invent a new fangled gizmo, to produce it, you need the infrastructure and the machineries. Most of the best machine tools and photo lithography etc are made in Japan. We still do large mechanical components, but due to pollution, we are not allowed to make certain chemicals. Besides, it is cheaper to buy them from China.

A year ago, I was sitting next to a furniture designer who just came back from China. Rather than building his ideas in USA, he is going to build them in China and import it cheap. That means, the 500 people he could have employed in USA will be no more.

Bottom line is, if you are a designer of innovative products or technology, you will do quite well. Others who got their degree in engineering and hoping to build your innovation will be selling hamburgers at Burger King.

There is nothing you can produce in USA that the Chinese, Japanese, Koreans could not produce cheaply. Only items that are impractical to ship will be produced here. And do not forget India which will do the brain work.

The real solution is to change the trade policy such that we hold on to the basic infrastructure items that you need to build new stuff. Germany does that very well. It is a national pride for the Germans to hold on to the technology foundation. There are some cracks in the German policies as well. Their Banks are notorious to shun new ideas and inventions. So, their days are coming too. They could not swallow Chrysler...

I mean, I was thinking that as the value of the USD is kind of tanking (I hope it really really really tanks) then manufacturing should be better off for it.
Thats an excellent point. The US might gradually recover some of its manufacturing base after a massive devaluation of the currency.

But this wont happen unless there is a serious crisis like a worldwide run on the dollar or persistent decline in the US GDP...a full blown depression in other words.

There are really four big problems looming:

1. Too much government debt.
2. Rising price of oil.
3. Undervaluation of Asian currencies.
4. Retirement of the boomers.

By the way, if our GDP drops say about 2 Trillion dollars - USA will still be the richest country but riots could break out in most major City. When economy tanks, the poor will be majorly affected and there are a lot more poor people than rich ones. We still hold 50% of worlds money!

Asian and European stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy, which has been battered by housing and credit problems. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

For years, the Japanese scan the patent office and buy off patents from items developed in US Universities.

How is this possible? Unis hold rights to all stuff developed in labs, why would they sell the patents to the Japanese?

A year ago, I was sitting next to a furniture designer who just came back from China. Rather than building his ideas in USA, he is going to build them in China and import it cheap. That means, the 500 people he could have employed in USA will be no more.

Most of the Indian businesspeople I know in the US are doing the same thing. Persian carpets designed in US, made in China. Luxury bedsheets for big hotels, designed in US, made in China. Designer clothes in Miami boutiques, designed in US, made in China.

How is this possible? Unis hold rights to all stuff developed in labs, why would they sell the patents to the Japanese?

Few people sell the patents. They license them for a long term. It is no point holding a patent, if you can not make money. I know a company that spun out of University of Utah research. They raised some local funding just enough to be operational. Then they got the major funding from Korea and moved the manufacturing there. So, the top management and marketing stayed in USA, but major work was done overseas where jobs went.

The problem is, in the past majority of items were manufactured in USA. Now, the research and maketing arm stays in USA and 90% moves overseas. There is nothing wrong with a few companies going overseas, but if majority moves overseas, then there are less jobs in USA. That causes the opposite trickle down. For every middle class job loss, there are 6 unemployed poor that has to be on welfare which drains the tax dollars.

And when the natives get restless, petty crime goes up as it is happening in Ohio (that is what I hear from friends in law enforcement).

I was watching BBC this morning and a few people were suggesting the USA may already be in a recession.

BBC

Global shares tumble on US fears

Investors remain worried about the state of the US economy
Global stock indexes, including the UK FTSE 100, have fallen their most since the terrorist attacks of September 11 2001 amid fears of a recession.
The FTSE 100 index tumbled 5.5% to 5,578.2, wiping £77bn ($149bn) off the value of its listed shares.

Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.

Investors questioned whether a recent plan to boost the US economy would be enough to avert a full-blown recession.

Last week the US government announced a financial stimulus plan which would involve about $145bn in tax cuts to encourage spending.

US markets are closed for a public holiday on Monday and reopen on Tuesday but other markets worldwide reacted negatively to the US plans.

Francis Lun of Fulbright Securities in Hong Kong said the falls stemmed from disappointment that the US stimulus was "too little, too late" adding that investors felt "it wouldn't help the economy recover".

'Panic mode'

The worry is that tax breaks and spending measures will not be enough to boost consumer spending in the US, because deeper economic problems remain.



In particular, the slowing housing market and problems in the sub-prime sector - which lends to those with limited or no credit histories - has contributed to a slowdown.

"We're falling back into the crisis of confidence in the financial sector," said Hugues Rialan, of Robeco France.

"The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realise there is nothing reassuring about it," he said.

Finance firms were among the main fallers, with Dutch ING Group, Germany's Allianz and Swiss Re all falling about 10%, while Royal Bank of Scotland shed 8%.

FTSE100 - WORST DAYS
20/10/87 down 12.2%
19/10/87 down 10.8%
26/10/87 down 6.2%
11/09/01 down 5.7%
22/10/87 down 5.7%

Many shoppers are struggling under higher mortgage repayment costs, prompting default rates to surge, especially among sub-prime borrowers.

This has prompted banks to tighten their lending policies after losing huge amounts of investments linked to the US housing and mortgage markets.

Dominique Strauss Kahn, the head of the International Monetary Fund, said the global economic situation was "serious" and that all countries in the world were suffering in the wake of a slowdown in US growth.

The state of the US economy is crucial for many of Europe's and Asia's biggest companies because it is one of their biggest export markets.


FTSE100 - BEST DAYS
21/10/87 up 7.9%
13/03/03 up 6.1%
10/04/92 up 5.6%
15/10/02 up 5.1%
25/07/02 up 5.0%

Any slowdown in demand is likely to hurt corporate profit growth and push share prices even lower, analysts have warned.

But some analysts took comfort from the prospect of falling US interest rates.

"If interest rates are cut to the extent we and others expect, the likelihood is that today's share prices will look like silly values in 12 months' time, if not before," said Mike Lenhoff at Brewin Dolphin Securities.

Global trend
http://newsimg.bbc.co.uk/media/images/44370000/gif/_44370592_ftse_21jan203x188.gif

Markets in China, India, South Korea, Singapore, Taiwan and the Philippines all fell.

In Mumbai, the main Sensex index fell 1,408 points, or 7.4%, adding to an 8% fall last week. Hong Kong's Hang Seng slumped 1,383.0 points, or 5.5%, to close at 23,818.9. Tokyo's main Nikkei 225 index fell 3.9%.

We're in the danger zone now

Bob Parker,
Credit Suisse Asset Management

Australia's benchmark ASX 200 index closed down 2.9%, or 166.9, points at 5,580.4, which is its lowest level for a year.

It was also the 11th consecutive negative day for the index, the longest losing streak in more than 25 years.

"People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen at Action Economics.

So far this year, Japan's Nikkei has dropped 13%, the Hang Seng is down more than 14% and China's main Shanghai index has slipped almost 7%.

Also, what about high-end jobs? My friend in CA insists there are sooo many vacant jobs in the top-end of the market (he's an enzymatic chemist/biochemist, he does directed evolution on enzymes). In the US, individuals pay for much of their own education and higher level training - in money, as well as time and opportunity.

So the upper end jobs will always go begging. The risk premium is too high, the debt too much, the life too short, tha payoff to the economy not reflected in the economy's investment early on. It is supposed to be the reward of individual ambition alone, and that will only support an unusual few willing to make the sacrifice up front and bet on the reward later.

Some high end jobs will be still there because some of the jobs and activities are planned ahead and budgeted. But they will be fewer if economy continues the way it is. Scripps international will be spending $800 million in Florida. That means they need a lot of researchers...remember, the great depression lost only 9% in GDP in 1930.

http://www.shambhala.org/business/goldocean/gdunemp.gif

In the US, individuals pay for much of their own education and higher level training - in money, as well as time and opportunity.

So the upper end jobs will always go begging. The risk premium is too high, the debt too much, the life too short, tha payoff to the economy not reflected in the economy's investment early on. It is supposed to be the reward of individual ambition alone, and that will only support an unusual few willing to make the sacrifice up front and bet on the reward later.Very clearly sighted iceaura. I totally agree.

kmguru,

When do we know if we're in a recession? When do the numbers come out?

Michael

Either last week of January or they may wait till April hoping the problem to go away. That is because numbers are calculated at the end of each quarter and results posted the following month. We are still waiting for a few major company results.

When do we know if we're in a recession?
The day after election day or until he finds a way to blame it on the democrats or Bin Laden. Bush will continue to do what must be done to make it look as if we are living in a rose-colored world.


http://chart.bigcharts.com/custom/nyt-com/marketbox-us-163.gifquote

Perspective on US recession and solutions

http://www.markfiore.com/

What I do not understand is that for the last eight years or so, Companies installed "Enterprise Performance Management" software that provides Balanced Scorecard, Business Planning, budgeting and forecasting, quality management, Business Metrics etc...to improve profit and revenue.

The vendors of these software claim the sky and Big 4 consulting companies including IBM install these high performance software and its twin, Business Process Management.

Somewhere there is a disconnect. A thought occurs to me is that just like the Brahmins in India some 2600 years ago destroyed the society (that would be another thread) , is the IT Group today doing the same thing?