A Possibility

Here is a possible picture as I see it. It aint necessarily so, but it gives me something to look for.
Stock markets are rising in the U.S., China and Japan plus all the lesser markets are also rising. Money is flowing in from all over the world, pushing stocks higher. Hedge funds, pension funds, mutual fund and to a smaller extent the public are all being forced to participate, because there is no other market big enough to handle so much cash. Now the only consumer in this group is the public and they are the smallest part, so the market rise does little to increase consumer spending. Therefore the economy doesn't expand as fast as the market and we have the final bubble!
The Fed is hoping that the rising market will lift consumption, and say that it does, but it wont rise as fast as the market is rising. The markets get way ahead of themselves, forcing the Fed to raise interest, because nobody wants to buy 3% bonds when the stock markets are roaring. In other words it isn't raising rates because there is a boom going on, it's raising them because it needs the money to finance the ongoing deficit, plus tax reciepts are the worst since the Great Depression. Tax collection are down because people are still out of work and corporations are not growing, earning aren't growing and they all have tax loss carryovers due to their giant losses.
With the market at a high, interest rates going up and the economy not yet out of the woods; any disruption, such as oil rising further, a small country getting into financial trouble, housing doesn't recover, autos can't get above 10 million unit/year,the dollar drops precipitously, interest rates start to ratchet up because of inflation fears, or interest rates drop because of deflation fears. Fear can raise its ugly head for no particularly good reason. The talking heads and empty suits will give plenty of reasons, but always after the fact.
Bottom line, if the market advances too far in relation to the economy's growth, and then the economy doesn't show any growth, the market has a big problem. At 1,000 the S&P 500 is selling at 18.2 X's projected 2009 earnings of $55. Projected earnings for 2010 are $74.75, an approximate 50% increase. If that happens the market is selling at 13.4 X's earning, not too bad. At 1,100 it's 14.8 X's 2010 projected earnings, still not bad, but if earnings don't grow, the rush for the exits will be horrendous. If earning look like they are going to be $55 or less in 2010, then the S&P 500 earnings ratio could be in the single digits. That would be HORRENDOUS!
My guess, if the economy starts down again, and I'm not saying that it will, but if it does buy some puts (70's ??), you'll need all the protection you can get.
Good luck and let's hope that the market is right about the future, and that all of the above is just something to think about.

Humorous to some, sad to others.

This is hard to believe, but this is the way the U.S. and China do business.

Suppose that you made a nice product that I really wanted. So I come to you and say, "I'd like to buy 10 widgets at $100 a piece, so I'll give you a $1,000. OK?" You say, "That sounds good to me." Some time later you deliver the widgets and ask for payment. I give you a 10 year 4% note, instead of cash. You give me a funny look, but take the note because I tell that I'm going to buy a lot more of your widgets and other things you make. What a wonderful way to trade! Goods for 4% notes!
My own opinion here is that the Chinese are really not that stupid, so what is going on? I believe that the Chinese costs are inflated for the goods sold by two or three hundred percent. I say this because the very same good sold to America will sell on the street in China for 10 to 20% of the U.S. buying price. They can afford to sell widgets for 0% notes or even pay us interest on the notes. Not only that, but they get to scare the BeJesus out of the U.S. Congress and the public as well. Now that's a real bargain!
So, do you find this situation humorous or sad?
The Old Philosopher

Comments on Bill Clinton's Economics

May 31, 2009 4:38 PM The New York Times
This was in response to an article titled, “Bill Clinton, on His Economic Legacy”
By David Leonhardt (May 27,2009)
“Given the range of issues Peter Baker covers in his article about Bill Clinton for the coming New York Times Magazine, there was not room for anything close to Mr. Clinton’s entire comments on his economic record. And they’re fascinating (as is the article). So we’re going to post, below, the transcript of that portion of the discussion between Mr. Clinton and Mr. Baker.
In several places, I have annotated it, in italics. I’d be interested in hearing the thoughts of readers and other bloggers, too. (Update: Noam Scheiber, Mark Thoma and Matthew Yglesias weigh in.)……………..”
You can read the entire article by looking up the author in The NY Times archives. It’s about Bill defending his economic policies.
My comments:
I am a 79 year old ex-republican. Now an Obamaite. Mr Clinton left no economic legacy to be proud of.
Bill Clinton is possibly the luckiest President to ever hold office. Here is a man who was up for impeachment for lying. who took credit for a massive stock market rise, who did nothing to improve the lot of the working man and who helped perpetuate the turning of the American government into a giant corporation that was to be for the benefit of the wealthiest U.S. citizens. And now The Times is lauding him. The GOP propaganda machine( Spelled: Carl Rove ), which perpetuates the myth that, sleepy Mr Reagan, was the father of Capitalism for the People and saved our country from the Russian Bear, also kept Mr. Clinton at bay by using Mr. Reagan’s name and the Gallup poll ( which Mr. Clinton used to run the country ). Not many original ideas come from that quarter. I wish that President Obama had been in his place. He is a man with ideas to help the working man, and take the government back from the corporations and their lackeys, the lobbyists..
— Bob Bregman

Normal

This is just a little piece on how the statistics of normalcy can fool you. The normal of birth and death in the State of Florida is: It's normal to be born a Latino and die a Jew. How about that for a misleading statistic? My point, don't be fooled by what politicians and others say about percentage's of this and curves of that. The question you must always ask is, "Compared to what"? Everyone uses stats for their own purposes. The old saw, "Figures don't lie, liars figure" is more true today than ever. In the next few months as the President tries to get health care for everyone in this country, you will see some of the most extraordinary lies told by anti health care advocates, using statistics that can't possibly be proven. You will see particular comparisons of U.S. vs Canada or the U.K.. All the stories will be anecdotal rather than sold facts and figures. The Pres has a tough problem, but the bottom line is that this is the only advanced country in the World that doesn't take care of the health of all it's citizens. We can do it here without breaking the countries financial back. After all, the insurance companies have big buildings full of offices, computers, execs, workers plus stockholders who expect a profit and dividends. That's a lot of overhead that's not going toward our health care. Last I heard, we in the U.S. spend 2.7 trillion dollars per year on health care, and there are still 47 million people left out of the system. That's over $8,800/year for every man, woman and child in the country.
The End
Speak to you all soon.
The Old Philosopher

New book

I just finished "The Horse Soldiers". It's about the first days of the war in Afghanistan, just after 9/11. I thought it was a great story, with an epilogue that doubled the value of the read. I recommend it to anybody who has been in the service and to all who want to keep American participation in war to a minimum, but still be victorious. Sounds like a tall order, but this is the way.

Luck!

Risk taking-Why do we do it?
We are blinded by the possible outcomes-Riches, power, love, notoriety,etc. What are the real odds of winning (getting rich)? Very, very high. The cemetery of failed enterprises is very silent. We hear about the grand successes, we don't hear much about the failures, grand or otherwise, even though they out number successes by a wide margin.
So, can success be ascribed to the casual relationship between specific traits and subsequent events? Trump is shrewd, tall, hardworking and cynical. Is that why he's rich?
Can failure be ascribed to the casual relationship between specific traits and subsequent events? Bob the Bear is shrewd, tall, hardworking, and cynical. Is that why he's poor? What truly separates Trump from Bob the Bear is a single factor-Luck. Plain luck. that's why you often see rich men and women become poor, they ran out of luck. Madoff investors, 401k owners at Enron, Lucent, World Communications, the list goes on and on.
Nobody deserves to be a millionaire and conversely, nobody deserves not to be a millionaire. So if you can deserve either rich or not rich, what is the difference? Again, Luck
Now it gets a bit scary as we go further along this road of fortune, good or bad. The bigger question becomes; how much do we have to do with our success or failure; wealth or poverty?
Think about it. Not very comforting to realize that luck is the difference!
The basic ideas for this blog come from "The Black Swan" by N.N.Taleb.

Mother's Day

Good day all you Mothers out there.
I hope that you all had a great day. It's nice once a year to pay homage to you wonderful women. actually everyday should be mother's day, but then who would be left to run the world. Sorry girls, you'll just have to keep running things.
Lots of love to all of you.

the Old Philosopher (and I do mean old)