Dow & NYSE NOT at all time high - dollar going down

[Billy T]

...However, I never referred to the figures on total compensation (which appear at the end of the article). Rather, I referred to the real wages figures, which are in the same range as 10 years ago (right about when all of the outsourcing began in earnest). It's true that there was an increase in the late 90's and a decrease in the past 5 years, but the overall result has been fairly stable wages, historically speaking. I cited this only in order to demonstrate that outsourcing was not causing a significant decrease in wages, as you had contended.
It is true that the increases in total compensation are going pretty much straight into the pockets of HMOs. This is why I didn't never mentioned the total compensation figures, as I don't think the picture they paint is any different than that illustrated by real wages. At any rate, Americans are already plenty mad about health care costs and flat wages, and this has a lot to do with why the Democrats did so well yesterday. ...

Perhaps we need to make sure our terms refer to the same thing, but first let me note that I think more important effect on "average wage" than "out sourcing" is the retiring baby boomers. I do not think that people not working are counted in the "average wage" so I am not, for example, thinking of retired people's zero wage is dragging down the average wage when I speculate that baby boomers retiring may be more important than out sourcing, or soon will be.

Most people are earning the highest wages of their life when they retire. 100 people making the average wage can all lose their jobs to out sourcing with no effect on the average wage (again I assume zero wages never enter the calculation of the average) but one person making 100 times the average wage retiring has same effect as 50 people making twice the average wage losing jobs to out sourcing.

I do not think out sourcing helps the economy and no doubt I have said this, but you should not understand me to be blaming outsourcing for the lowering of the average wage. In fact it may help to raise the average wage if the typical job outsourced is less than a average wage. I.e. if you were sewing shirts in a NC shirt factory (less than average wage) and lost your job (as many have) to someone in Asia working for even less than you, then your dropping out (zero wage not counted assumption again) of the average wage slightly lifts the average wage.

I will not define all the terms we have been using, but would agree that the total of you get from your employer could be called "compensation" and exceeds your "wages." As I understood you and your reference, you did not like me stating that average wages were dropping because I was ignoring fact that the typical (compensation/wage) ratio has been increasing. I agreed that it had been, but if you want, as your ref did to say "average wage" is not falling as really it should be recognizing the growing compensation, then I insist that the fact that the education (especially college tuition), health care, and employer's Social Security contribution in "compensation" have NOT been increasing as rapidly as these cost to the worker can not be ignored either. I.e. employer is now paying smaller fraction of these cost also.

If we look only at wages, we all agree they have been going down. If we look only at education, healthcare & SS expenses, then worker still pays more AFTER RECEIVING from employer some greater help ( the non-wage "compensation") for these items. Thus is still true that the worker is having a harder time to pay for these items than years earlier. No mater how you want to calculate it (assuming you are honest and include both sides - income and out go) it is getting harder and harder for the worker. His compensation or his wages (Inflation corrected or "real") are going down compared the what his expense are doing.

Speak of “real wages”, “compensation” - what every you like, but get real about the fact that it is getting harder for Joe American to make ends meet.


I do not want to argue semantics with you. - I just think, whatever you want to call things, THE CURRENT AVERAGE WORKER IS LESS ABLE TO PAY HIS BILL NOW THAN IN MOST ALL PAST YEARS. That is why he has been forced to take cash out of his house by re-finance, borrow more where ever he can, save so little that saving rate is negative [baby boomers make big effect here too]. - He had no choice as his real wages [or compensation as % of education, health & SS education cost, if you want to speak of the non-wage part of his life] has been going down under GWB while the dollar has been dropping in value relative to other currencies [Frenchman etc. will be better able, relatively, to buy oil etc.]

GWB has been a disaster for US, even if there were no war in Iraq! From the election results, it seem many now understand that GWB’s Iraq war is a disaster. Few understand that the Iraq war is NOT his greatest disaster - they will recognize his bigger disaster when the run on the dollar starts, and they can not afford gas for their cars or meat for their table.

 

[Billy T]

In numerous threads I have noted that GWB really serves the big private firms, especially oil related or the family held ones, like Cargill (farm subsidies and gift of your tax dollars of 54cents / gallon of alcohol produced from corn etc.). While for many years, Cargill was the largest, according to Forbe's latest data, Koch Industries 90 billion dollars of income claimed first palce in 2005, bumping Cargill into second place. Koch is basically an oil company but uses the oil as a chemical feedstock and gets much higher return by making value added products from it (plastics like rayon & nylon the non-wool rugs you buy etc I think). Forbes described them as:

"Koch Industries, now the largest private company in the United States, owns a diverse group of companies engaged in refining and chemicals; fibers and polymers; commodity and financial trading; and forest and consumer products. The company has a presence in nearly sixty countries. In December 2005, Koch Industries finalized its $21 billion acquisition of forest products company Georgia-Pacific Corp."

Nice to have $21 billion lying around to buy a large paper company, is it not? Keep buying what they are selling. - GWB needs campaign funds now more than ever.

 

[Jeff 152]

Everyone is making this too complicated. As long as there is global faith in the dollar and the stability of the US Government (which there is) then there is no problem. Did you know that 2 South American contries have gotten rid of their own currencies and have made the dollar their currency? Bottom line, as long as there is faith in the dollar, and people continue to buy it, there is not problem. The only thing that could cause a crash would be radical political change that would make the world question the stability of the country.

And for teh record, there is no problem with the value of the dollar going up or down, it fluctuates due to a myriad of factors and goes both ways. Both can be good in moderation, both are bad in extremes.

 

[Billy T]

.... Bottom line, as long as there is faith in the dollar, and people continue to buy it, there is not problem....

that is correct. All fiat money is built on confidance. History is filled with examples of when confidence failed - runs on banks and national currencies. Confidence in the dollar is dropping, but not a run to get out, yet.

 

[Billy T]

Just thought I would bring life back to this old thread because it shows, as I predicted earlier here and imply in title of the thread of thread, which I started, that the Dow will make new highs as the dollar makes new lows. Again, I have been proven right.

 

[Billy T]

Not only the DOW, but Oil also is not at an all time high, if measured by a basket of currencies, instead of the dollar.

What is at an all time high is the fraction of the US corporate bond market that is with the "JUNK BOND" rating.

" ... Standard & Poor's said the U.S. corporate bond market was officially speculative grade. The big ratings agency said 50.7% of the corporate bond market is now rated speculative grade*, the first time this has happened, marking a decade-long shift toward more aggressive finance strategies and the evolution of the leveraged finance market. S&P calls anything below BBB- "speculative," but most people just call it junk. These days, the market calls it scary. ..."
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*That is their official name, but everyone calls them what they are: "Junk Bonds."

From Forbes:
http://www.forbes.com/2007/07/31/mar...ily_newsletter

 

[MrManganese]

I think you're essentially chasing performance, BillyT. A 5-year trend does not a permament setback make. At the start of 2002, when the USD had gone up in value 40% against world currencies over the previous 5 years, did you think it would go up forever? At the start of 1991, when it had just dropped 30% in the 5 years prior, did you think it would drop forever?

Would you have changed your money out of USDs in 1991 and into USDs in 2002? If so, you would've looked a little silly in hindsight. What you treat as imminent, actually has already happened.

 

[Billy T]

I think you're essentially chasing performance, BillyT. ...

No, I am not much interested in (or knowledgable about) the actual facts of the dollars valuation vs time. Quardaphonics has thus had the opportunity to correct me several times with real data, and I assume yours is also correct.

What I see and focus on is a "water shed" event - basically the transformation of the Clinton's surpluses into GWB's twin defficits. (His invasion of Iraq of course makes this more extreme and long lasting) These debts have become so large and the economy is losing jobs (that pay well) so rapidly that these debts can only be re-paid one way. - printing press dollars.

This is the excess liquidity that is currently bailing out the world's economies, but it can not be sustained, long term. This is the latest and last (MHO) of what I have called the "6L cycle" in thread:

"Is today the start of a perfect financial storm? (caused by "6L cycle")

in "World Events" forum, as it certainly is the major world event now occuring. (Occupies the front page of most newspapers all over the world.)

See that thread for more understanding of my reasoning, which is NOT based on temporal market value of the dollar data, as you assume, but on more fundamental considerations.

 

[Billy T]

Here is link to brief video presentation telling what I have been stating in this thread (especially the final chart showing that stock were up in dollars but basically flat in the british pound for several years):

http://video.ft.com/specials/?clipid=1359_FT0710

You may need to click on "The short view - weak dollar" to select and start the video.

Note I made this observation / prediction more than a year ago (post 1 was on 10JUly 06).
Also more than ayear ago I predicted that the DOW will be "flerting" with 15,000 by end of 2007 or eary in 2008 (I.e. in first quarter). I admit I am not so confident in this now because of the spill out from the "subprime mess," but think the "early 2008" qaualification will permit me to keep my prediction record unblimished.

 

[Billy T]

"..After a 5,000-point rise in the last seven weeks, the Sensex witnessed a correction of 1,500 points in the last three days of the week gone by. While foreign investors pumped $9.2 billion into the Indian markets in seven weeks, the outflow in the first two days — Wednesday and Thursday — after the Securities and Exchange Board of India (Sebi) proposed curbs on Participatory Notes was only $410 million.

Though Cassandras have started proclaiming doom for the market and the economy, after Sebi’s proposal on PN and the correction that followed, the ground realities have hardly changed. A section of market participants claim that foreign investors are on a “Quit India” movement, but the fact is that FIIs remain bullish on Indian markets and the economy, and even predict exciting times ahead over the next three to four years. ..."
FROM:
http://www.indianexpress.com/sunday/story/230523.html

Note that the ADRs are not covered by "Participatory Notes" that India is restricting (almost sure) to try to stem the flow of dollars into India. As in Brazil*, that influx has driven the value of the rupee up (now less than 40 to buy a dollar). The strong Rupee hurts exports and makes it less profitable to India's IT service industry (paying emploees in Rupees and collecting dollars for their services).

There has long been some restriction on foreign ownership of Indian companies. For example IBN (bank ICICI) ADR trades at a priemium on NYSX. It was almost 10% more I had to pay when I bought that. Any new restricition will just increase the premiums. I.e. Indian ADRs are good thing still to do with your money to protect its purchasing power as the dollar slide down will continue, YoY, with some volitity up and down, of course.
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*Only 1,79 Brazilian Real now required to buy a dollar, not the $4R of a few years ago.


BTW, DOW closed friday at 13,522, a long way from my predicted "flerting with 15,000 before end of first quater of 2008" (recently, and perhaps too cockyly changed to "before first 50days of 2008") HOWEVER, even with the closer termination date, today being 22Oct, there is 9+30+31+50 = 120 days to go. (Again I note "flerting" is to come within 2 or 3% of 15,000 and fall back without going thru at least once.) I remain confident still, but may need to switch back to the original end point. This confidence, as was the original prediction, is based on fact dollar is still hitting all time lows in value. Thus, Europeans can rush into US stocks cheaply now and "save my bet." - We will just wait and see. - I.e. it is still too soon to "throw in the towel."

 

[nietzschefan]

I dare say Billy, you are calling the shots now.

What is next...

 

[Billy T]

I dare say Billy, you are calling the shots now. What is next...

I wish I knew. I am not very good at short term predictions. Even my postulated mechanism for my long term prediction of a depression (between Oct08 and Oct2014) in EU and US may be wrong, but I hold firm to the prediction itself. I.e. I expected the dropping value of the dollar to one day turn into a run to get out that quickly (certainly less than the 6 months required for a recession to become "official") converted into the "Great Depression." Perhaps the Great Depression comes by via a recession first. GWB has doubled the debt, destroy US's good will, and had tax & loan regulation policy that favored the rich and killed Joe American's purchasing power, so it is surely coming.

I.e. It now looks like I may have been wrong about the details of the mechanism. I say that not only because we are clearly either already in recession or soon will be, but because of the current reaction in the BRICs, etc. It appears that many foreign investors* still consider the US Treasury bonds a "safe haven" as funds are being pulled out of the BRIC stock markets for investment in them. Perhaps even gold will do quite well for a year or two as Treasury bond interest has fallen so low that gold's zero interest (plus even custodial holding expense) does not look so bad by comparison.

The really interesting debate now is how real is "decoupling." - Or is it still true that when the US sneezes, the rest of the world get pneumonia?

Certainly now the BRICs are not decoupled and need US buyers (as does the US economy). MY suggestions that China and Asia in general, including India, could continue to prosper, with >5% annual GDP growth on their internal demand and the exports paying for their imports from South America and Africa, was conditioned on the collapse of the US NOT being this year or next, but at least a decade hence. None-the-less, even with the current events, I can NOT foresee China and India even sinking to typical low (2 or 3%) growth US has had, but if they do not continue to have approximately 10% growth for about a decade more, their internal customers AND export requirements** will not be big and strong enough to replace the US and EU customer demand.
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*Brazil has hard currency reserves equal to it total external debt - I.e could pay it all off - Something the US will never be able to do except by printing dollars. Yet on Monday the "Brazilain DOW" fell 6.6% mainly as foreigners took money out of Brazilian stocks. People are very irrational and thus unpredictable.

**payments to their suppliers of raw materials, food stock, and energy, mainly in form of new railroads with rolling stock, tractors, cars, TVs, cell phones, new ports with containers and cranes, medical / industrial / mining equipment, even whole "turn-key" factories, etc. (not only in money and weapons - that was the US way, which made local corruption and friendly dictators so easy and common.).