Cost of Living
June 9, 2006 12:55pm by Barry Ritholtz
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Watch the Nasdaq Channel today!
Without wage inflation this is not sustainable. Will we get it?
Something I find even more funny, although sad funny, are the people who believe in this Chinese miracle. So, China has 800 steel companies with enough capacity to serve the world and none are making money. We have government loans based on politics and back scratching as opposed to legitimate business opportunities. We have insolvent banks with up to 70% of their loans as nonperforming yet the government keeps infusing money into the banks to keep them afloat. Actually, the government keeps infusing itself with American capital since the government owns the banks. And, we have a real estate bubble in China that is financed by the American consumer. Oh, and no one can actually afford the real estate. So, speculators keep passing it off to other speculators at higher and higher prices.
And, now we are really reminded that we are not dealing with free markets and the miracle is indeed a mirage that will likely totally collapse if the American consumer quits spending because…………China built 2 million more cars than they sold last year. ARE YOU SHITTING ME? That five year planning process at the politboro isn’t working out to well. Maybe a little free market flexibility based on supply and demand would help clean things up. So, if they are doing this with cars, they are likely doing it with everything and the whole economy will likely implode without continued consumption by Americans.
I wonder if they are giving them away. I’d drive one. I used to have a fondness for the Yugo. Let’s all sing along. Deflation, deflation, deflation. Oh how we long for deflation. Can you say 1987? Sure you can. China is likely the next Japan but worse.
http://www.autoblog.com/2006/06/08/china-manufactures-two-million-vehicle-surplus/
That’s the healthiest looking Wage flower I’ve seen in quite a spell…and so polite.
Well atleast there’s no estate tax bull in the picture.
Could have been a second frame, no? The tail end of those beasts (yes, of course branded with the same tags) and the piles left behind .
I’m tired of being pushed around by fear, you?
I need some promise –even if it has to come from those piles.
you might enjoy this if you haven’t seen it.. a little perspective from the Chinese viewpoint
http://festival.sundance.org/2006/watch/film.aspx?which=402&category=DOC
Hey all – A reminder…don’t forget..it’s soccer world championship time now…
Hey all – A reminder…don’t forget..it’s soccer world championship time now…
And what a great start – two legend goals from Germany!
/Go Angola
B …. good call on China …. will be such a mess when it implodes …. and then they will see their Yuan drop like a rock…. real estate will crater there…… will make Tiennanmen Square look like a picnic when the people rise up…and rates will follow in a huge rush to reliquify , so ,,, we can do the Yuan-carry trade instead of Yen-carry !!!
Recently I paid $75 for my half of dinner at a nice French restaurant in the midwest. The next day I bought a stack of frozen dinners at the grocery store for $1.50 each.
Now, the quality of the French restaurant was better than the frozen meal, for sure, but it wasn’t (75/1.5)= 50 times better. Maybe, say, 5 or 10 times better. But not 50!
Today’s inflation is weird!!
there are French restaurants in the midwest ?!?!?!!?
That’s funny you mention that. It appears the Chinese government is fearful of exactly that scenario.
And I quote………
China won’t make its currency fully convertible for at least five years because it worries hedge funds may force the yuan to plunge, much as happened to the Korean won and Thai baht during the 1997 Asian financial crisis, said Li Deshui, a member of the central bank’s monetary committee.
“There’s more than $800 billion to $1 trillion of hedge funds in the world and the Chinese financial system is relatively weak,” Li, 61, said in an interview with Bloomberg News. “If the yuan becomes fully convertible it would be attacked by these hedge funds.”
Can you imagine the hedge funds preying on the little ole unsophisticated Chinese financial markets? It would be like taking candy from a baby……..or worse a collapse of the Chinese financial markets.
But we GOT ZARQAWI!
Doesn’t that make everything better?
I hope his approval rating tanks even further….
Like herding dead cats….could someone please remind the market how it is supposed to behave after a fearful big volume selloff. I am getting the distinct impression that no one wants to be long over the weekend.
B ……… we can start w/ the ADR’s then go after the Hong Kong B’s ….. mainland will crater right after and they’ll send their $$$$’s to Geneva……. yummy
Ned-
Well, maybe yesterday’s action was a cruel little short squeeze in the midst of going down, down, DOWN.
Certainly the last hour today was very telling.
And Matt, what sort of person eats at a French restaurant one night and follows that up with a Swanson’s Chicken Pot Pie the next? Good God, man!
ste: Yes, there are French restaurants in the Midwest. They have excellent fritures de liberté.
Mark: Ever heard the Al Bundy roach theory?: Roaches will outlive us all because they eat cr@p.
Bah! It seems that there is a huge disconnect here between Barry and some of the traders in the comments: Barry seems to be a Biggs style (“Hedgehog”) macro long guy, even if sometimes he dabbles in short term positions, but many comments here seem about short term trading…
However as to a macro trend like inflation and wages, pretty amusing news and insight from Brad deLong:
http://delong.typepad.com/sdj/2006/06/what_should_the.html
«What Should the Federal Reserve Stabilize
The argument that central banks should focus mostly on stabilizing the growth rate of nominal wages is clear and convincing,»
Now I suspect that the Federal Reserve actually does consider limiting wages as an objective, only they are too shy to admit it.
However, if this is policy, especially considering commodity prices rising etc., the implications for macro trading may be:
* Companies selling consumer staples underperform.
* Companies with operations in the USA and exporting outperform.
* Companies catering to ”high net worth” consumers and investors outperform.
Or not? What do you think?
Great posts…..It is quite obvious that the FED
does not like to see inflation in wages of the
little guy out there as he is struggling to
keep up with inflation in the basic necessities
such as housing, financial assets(loans), education,
health care,food, gasoline, etc, etc.
Inflation is OK with the FED as long as it is contained
in the assets of the super RICH like Stocks, Realestate
and even commodity speculators….
But as soon as there are signs that wages are going up, the FED jacks the interest rates up.
They have a mandate to wipe out the middle class
and create bigger gaps between the haves and
the have nots….
IMO…Inflation is already well under way. It seems that within the past 8-9 years everything has gotten dramatically more dynamic. The economy is attached to a rubber band that is stretching more and more in all directions. The ups are/were galactic the and lows will be the same. Our current system of tracking and reacting to the economic indicators is not fast enough. It almost seems that our own appetite for consumption and wealth will ultimately cause this frenzy to implode.
On a lighter note, maybe someone could shed some light on… what is keeping the oil producing cash money Billionaires from purchasing intrest in oil (ETF’s). If I sold widgets and could put my profit into driving the cost up to make more profit it seems only human to do so (greed).
IMO…Inflation is already well under way. It seems that within the past 8-9 years everything has gotten dramatically more dynamic. The economy is attached to a rubber band that is stretching more and more in all directions. The ups are/were galactic the and lows will be the same. Our current system of tracking and reacting to the economic indicators is not fast enough. It almost seems that our own appetite for consumption and wealth will ultimately cause this frenzy to implode.
On a lighter note, maybe someone could shed some light on… what is keeping the oil producing cash money Billionaires from purchasing intrest in oil (ETF’s). If I sold widgets and could put my profit into driving the cost up to make more profit it seems only human to do so (greed).
Lauteus ….. the Saudis and Majors are already doing that thru WTI futures on the Nymex….. with 20/1 leverage !!!!! ….. then they blame it on too much demand from China and hedgies ( everyone’s convenient fall guy — remember when used to be the gnomes from Zurich ) !!!!