*** Bill Bonner
Goodness does this man (Stephen Roach) ever find anything to be happy about...
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Limtex,
Don't you think it reasonable that he gets paid to tell things the way he sees them; not to put on a happy face for his readers.
Have you stopped to consider that those things he writes of may be in worse shape than you thought?
If you want happy faced spins, I suggest you turn your attention to CNBC..... <gg>
Here's s'more real life stuff from the brilliant minds of Bill Bonner and crew.
The People's Business ** Gold over $400...
By: Bill Bonner & Eric Fry
The Daily Reckoning
Paris, France
Monday, 8 March 2004
"It's completely natural," we explained to the reporter from "20 Minutes" on Friday, "people try to improve their living standards in the easiest way possible. But it's unnatural when they can print the world's money whenever they need some spending cash. Then, it is too easy. People begin to think you can get rich by not saving...or by borrowing and never paying back. It is dangerous; you almost can't resist slitting your own throat."
We had been asked to condense the theme of our book (recently a best-seller in France) into a sentence or two, for a broad audience. "20 Minutes" is a newspaper read by thousands of people on the metro in Paris every morning.
"Americans were on top of the world after WWII," we continued. "Gradually, they lost the habits that had made them rich...they became less thrifty and more immodest. Over 5 decades, my countrymen switched from making things to buying things, from saving money to spending it, and from lending money to the rest of the world to borrowing from it. The economy gradually changed from production to consumption, from manufacturing to retailing, from GM to Wal-Mart. And Wall Street mutated, too...from investing in industries, to investing in speculative finance."
"But the latest GDP numbers show the U.S. economy doing very well," protested the reporter.
"Ah...but there are different kinds of economies," we replied. "There's the kind of economy that makes people wealthy - in which people make things and sell them at a profit. And there's the economy that helps rich people get rid of their money...a consumption-led economy, with few factories, but plenty of credit and shopping malls.
"Unfortunately, most economists can't tell the difference. And the GDP numbers make no distinction between a productive, wealth-creating economy and a declining, wealth-consuming one. GDP only measures activity. It is a bit like taking the temperature of a shooting victim; you mightn't spot the problem until the body cools."
"Every day, the lifeblood of the U.S. economy dribbles overseas," we went on. "Profits, jobs, revenues...all flow towards lower-cost production centers. Today's [Friday's] job report out of the federal government, for example, shows about 100,000 fewer jobs than economists expected. Where are the jobs that should have been created by this stage of the 'recovery?' No one knows. All they can think of is the novel idea that productivity and innovation [see more below] have now made labor unnecessary - just as they said the New Era made savings unnecessary. But is all fraud and chutzpah..."
The Feds try to rescue the situation; they attach jumper cables of credit...stand back...and give the body a jolt. The poor schmuck jumps from the table, refinances his houses, and falls again in a heap. But the juice ends up stimulating economies in China, Malaysia and India! That's where they make the things Americans want to buy.
Thank God for Zembei Mizoguchi. The VP of the Japanese Ministry of Finance keeps the patient on life-support. He spent $250 billion of Japanese taxpayers' money last year...buying U.S. debt. This year, he may spend $270 billion.
As long as the money pumps back into the U.S. economy, Americans' home prices rise...and they borrow and spend happily. No one, neither Republican nor Democrat, high nor low, drunk nor sober, seems to notice that the patient is bleeding to death.
Over to Eric for more news...
Eric Fry in the heart of the beast, NYC...
- "Guilty as charged!"...Friday morning, the Labor Department's unemployment report indicted the "Greenspan recovery" on 21,000 counts of feeble job growth. The most serious charges were as follows:
a) Pathetic payroll growth of 21,000, which fell woefully short of Wall Street's expectation that 130,000 new jobs would show up in February.
b) The net new jobs number was a mere 279,000 jobs LESS than the White House's projection that payrolls would grow by 300,000 per month for 2004.
c) January's payroll gain was revised down to 97,000 from 112,000...76,000 of which were a seasonally adjusted mirage.
d) The average duration of unemployment rose to 20.3 weeks, the highest in 20 years.
e) The manufacturing sector lost jobs for the 43rd straight month.
So you see, acquittal was simply not an option.
- The Greenspan recovery has been producing many statistically pleasing data points, like booming GDP growth, rising consumer sentiment and strengthening surveys from the Institute for Supply Management. Unfortunately, the most important data point, job growth, continues to disappoint.
- Payrolls have risen for six months in a row, but job growth has been tepid, averaging only 61,000 a month, and February's numbers were downright awful. "This is another terribly dreary number," said Bill Cheney, chief economist for John Hancock Financial. "Yuck," said Joshua Shapiro, chief economist for MFR.
- The financial markets rendered their verdicts immediately: The dollar plummeted 1.5% to $1.237 per euro, while gold soared $8.20 to $401.25 an ounce and bonds yields tumbled to their lowest levels since July. Like a hungry vulture, the bond market feasted on the carrion of the nation's labor market, until the yield on the 10-year Treasury bond fell to 3.85%. [For ways to play the falling dollar, see our Special Reckoning Report:
"Seven Ways To Sell The Dollar" ]
- The jobs report was even weaker than the Daily Reckoning's Paris office had predicted earlier in the week, implying that the economy is weaker than most folks had believed. As Addison pointed out midweek, the jobs that should be showing up inside the 50 states are, instead, cropping up in distant lands like China and India.
- "Aren't jobs showing up in India, at lower wage rates?" he asked. "Won't any new jobs in the U.S. have to be competitive with those wages? Effectively mutating the 'jobless recovery' into the 'wageless recovery'?" We suspect that we have not yet seen our last "surprisingly weak" employment reports.
- Meanwhile, as investors rendered their collective verdict about the Greenspan recovery, a different sort of courtroom drama was unfolding: Martha Stewart was convicted Friday of obstructing justice and lying to the government about her well-timed sale of Imclone stock. The shocking verdict could mean that the homemaking maven will soon be scattering doilies around a prison cell. Predictably, Stewart issued a statement maintaining her innocence and promising an appeal.
- But holders of Martha Stewart Living (MSO) shares are not waiting around for the next trial. After Martha's conviction became public, MSO stock tumbled like a share of Imclone, ending Friday's session down 22% at $10.86. Ahead of the verdict, hopeful speculators and die-hard Martha fans had bid the stock up 16% to $16.27. Obviously, Ms. Stewart's convictions put her media empire in jeopardy. For one thing, the nationwide market for 400-count percale prison dungarees simply isn't nearly large enough to power a lucrative "Martha Stewart" brand extension.
- Meanwhile, the rest of the stock market was relatively quiet. The Dow gained 7 points to 10,595 and the Nasdaq Composite slipped 7 points to 2,047. For the week, the Dow eked out a 12-point gain, while the Nasdaq added 0.8% to break its six-week losing streak.
- But the weight of evidence continues to point to lower stock prices, lower dollar values...and a higher gold price.
Bill Bonner, back in Paris...
*** When we are in need of a laugh we turn to the editorial pages. We count especially on NYTimes columnist Thomas Friedman. The man is all at once the Three Stooges of intellectualism...picking up ideas as if they were 2 x 4s...clumsily whacking everyone and everything, poking himself in the eyes, bopping himself on the head...nyuk, nyuk, nyuk...
After doing heavy slapstick in Iraq for several weeks - describing America's fighting men as if they were the Peace Corps, "nurturing" a model democracy for the desert tribes, he's slacked off his cheerleading for nation-building and made his way to India. There, he discovered outsourcing and found that he likes it. He's not worried about the loss of jobs because our secret, says he, has nothing to do with savings, capital machinery, nor even making things...instead it is that "America allows you to explore your own mind." The quotation is not from Friedman himself, but from an Indian information worker who was trained in Oklahoma and Virginia, but now works in Bangalore.
What do Americans find when they explore their own minds? They find things such as Post-It Notes...and Starbucks...and Wal-Mart...and outsourcing! Americans invented outsourcing, so it must be a good idea, of course.
Friedman uses the following example, still quoting his Indian source, to show how innovative America is...and how outsourcing is no threat to our innovating genius:
"I just read about a guy in America who lost his job to India and he made a T-shirt that said, 'I lost my job to India and all I got was this (lousy) T-shirt.' And he made all kinds of money."
Ha, ha, ha...what a clever innovation! Found, no doubt, in some dusty attic of his own mind. What will he find in there next?
*** But what's this? Foreigners can peek into their minds too...Here's a little item from Tobin Smith:
"In the Beginning (two years ago) there was Wi-Fi, and it was Good. Wi-Fi provides 'hot spots' where anyone can piggyback onto an already established broadband connection and hop on the Net wirelessly.
"But coverage doesn't extend far beyond the doors of your local Starbucks or hotel. And while Wi-Fi is cheap, it's also low-powered.
"Now comes WiMax, and it is Better. It is also already a total WAY OF LIFE in Seoul, San Paulo, Antwerp, Shanghai and Hydrobad.
"It's the U.S., for once, that's playing catch-up here."
Looks like others can innovate, too.
[Ed note. One of the more successful companies presenting their wares at the quatro-annual Supper Club meetings is a company on the leading edge of Wi-Fi hotel room connections in the U.S. and Canada. The company is not yet public. If you are interested in the deals currently under consideration by the group, please contact John Wilkinson at: at 410-454-0416 or 800-251-1537, or e-mail him at jwilkinson@agora-inc.com ... You can tell him we sent you.]
*** Taking an opposite but equally moronic point of view from Friedman, the Senate voted to try to put a stop to outsourcing - at least where it involved public money. The legislation rose up after Gregory Mankiw, Chairman of the Council of Economic Advisors, said publicly that losing jobs was not a problem. Press reports tell us that Mankiw later "apologized" for his remark. It was not clear to whom he was apologizing...or for what.
*** We recall that in the final years of the Japanese miracle, any news at all was taken as a reason for stock prices to go up - even an earthquake in downtown Tokyo.
Now comes our friend Gregor with this observation from CNBC:
"Reasons for the market to rebound from the sorry job report, were:
1) Lower interest rates
2) Short covering
Then came this real gem:
3) The weaker dollar!"
The dollar fell on the news. Bonds rose. Stocks fell...then rose...and ended up about where they started.
*** Gold rose above our target buying price of $400 on Friday. Did you buy, dear reader? Friend Trey Reik offers this perspective:
"Gold fell from an intraday high of $416.80 on February 18 to an intraday low of $387.95 on March 3. While people buy gold and gold shares for many reasons, there has clearly been a large contingent of 'investors' who have played the 'dollar carry trade,' shorting U.S. dollars and buying Euros, commodities of all sorts and gold and gold shares. To these folks, there is little difference between gold and the Euro, they are simply anti-dollar bets.
"We believe strongly that when the knee-jerk 'euro-down- sell-gold' dust settles, inquiring minds will conclude Euro debasement is bullish for gold, not bearish! Indeed, we believe events of the week of February 23 represent the starting gun of gold's appreciation versus all fiat paper, as opposed to versus the dollar exclusively. This marks the beginning of the real bull market for gold."
*** Finally, we noticed an error in our essay from Friday. Jean de Mayol was decorated for his actions in WWI. For his WWII service, he was prosecuted.
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