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Terri -:- Asset Prices -:- Tues, Nov 16, 2004 at 16:07:01 (EST)

Emma -:- Inflation in Ireland -:- Tues, Nov 16, 2004 at 15:23:02 (EST)

Pete Weis -:- World boycott of US goods & markets? -:- Tues, Nov 16, 2004 at 12:41:21 (EST)

Pete Weis -:- Gunslingers and cowboys -:- Tues, Nov 16, 2004 at 10:49:40 (EST)
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Pete Weis -:- Correction -:- Tues, Nov 16, 2004 at 10:55:14 (EST)
__ Pete Weis -:- Jeremy Grantham -:- Tues, Nov 16, 2004 at 10:57:28 (EST)
___ Emma -:- Re: Jeremy Grantham -:- Tues, Nov 16, 2004 at 15:32:28 (EST)
___ Terri -:- Re: Jeremy Grantham -:- Tues, Nov 16, 2004 at 14:22:05 (EST)
____ Pete Weis -:- Trailing earnings vs projected earnings -:- Tues, Nov 16, 2004 at 15:34:40 (EST)
_____ Terri -:- Re: Trailing earnings vs projected earnings -:- Tues, Nov 16, 2004 at 17:10:08 (EST)

krugman en francais -:- sum up of my thesis on Krugman -:- Tues, Nov 16, 2004 at 04:15:46 (EST)
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Jennifer -:- Re: sum up of my thesis on Krugman -:- Tues, Nov 16, 2004 at 17:17:11 (EST)
_ Emma -:- Re: sum up of my thesis on Krugman -:- Tues, Nov 16, 2004 at 16:24:34 (EST)

Terri -:- Investor Costs -:- Mon, Nov 15, 2004 at 20:51:44 (EST)
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Jennifer -:- Re: Investor Costs -:- Tues, Nov 16, 2004 at 05:43:21 (EST)
_ Institutional Investor -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:18:22 (EST)
__ Jennifer -:- Re: Investor Costs -:- Tues, Nov 16, 2004 at 05:51:54 (EST)
__ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:33:33 (EST)
___ Institutional Investor -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:43:27 (EST)
____ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:54:04 (EST)
_____ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 23:03:11 (EST)
______ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 23:18:05 (EST)
_ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 21:40:01 (EST)
__ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 21:49:21 (EST)
___ Terri -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:00:21 (EST)
____ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:12:12 (EST)
__ Ari -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 21:49:16 (EST)
___ Ari -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 21:53:31 (EST)
____ El Gringo -:- Re: Investor Costs -:- Mon, Nov 15, 2004 at 22:30:30 (EST)

Terri -:- The Dollar Adjustment -:- Mon, Nov 15, 2004 at 16:39:36 (EST)
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Terri -:- Dollar Adjustment -:- Mon, Nov 15, 2004 at 17:21:24 (EST)
__ Terri -:- Optimism -:- Mon, Nov 15, 2004 at 18:30:23 (EST)

Emma -:- Ivory Coast: Things Fall Apart -:- Mon, Nov 15, 2004 at 14:18:54 (EST)

Emma -:- Teamsters Find Pensions at Risk -:- Mon, Nov 15, 2004 at 11:45:10 (EST)
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Emma -:- Teamsters Find Pensions at Risk... -:- Mon, Nov 15, 2004 at 21:06:08 (EST)
_ Terri -:- Privatization Anyone? -:- Mon, Nov 15, 2004 at 14:03:16 (EST)
__ Emma -:- Re: Privatization Anyone? -:- Mon, Nov 15, 2004 at 21:09:48 (EST)
___ Institutional Investor -:- Re: Privatization Anyone? -:- Mon, Nov 15, 2004 at 22:41:09 (EST)
__ Terri -:- Re: Privatization Anyone? -:- Mon, Nov 15, 2004 at 14:05:55 (EST)

Pete Weis -:- Loan volume desperation -:- Mon, Nov 15, 2004 at 10:03:20 (EST)
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Ari -:- Re: Loan volume desperation -:- Mon, Nov 15, 2004 at 10:47:49 (EST)
__ jimsum -:- Re: Loan volume desperation -:- Mon, Nov 15, 2004 at 16:08:41 (EST)
___ Terri -:- Re: Loan volume desperation -:- Mon, Nov 15, 2004 at 17:19:09 (EST)

Emma -:- About the Drug Companies -:- Sun, Nov 14, 2004 at 15:36:10 (EST)

Pete Weis -:- Has anything really changed? -:- Sun, Nov 14, 2004 at 14:43:32 (EST)
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Terri -:- Re: Has anything really changed? -:- Sun, Nov 14, 2004 at 15:32:30 (EST)
__ Terri -:- Re: Has anything really changed? -:- Sun, Nov 14, 2004 at 16:14:21 (EST)
___ Pete Weis -:- Do you believe those earnings? -:- Sun, Nov 14, 2004 at 20:33:40 (EST)
____ Ari -:- Re: Do you believe those earnings? -:- Mon, Nov 15, 2004 at 10:36:51 (EST)
____ Jennifer -:- Re: Do you believe those earnings? -:- Mon, Nov 15, 2004 at 06:07:37 (EST)
_____ Pete Weis -:- Invest from a global perspective -:- Mon, Nov 15, 2004 at 14:27:10 (EST)
______ Jennifer -:- Re: Invest from a global perspective -:- Mon, Nov 15, 2004 at 15:54:48 (EST)
____ Terri -:- Re: Do you believe those earnings? -:- Sun, Nov 14, 2004 at 21:43:05 (EST)
_____ Terri -:- Re: Do you believe those earnings? -:- Sun, Nov 14, 2004 at 21:51:09 (EST)

Emma -:- On The Cost of Drugs -:- Sun, Nov 14, 2004 at 10:25:13 (EST)

Emma -:- Merck and Vioxx -:- Sun, Nov 14, 2004 at 06:52:53 (EST)

Ari -:- Business Ethics -:- Sat, Nov 13, 2004 at 21:35:25 (EST)
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Pete Weis -:- An important issue...... -:- Sun, Nov 14, 2004 at 13:42:22 (EST)
__ jimsum -:- Re: An important issue...... -:- Mon, Nov 15, 2004 at 15:08:10 (EST)
___ Jennifer -:- Re: An important issue...... -:- Mon, Nov 15, 2004 at 15:52:06 (EST)
__ Emma -:- Re: An important issue...... -:- Sun, Nov 14, 2004 at 20:19:58 (EST)
__ Emma -:- Re: An important issue...... -:- Sun, Nov 14, 2004 at 19:29:57 (EST)
_ Ari -:- Re: Business Ethics -:- Sun, Nov 14, 2004 at 10:46:51 (EST)
_ Jennifer -:- Re: Business Ethics -:- Sun, Nov 14, 2004 at 06:18:12 (EST)

Emma -:- Pfizer and Bextra -:- Sat, Nov 13, 2004 at 21:19:32 (EST)

Terri -:- REITs and Earnings? -:- Sat, Nov 13, 2004 at 20:46:25 (EST)

Terri -:- Investment Costs and costs and costs -:- Sat, Nov 13, 2004 at 18:42:37 (EST)
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Institutional Investor -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 11:04:58 (EST)
__ Jennifer -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 12:09:09 (EST)
___ David E... -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 18:05:24 (EST)
____ Jennifer -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 18:34:48 (EST)
_____ David E... -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 01:41:18 (EST)
______ Institutional Investor -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 09:18:42 (EST)
_______ David E... -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 12:10:32 (EST)
_______ Terri -:- Timing and Timing -:- Mon, Nov 15, 2004 at 11:25:02 (EST)
________ Institutional Investor -:- Re: Timing and Timing -:- Mon, Nov 15, 2004 at 12:17:13 (EST)
_________ Terri -:- Re: Timing and Timing -:- Mon, Nov 15, 2004 at 12:50:09 (EST)
__________ Institutional Investor -:- Re: Timing and Timing -:- Mon, Nov 15, 2004 at 15:07:34 (EST)
___________ Terri -:- Fine Managers -:- Mon, Nov 15, 2004 at 15:21:11 (EST)
______ Jneeifer -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 05:53:32 (EST)
_______ David E... -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 12:33:24 (EST)
________ Jennifer -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 13:07:50 (EST)
_______ Jennifer! -:- Re: Investment Costs and costs and costs -:- Mon, Nov 15, 2004 at 05:54:43 (EST)
____ David E... -:- The Missing Link -:- Sun, Nov 14, 2004 at 18:08:18 (EST)
___ Institutional Investor -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 13:30:28 (EST)
____ Jennifer -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 14:41:51 (EST)
_____ Terri -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 15:25:36 (EST)
______ Institutional Investor -:- Re: Investment Costs and costs and costs -:- Sun, Nov 14, 2004 at 15:59:37 (EST)
_______ Terri -:- Asset Allocation -:- Sun, Nov 14, 2004 at 16:20:55 (EST)
________ Institutional Investor -:- Re: Asset Allocation -:- Sun, Nov 14, 2004 at 20:26:00 (EST)
________ Terri -:- Re: Asset Allocation -:- Sun, Nov 14, 2004 at 17:57:34 (EST)

Emma -:- Karl Legerfeld on Sale -:- Sat, Nov 13, 2004 at 16:52:43 (EST)
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Emma -:- Karl Lagerfeld Sale -:- Sat, Nov 13, 2004 at 16:54:22 (EST)
__ Jennifer -:- Re: Karl Lagerfeld Sale -:- Sat, Nov 13, 2004 at 17:44:21 (EST)

Pete Weis -:- Another look at the jobs number -:- Sat, Nov 13, 2004 at 12:54:25 (EST)
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Jennifer -:- What Should the Fed do? -:- Sun, Nov 14, 2004 at 06:24:11 (EST)
__ Ari -:- Re: What Should the Fed do? -:- Sun, Nov 14, 2004 at 09:38:50 (EST)
_ Terri -:- Re: Another look at the jobs number -:- Sat, Nov 13, 2004 at 14:24:12 (EST)
__ Ari -:- Re: Another look at the jobs number -:- Sat, Nov 13, 2004 at 18:11:03 (EST)

Jennifer -:- Social Security and Medicare -:- Sat, Nov 13, 2004 at 11:13:54 (EST)
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jimsum -:- Re: Social Security and Medicare -:- Mon, Nov 15, 2004 at 12:14:18 (EST)

Emma -:- Insuring Our Benefits? -:- Sat, Nov 13, 2004 at 10:36:24 (EST)

Emma -:- A Rising Euro -:- Sat, Nov 13, 2004 at 10:19:55 (EST)
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Emma -:- As the Dollar Declines -:- Sat, Nov 13, 2004 at 20:13:26 (EST)

El Gringo -:- Our troubles are all the same ... -:- Fri, Nov 12, 2004 at 22:33:34 (EST)
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Emma -:- Not Really -:- Sat, Nov 13, 2004 at 09:41:52 (EST)
__ Ari -:- Re: Not Really -:- Sat, Nov 13, 2004 at 18:11:49 (EST)

Terri -:- Vanguard Returns -:- Fri, Nov 12, 2004 at 15:06:20 (EST)
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Terri -:- Vanguard Returns.... -:- Fri, Nov 12, 2004 at 19:13:58 (EST)
_ Terri -:- A Serious Bull Market -:- Fri, Nov 12, 2004 at 16:25:46 (EST)
__ Emma -:- Moderate Growth Prospects -:- Sat, Nov 13, 2004 at 09:49:35 (EST)

Emma -:- Guaranteed Retirement Income Fades -:- Fri, Nov 12, 2004 at 13:39:26 (EST)
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jimsum -:- Re: Guaranteed Retirement Income Fades -:- Fri, Nov 12, 2004 at 17:02:51 (EST)
__ Emma -:- Re: Guaranteed Retirement Income Fades -:- Fri, Nov 12, 2004 at 18:21:09 (EST)

Emma -:- Credit Boom in Asia -:- Fri, Nov 12, 2004 at 13:36:13 (EST)

Ari -:- Recovery and Inflation -:- Fri, Nov 12, 2004 at 06:06:58 (EST)
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Mik -:- I agree 100% -:- Fri, Nov 12, 2004 at 14:36:25 (EST)
__ Jennifer -:- Re: I agree 100% -:- Fri, Nov 12, 2004 at 14:40:26 (EST)

Terri -:- Vanguard Returns -:- Thurs, Nov 11, 2004 at 16:05:04 (EST)
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Terri -:- Markets -:- Thurs, Nov 11, 2004 at 16:46:33 (EST)
__ Ari -:- Re: Markets -:- Fri, Nov 12, 2004 at 05:31:58 (EST)

El Gringo -:- Are We Running Out of Oil (Again)? -:- Thurs, Nov 11, 2004 at 08:54:14 (EST)
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Jennifer -:- Re: Are We Running Out of Oil (Again)? -:- Thurs, Nov 11, 2004 at 10:24:46 (EST)
__ Pete Weis -:- Re: Are We Running Out of Oil (Again)? -:- Thurs, Nov 11, 2004 at 11:20:31 (EST)
___ Terri -:- Re: Are We Running Out of Oil (Again)? -:- Thurs, Nov 11, 2004 at 11:56:01 (EST)
____ Pete Weis -:- No mystery here -:- Thurs, Nov 11, 2004 at 13:21:18 (EST)
_____ kevin -:- Re: No mystery here -:- Thurs, Nov 11, 2004 at 20:22:57 (EST)

Terri -:- Interest Rates -:- Thurs, Nov 11, 2004 at 06:11:15 (EST)
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Terri -:- Price Increases -:- Thurs, Nov 11, 2004 at 06:31:48 (EST)
__ kevin -:- Re: Price Increases -:- Thurs, Nov 11, 2004 at 20:40:28 (EST)

Ari -:- Commercial Real Estate Questions -:- Thurs, Nov 11, 2004 at 05:42:16 (EST)

neutrin -:- About a paper of Paul -:- Wed, Nov 10, 2004 at 20:50:45 (EST)

Emma -:- Ireland is Greener -:- Wed, Nov 10, 2004 at 15:35:24 (EST)

Emma -:- Brazil's Cable Pirates -:- Wed, Nov 10, 2004 at 14:32:56 (EST)

Emma -:- Commercial Real Estate -:- Wed, Nov 10, 2004 at 14:27:56 (EST)

Pete Weis -:- Dollar decline will eventually mean.... -:- Wed, Nov 10, 2004 at 11:30:24 (EST)
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Ari -:- Re: Dollar decline will eventually mean.... -:- Thurs, Nov 11, 2004 at 05:45:49 (EST)
_ Terri -:- Re: Dollar decline will eventually mean.... -:- Wed, Nov 10, 2004 at 21:57:46 (EST)
_ Emma -:- Re: Dollar decline will eventually mean.... -:- Wed, Nov 10, 2004 at 15:10:26 (EST)
__ Ari -:- Re: Dollar decline will eventually mean.... -:- Wed, Nov 10, 2004 at 16:48:56 (EST)

El Gringo -:- Rubin: Dollar Decline Could Accelerate -:- Tues, Nov 09, 2004 at 20:25:11 (EST)
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Jennifer -:- Re: Rubin: Dollar Decline Could Accelerate -:- Tues, Nov 09, 2004 at 21:09:23 (EST)
__ Ari -:- Re: Rubin: Dollar Decline Could Accelerate -:- Wed, Nov 10, 2004 at 05:11:56 (EST)

Emma -:- Outsourcing on Outsourcing -:- Tues, Nov 09, 2004 at 17:40:37 (EST)

Terri -:- We Have a Problem -:- Tues, Nov 09, 2004 at 14:21:11 (EST)
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Ari -:- Re: We Have a Problem -:- Wed, Nov 10, 2004 at 05:34:46 (EST)
_ Terri -:- Vanguard Returns -:- Tues, Nov 09, 2004 at 16:50:38 (EST)

Pete Weis -:- What's in the interest for one..... -:- Tues, Nov 09, 2004 at 13:14:58 (EST)
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Terri -:- Re: What's in the interest for one..... -:- Tues, Nov 09, 2004 at 19:54:43 (EST)

Pete Weis -:- Privatizing social security DOA -:- Tues, Nov 09, 2004 at 12:07:54 (EST)
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Ari -:- Re: Privatizing social security DOA -:- Tues, Nov 09, 2004 at 15:24:27 (EST)
__ Pete Weis -:- Inflating away the bill -:- Tues, Nov 09, 2004 at 17:11:53 (EST)
___ Ari -:- Re: Inflating away the bill -:- Wed, Nov 10, 2004 at 05:28:08 (EST)
_ Terri -:- Re: Privatizing social security DOA -:- Tues, Nov 09, 2004 at 12:11:35 (EST)
__ jimsum -:- Re: Privatizing social security DOA -:- Wed, Nov 10, 2004 at 14:21:05 (EST)
___ Ari -:- Re: Privatizing social security DOA -:- Wed, Nov 10, 2004 at 16:46:01 (EST)
___ Emma -:- Interesting Post -:- Wed, Nov 10, 2004 at 14:25:03 (EST)
__ Pete Weis -:- Re: Privatizing social security DOA -:- Tues, Nov 09, 2004 at 13:32:00 (EST)
___ Terri -:- Re: Privatizing social security DOA -:- Tues, Nov 09, 2004 at 14:44:56 (EST)

Pete Weis -:- China demand helping US companies -:- Tues, Nov 09, 2004 at 11:58:42 (EST)
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Terri -:- Re: China demand helping US companies -:- Tues, Nov 09, 2004 at 19:08:00 (EST)

Emma -:- China's Informal Lenders -:- Tues, Nov 09, 2004 at 10:57:56 (EST)
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Emma -:- China's Informal Lenders... -:- Tues, Nov 09, 2004 at 19:02:22 (EST)

Ari -:- Canadian, Swiss, Swedish Currencies -:- Tues, Nov 09, 2004 at 05:58:17 (EST)

Emma -:- Rethinking the China Slowdown -:- Mon, Nov 08, 2004 at 17:47:54 (EST)
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Emma -:- Rethinking China's Slowdown -:- Mon, Nov 08, 2004 at 17:49:41 (EST)
__ Emma -:- Yuan and Dollar -:- Mon, Nov 08, 2004 at 19:12:12 (EST)
___ Terri -:- China's Promise -:- Mon, Nov 08, 2004 at 21:06:57 (EST)

Emma -:- China's Foreign Exchange Reserves -:- Mon, Nov 08, 2004 at 17:01:21 (EST)

Terri -:- Strong Dollar, Weak Dollar -:- Mon, Nov 08, 2004 at 16:50:51 (EST)
_
Pete Weis -:- The danger -:- Mon, Nov 08, 2004 at 18:33:20 (EST)
__ Ari -:- Re: The danger -:- Tues, Nov 09, 2004 at 05:48:31 (EST)
___ Pete Weis -:- Tightening credit ahead -:- Tues, Nov 09, 2004 at 11:05:55 (EST)
____ Emma -:- Tightening credit -:- Tues, Nov 09, 2004 at 12:08:13 (EST)

Jack -:- Tax Cuts -:- Mon, Nov 08, 2004 at 16:20:40 (EST)
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Ari -:- Re: Tax Cuts -:- Tues, Nov 09, 2004 at 05:50:46 (EST)
_ Ari -:- Re: Tax Cuts -:- Mon, Nov 08, 2004 at 17:53:16 (EST)

Emma -:- Complicating the Dollar Value -:- Mon, Nov 08, 2004 at 13:34:52 (EST)
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Terri -:- Re: Complicating the Dollar Value -:- Mon, Nov 08, 2004 at 14:07:18 (EST)
__ Terri -:- Re: Complicating the Dollar Value -:- Mon, Nov 08, 2004 at 14:31:47 (EST)
___ Pete Weis -:- Why worry? -:- Mon, Nov 08, 2004 at 18:18:14 (EST)
____ Ari -:- Re: Why worry? -:- Tues, Nov 09, 2004 at 05:32:29 (EST)
_____ Pete Weis -:- Relativity -:- Tues, Nov 09, 2004 at 11:13:06 (EST)
______ Emma -:- Re: Relativity -:- Tues, Nov 09, 2004 at 12:10:26 (EST)
___ Terri -:- Re: Complicating the Dollar Value -:- Mon, Nov 08, 2004 at 14:51:51 (EST)

Emma -:- Ethopian Roads -:- Mon, Nov 08, 2004 at 12:04:30 (EST)
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Jennifer -:- Re: Ethopian Roads -:- Mon, Nov 08, 2004 at 21:22:50 (EST)

Raging Grannie -:- Why is no one screaming about a stolen election? -:- Mon, Nov 08, 2004 at 11:10:20 (EST)

Terri -:- The Coming Collapse of the Dollar? -:- Sun, Nov 07, 2004 at 19:27:59 (EST)
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Emma -:- Re: The Coming Collapse of the Dollar? -:- Sun, Nov 07, 2004 at 20:25:40 (EST)
__ Jennifer -:- Re: The Coming Collapse of the Dollar? -:- Mon, Nov 08, 2004 at 10:44:23 (EST)
___ Terri -:- Re: The Coming Collapse of the Dollar? -:- Mon, Nov 08, 2004 at 14:09:56 (EST)
____ David E... -:- XPACX looks good to me -:- Mon, Nov 08, 2004 at 18:03:39 (EST)
_____ David E... -:- whoops I mean VPACX -:- Mon, Nov 08, 2004 at 19:43:10 (EST)
______ Ari -:- Re: whoops I mean VPACX -:- Mon, Nov 08, 2004 at 20:19:48 (EST)
__ Pete Weis -:- Re: The Coming Collapse of the Dollar? -:- Sun, Nov 07, 2004 at 23:42:01 (EST)
___ Emma -:- Yuan and Dollar -:- Mon, Nov 08, 2004 at 10:38:03 (EST)
___ Ari -:- Re: The Coming Collapse of the Dollar? -:- Mon, Nov 08, 2004 at 07:11:45 (EST)
___ Pete Weis -:- Dollar selloff? -:- Mon, Nov 08, 2004 at 00:31:53 (EST)
__ Terri -:- Re: The Coming Collapse of the Dollar? -:- Sun, Nov 07, 2004 at 21:12:27 (EST)
___ Terri -:- Re: The Coming Collapse of the Dollar? -:- Sun, Nov 07, 2004 at 21:46:18 (EST)

Terri -:- Fed Rate Increase Coming -:- Sun, Nov 07, 2004 at 16:55:12 (EST)
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Terri -:- Deficit Blues -:- Sun, Nov 07, 2004 at 18:29:52 (EST)

Emma -:- Social Security in Sweden -:- Sun, Nov 07, 2004 at 12:39:16 (EST)
_
kevin -:- Re: Social Security in Sweden -:- Sun, Nov 07, 2004 at 16:09:25 (EST)

Emma -:- Insurance Stocks Anyone? -:- Sun, Nov 07, 2004 at 12:12:28 (EST)

Emma -:- Taxes and Consequences -:- Sun, Nov 07, 2004 at 10:47:45 (EST)
_
Pete Weis -:- Re: Taxes and Consequences -:- Sun, Nov 07, 2004 at 11:54:09 (EST)
__ Emma -:- Re: Taxes and Consequences -:- Sun, Nov 07, 2004 at 13:24:13 (EST)
___ kevin -:- Re: Taxes and Consequences -:- Sun, Nov 07, 2004 at 16:17:50 (EST)
___ Pete Weis -:- Concentration of wealth -:- Sun, Nov 07, 2004 at 14:38:16 (EST)
____ Jennifer -:- Re: Concentration of wealth -:- Sun, Nov 07, 2004 at 15:43:32 (EST)

Terri -:- Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 06:25:35 (EST)
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Terri -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 07:14:39 (EST)
__ Terri -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 11:57:38 (EST)
___ Jason -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 15:58:41 (EST)
____ Jennifer -:- Re: Real Estate and Interest Rates -:- Mon, Nov 08, 2004 at 10:40:41 (EST)
__ Jason -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 10:58:26 (EST)
___ Ari -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 11:13:46 (EST)
____ Ari -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 11:51:29 (EST)
__ Ari -:- Re: Real Estate and Interest Rates -:- Sun, Nov 07, 2004 at 09:50:43 (EST)

Chicago Boy -:- The Latest from the Krugmeister -:- Sun, Nov 07, 2004 at 02:55:19 (EST)
_
Bobby -:- To Avoid Divorce, Move to Massachusetts -:- Sat, Nov 13, 2004 at 12:59:23 (EST)
_ Paul G. Brown -:- Re: The Latest from the Krugmeister -:- Mon, Nov 08, 2004 at 00:38:54 (EST)
__ RL -:- Re: The Latest from the Krugmeister -:- Mon, Nov 08, 2004 at 08:06:36 (EST)
___ Paul G. Brown -:- Re: The Latest from the Krugmeister -:- Tues, Nov 09, 2004 at 05:08:28 (EST)

Emma -:- Housing Market Collapse in Britain -:- Sat, Nov 06, 2004 at 21:07:17 (EST)
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Emma -:- Housing Market in Britain -:- Sat, Nov 06, 2004 at 21:20:17 (EST)
__ Pete Weis -:- US housing market -:- Sun, Nov 07, 2004 at 01:33:31 (EST)
___ Terri -:- A Problem -:- Sun, Nov 07, 2004 at 14:10:22 (EST)
____ Pete Weis -:- Answer to Problem -:- Sun, Nov 07, 2004 at 14:58:36 (EST)
_____ Terri -:- Excellent -:- Sun, Nov 07, 2004 at 15:07:34 (EST)

Terri -:- Market Returns -:- Sat, Nov 06, 2004 at 13:30:34 (EST)
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Terri -:- Dollar Hedging -:- Sat, Nov 06, 2004 at 13:52:58 (EST)

Emma -:- Buying Sears for the Real Estate -:- Sat, Nov 06, 2004 at 11:27:25 (EST)
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Ari -:- Re: Buying Sears for the Real Estate -:- Sat, Nov 06, 2004 at 11:43:06 (EST)

Pete Weis -:- Is the fall in the dollar........ -:- Sat, Nov 06, 2004 at 11:08:13 (EST)
_
Terri -:- Re: Is the fall in the dollar........ -:- Sat, Nov 06, 2004 at 11:26:20 (EST)
__ Terri -:- Re: Is the fall in the dollar........ -:- Sat, Nov 06, 2004 at 16:38:56 (EST)
___ Pete Weis -:- What's different? -:- Sat, Nov 06, 2004 at 19:26:30 (EST)
____ Terri -:- Re: What's different? -:- Sat, Nov 06, 2004 at 20:53:41 (EST)
_____ Pete Weis -:- Alice and Ralph -:- Sun, Nov 07, 2004 at 02:12:25 (EST)
______ Terri -:- Re: Alice and Ralph -:- Sun, Nov 07, 2004 at 07:03:51 (EST)
______ El Gringo -:- Re: Alice and Ralph -:- Sun, Nov 07, 2004 at 02:18:32 (EST)
_____ Terri -:- Re: What's different? -:- Sat, Nov 06, 2004 at 21:59:18 (EST)

Pete Weis -:- More 'Wolf at the Door' -:- Sat, Nov 06, 2004 at 10:12:25 (EST)
_
Ari -:- Re: More 'Wolf at the Door' -:- Sat, Nov 06, 2004 at 10:36:03 (EST)
__ Pete Weis -:- You are right Ari but.... -:- Sat, Nov 06, 2004 at 11:16:03 (EST)
___ Ari -:- Re: You are right Ari but.... -:- Sat, Nov 06, 2004 at 11:37:54 (EST)

Ari -:- Foreign Investment -:- Sat, Nov 06, 2004 at 06:51:52 (EST)
_
Jennifer -:- Re: Foreign Investment -:- Sat, Nov 06, 2004 at 09:32:44 (EST)

A Right Winger -:- Misreading the election results -:- Sat, Nov 06, 2004 at 01:03:09 (EST)

Terri -:- Foreign Exchange -:- Fri, Nov 05, 2004 at 20:42:51 (EST)
_
Ari -:- Re: Foreign Exchange -:- Sat, Nov 06, 2004 at 06:55:17 (EST)

El Gringo -:- Globalization and the Dollar -:- Fri, Nov 05, 2004 at 18:45:33 (EST)
_
Pete Weis -:- Re: Globalization and the Dollar -:- Fri, Nov 05, 2004 at 21:51:13 (EST)
__ El Gringo -:- Re: Globalization and the Dollar -:- Sat, Nov 06, 2004 at 18:42:04 (EST)
___ Pete Weis -:- Re: Globalization and the Dollar -:- Sat, Nov 06, 2004 at 20:11:12 (EST)
____ El Gringo -:- Re: Globalization and the Dollar -:- Sun, Nov 07, 2004 at 02:12:47 (EST)
_____ Ari -:- Re: Globalization and the Dollar -:- Sun, Nov 07, 2004 at 10:09:44 (EST)
____ Terri -:- Re: Globalization and the Dollar -:- Sat, Nov 06, 2004 at 20:59:28 (EST)
_ Jennifer -:- Thanks, El Gringo -:- Fri, Nov 05, 2004 at 19:32:36 (EST)
__ El Gringo triste -:- Re: Thanks, El Gringo -:- Fri, Nov 05, 2004 at 19:39:45 (EST)

johnny5 -:- Vanguard Analysis -:- Fri, Nov 05, 2004 at 16:50:31 (EST)

Emma -:- Merck and Vioxx -:- Fri, Nov 05, 2004 at 16:02:50 (EST)
_
byron -:- Re: Merck and Vioxx -:- Fri, Nov 05, 2004 at 23:03:03 (EST)

Terri -:- Stock and Bonds -:- Fri, Nov 05, 2004 at 15:58:03 (EST)
_
A Right Winger -:- Re: Stock and Bonds -:- Sat, Nov 06, 2004 at 01:13:22 (EST)
_ Terri -:- Returns -:- Fri, Nov 05, 2004 at 15:58:29 (EST)

Emma -:- Hedge Funds and Us -:- Fri, Nov 05, 2004 at 15:34:11 (EST)

gerald mckee -:- post election analysis -:- Fri, Nov 05, 2004 at 14:26:44 (EST)
_
Mik -:- Stop looking for excuses -:- Fri, Nov 05, 2004 at 17:47:17 (EST)
__ Ben -:- Re: Stop looking for excuses -:- Fri, Nov 05, 2004 at 22:13:05 (EST)
___ A Right Winger -:- Re: Stop looking for excuses -:- Sat, Nov 06, 2004 at 00:54:46 (EST)

El Gringo triste -:- Can High Oil Prices Be Good? -:- Fri, Nov 05, 2004 at 14:09:21 (EST)
_
Emma -:- Can High Oil Prices Be Good...? -:- Fri, Nov 05, 2004 at 18:54:56 (EST)
__ El Gringo -:- Re: Can High Oil Prices Be Good...? -:- Fri, Nov 05, 2004 at 19:17:45 (EST)
___ Emma -:- Projecting Price -:- Fri, Nov 05, 2004 at 19:49:39 (EST)
____ El Gringo -:- Re: Projecting Price -:- Fri, Nov 05, 2004 at 21:26:04 (EST)
_____ Pete Weis -:- Politicians aim to please -:- Fri, Nov 05, 2004 at 22:07:50 (EST)
_ Emma -:- Re: Can High Oil Prices Be Good? -:- Fri, Nov 05, 2004 at 16:19:08 (EST)
__ El Gringo -:- Re: Can High Oil Prices Be Good? -:- Fri, Nov 05, 2004 at 18:30:51 (EST)

Pete Weis -:- October jobs number -:- Fri, Nov 05, 2004 at 09:57:08 (EST)
_
Ari -:- Re: October jobs number -:- Fri, Nov 05, 2004 at 17:17:22 (EST)
__ Pete Weis -:- Good points Ari -:- Sat, Nov 06, 2004 at 10:25:15 (EST)

Pete Weis -:- Jeremy Grantham & Bill Gross -:- Fri, Nov 05, 2004 at 09:20:07 (EST)
_
Terri -:- Portfolio Protection -:- Fri, Nov 05, 2004 at 11:46:41 (EST)
__ Pete Weis -:- Bond funds & rising ...... -:- Fri, Nov 05, 2004 at 14:49:37 (EST)
___ Terri -:- Re: Bond funds & rising ...... -:- Fri, Nov 05, 2004 at 15:25:38 (EST)
____ Pete Weis -:- A different time -:- Fri, Nov 05, 2004 at 21:20:28 (EST)
__ Terri -:- Re: Portfolio Protection -:- Fri, Nov 05, 2004 at 11:51:44 (EST)

Terri -:- A Dollar Adjustment -:- Fri, Nov 05, 2004 at 03:59:08 (EST)
_
Pete Weis -:- Fed increasingly impotent -:- Fri, Nov 05, 2004 at 21:36:08 (EST)

Emma -:- Decline of the Dollar -:- Thurs, Nov 04, 2004 at 20:29:09 (EST)
_
Emma -:- Decline of the Dollar... -:- Thurs, Nov 04, 2004 at 20:52:54 (EST)

Emma -:- German Company and Workers -:- Thurs, Nov 04, 2004 at 20:11:57 (EST)

Terri -:- Market Returns -:- Thurs, Nov 04, 2004 at 16:27:30 (EST)
_
Terri -:- Re: Market Returns -:- Thurs, Nov 04, 2004 at 17:32:05 (EST)

Ayn Rant -:- Reality eventually bites you in the ass -:- Thurs, Nov 04, 2004 at 15:49:03 (EST)
_
A Right Winger -:- Re: Reality eventually bites you in the ass -:- Sat, Nov 06, 2004 at 00:58:55 (EST)

Pete Weis -:- Return of the late 90's? -:- Thurs, Nov 04, 2004 at 15:13:48 (EST)
_
Terri -:- Re: Return of the late 90's? -:- Thurs, Nov 04, 2004 at 20:01:58 (EST)
_ Ayn Rant -:- 100% Pure Snake Oil -:- Thurs, Nov 04, 2004 at 15:42:38 (EST)

Bobby -:- Progress without the Federal Government (revised) -:- Thurs, Nov 04, 2004 at 14:57:28 (EST)
_
johnny5 -:- Freedom? -:- Fri, Nov 05, 2004 at 14:07:03 (EST)
__ Bobby -:- Re: Freedom? -:- Fri, Nov 05, 2004 at 19:31:32 (EST)
___ johnny5 -:- Re: Freedom? -:- Fri, Nov 05, 2004 at 19:44:48 (EST)
_ Emma -:- Science and Health Initiative -:- Thurs, Nov 04, 2004 at 15:37:09 (EST)
__ Ari -:- Who Pays Who Gets -:- Thurs, Nov 04, 2004 at 19:44:59 (EST)
___ Bobby -:- Re: Who Pays Who Gets -:- Thurs, Nov 04, 2004 at 20:37:51 (EST)
____ Emma -:- Re: Who Pays Who Gets -:- Thurs, Nov 04, 2004 at 20:54:24 (EST)

Emma -:- Wall Street's Guy -:- Thurs, Nov 04, 2004 at 14:09:33 (EST)

Emma -:- Indian Outsourcing -:- Thurs, Nov 04, 2004 at 13:30:38 (EST)

Fabulous -:- 4 MORE YEARS!!!! -:- Thurs, Nov 04, 2004 at 13:22:12 (EST)

Joel -:- India:120bn in forex reserves -:- Thurs, Nov 04, 2004 at 13:10:55 (EST)
_
Emma -:- Re: India:120bn in forex reserves -:- Thurs, Nov 04, 2004 at 13:34:17 (EST)

Pete Weis -:- Going after social security -:- Thurs, Nov 04, 2004 at 10:14:15 (EST)
_
Emma -:- Re: Going after social security -:- Thurs, Nov 04, 2004 at 11:31:40 (EST)

Yann -:- He looks French -:- Thurs, Nov 04, 2004 at 07:17:20 (EST)

Bobby -:- Progress without the Federal government???????? -:- Thurs, Nov 04, 2004 at 04:23:13 (EST)
_
Terri -:- Re: Progress without the Federal government? -:- Thurs, Nov 04, 2004 at 05:53:47 (EST)

Bobby -:- Rant on Troubling 'Values' in Parts of America -:- Wed, Nov 03, 2004 at 23:31:55 (EST)
_
johnny5 -:- Re: Rant on Troubling 'Values' in Parts of America -:- Fri, Nov 05, 2004 at 13:49:56 (EST)
_ yy -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 16:31:55 (EST)
_ David E... -:- I am proud that we lost on 'values' -:- Thurs, Nov 04, 2004 at 13:13:27 (EST)
__ Ari -:- Re: I am proud that we lost on 'values' -:- Thurs, Nov 04, 2004 at 16:48:35 (EST)
_ Jennifer -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 11:41:16 (EST)
_ jimsum -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 10:34:35 (EST)
__ Bobber -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 20:51:38 (EST)
___ jimsum -:- Re: Rant on Drug 'Values' -:- Fri, Nov 05, 2004 at 10:36:48 (EST)
_ Pete Weis -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 01:34:56 (EST)
__ Terri -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 06:07:19 (EST)
___ Piranha -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 12:15:02 (EST)
____ jimsum -:- Re: Rant on Troubling 'Values' in Parts of America -:- Thurs, Nov 04, 2004 at 13:38:12 (EST)

Terri -:- Investing After -:- Wed, Nov 03, 2004 at 18:39:56 (EST)
_
Bobby -:- Re: Investing After -:- Thurs, Nov 04, 2004 at 02:16:03 (EST)
__ jimsum -:- PK has a fixed rate mortgage -:- Thurs, Nov 04, 2004 at 09:54:49 (EST)
___ Pete Weis -:- At their limit -:- Thurs, Nov 04, 2004 at 10:28:20 (EST)
__ Terri -:- Re: Investing After -:- Thurs, Nov 04, 2004 at 05:47:55 (EST)
___ Pete Weis -:- Re: Investing After -:- Thurs, Nov 04, 2004 at 09:46:35 (EST)
_ Pete Weis -:- Re: Investing After -:- Thurs, Nov 04, 2004 at 01:21:42 (EST)
__ Ari -:- Interesting -:- Thurs, Nov 04, 2004 at 17:36:36 (EST)
__ Terri -:- Re: Investing After -:- Thurs, Nov 04, 2004 at 06:06:07 (EST)
_ Terri -:- Markets After -:- Wed, Nov 03, 2004 at 20:15:47 (EST)

Emma -:- Energy Prices and Japan -:- Wed, Nov 03, 2004 at 13:53:29 (EST)
_
Pete Weis -:- Re: Energy Prices and Japan -:- Wed, Nov 03, 2004 at 23:23:58 (EST)
__ Terri -:- Re: Energy Prices and Japan -:- Thurs, Nov 04, 2004 at 20:07:02 (EST)
__ Dr. Funkenstein -:- Re: Energy Prices and Japan -:- Thurs, Nov 04, 2004 at 18:54:35 (EST)

Mik -:- Oh F#@&% -:- Wed, Nov 03, 2004 at 13:49:30 (EST)

Emma -:- Living Poor, Voting Rich -:- Wed, Nov 03, 2004 at 12:37:28 (EST)
_
Bobby -:- Re: Living Poor, Voting Rich -:- Wed, Nov 03, 2004 at 15:14:22 (EST)
__ Pete Weis -:- Social conservatism -:- Wed, Nov 03, 2004 at 22:44:08 (EST)
__ Terri -:- Re: Living Poor, Voting Rich -:- Wed, Nov 03, 2004 at 15:21:31 (EST)
___ Terri -:- Robert Burd -:- Wed, Nov 03, 2004 at 18:41:16 (EST)
_ johnny5 -:- Grey Hairs swing it -:- Wed, Nov 03, 2004 at 13:11:25 (EST)

Henry -:- Is Paul Krugman responsible? -:- Wed, Nov 03, 2004 at 09:02:55 (EST)
_
Terri -:- No -:- Wed, Nov 03, 2004 at 13:10:11 (EST)
__ johnny5 -:- Maybe -:- Wed, Nov 03, 2004 at 13:20:25 (EST)
___ Terri -:- Re: Maybe -:- Wed, Nov 03, 2004 at 15:19:04 (EST)
_ Ari -:- Re: Is Paul Krugman responsible? -:- Wed, Nov 03, 2004 at 11:02:30 (EST)
_ Pete Weis -:- The Iraq Quagmire...... -:- Wed, Nov 03, 2004 at 10:33:40 (EST)
__ johnny5 -:- Re: The Iraq Quagmire...... -:- Wed, Nov 03, 2004 at 11:18:39 (EST)
___ Jennifer -:- John Edwards -:- Wed, Nov 03, 2004 at 12:09:58 (EST)
____ krugman en francais -:- Re: John Edwards -:- Wed, Nov 03, 2004 at 12:22:16 (EST)
_____ Emma -:- Paul Krugman is Wonderful -:- Wed, Nov 03, 2004 at 12:40:48 (EST)

Terri -:- Today -:- Tues, Nov 02, 2004 at 17:26:02 (EST)
_
Ari -:- Re: Today -:- Tues, Nov 02, 2004 at 17:40:00 (EST)
__ Ari -:- Tomorrow -:- Wed, Nov 03, 2004 at 05:38:28 (EST)
__ Emma -:- Thanks PK -:- Tues, Nov 02, 2004 at 20:24:12 (EST)
___ Pete Weis -:- Paul Krugman..... -:- Tues, Nov 02, 2004 at 21:35:46 (EST)

Emma -:- Trade and Employment -:- Tues, Nov 02, 2004 at 12:38:13 (EST)

Pete Weis -:- World job markets level rapidly -:- Tues, Nov 02, 2004 at 11:21:35 (EST)

Pete Weis -:- Neoconservatives are desperate -:- Tues, Nov 02, 2004 at 11:07:14 (EST)
_
Pete Weis -:- Re: Neoconservatives are desperate -:- Tues, Nov 02, 2004 at 11:09:47 (EST)
__ Ari -:- Re: Neoconservatives are desperate -:- Tues, Nov 02, 2004 at 11:11:30 (EST)

Emma -:- China's Talent in Technology -:- Tues, Nov 02, 2004 at 10:53:24 (EST)
_
Pete Weis -:- Whoops! -:- Tues, Nov 02, 2004 at 11:33:01 (EST)
__ Emma -:- Re: Whoops! -:- Tues, Nov 02, 2004 at 12:39:14 (EST)

krugman en francais -:- CNN international -:- Tues, Nov 02, 2004 at 10:47:04 (EST)
_
Terri -:- Krugman on PBS -:- Tues, Nov 02, 2004 at 10:55:54 (EST)
__ krugman en francais -:- Re: Krugman on PBS -:- Tues, Nov 02, 2004 at 11:01:38 (EST)
___ Ari -:- Re: Krugman on PBS -:- Tues, Nov 02, 2004 at 11:10:00 (EST)

Terry -:- Europe -:- Mon, Nov 01, 2004 at 20:49:59 (EST)
_
Terri -:- Values -:- Tues, Nov 02, 2004 at 07:08:01 (EST)

Emma -:- Supercomputers and China -:- Mon, Nov 01, 2004 at 19:14:49 (EST)

Jack -:- Home ownership -:- Mon, Nov 01, 2004 at 17:33:04 (EST)
_
Emma -:- Re: Home ownership -:- Mon, Nov 01, 2004 at 18:16:33 (EST)

Emma -:- Wal-Mart and Health Care -:- Mon, Nov 01, 2004 at 11:21:01 (EST)

Ari -:- Saving More -:- Mon, Nov 01, 2004 at 07:05:13 (EST)

Pete Weis -:- Asian Times - US dollar/US inflation -:- Sun, Oct 31, 2004 at 19:55:27 (EST)
_
Terri -:- Re: Asian Times - US dollar/US inflation -:- Sun, Oct 31, 2004 at 20:32:15 (EST)
__ Pete Weis -:- Re: Asian Times - US dollar/US inflation -:- Sun, Oct 31, 2004 at 21:54:32 (EST)
___ Terri -:- The Dollar and the Yuan -:- Mon, Nov 01, 2004 at 15:59:11 (EST)

Pete Weis -:- Jobs -:- Sun, Oct 31, 2004 at 18:49:54 (EST)
_
Ari -:- Re: Jobs -:- Mon, Nov 01, 2004 at 05:02:15 (EST)
_ Terri -:- 2004 and 1994 -:- Sun, Oct 31, 2004 at 19:32:59 (EST)

Emma -:- Drug Shortages in America -:- Sun, Oct 31, 2004 at 16:56:57 (EST)

Emma -:- The Future of Health Care? -:- Sun, Oct 31, 2004 at 11:03:01 (EST)

Terri -:- Long Term Stock and Bond Returns -:- Sun, Oct 31, 2004 at 10:48:19 (EST)
_
Ari -:- REITs are Stocks -:- Sun, Oct 31, 2004 at 14:22:48 (EST)
__ Ari -:- Re: REITs are Stocks -:- Mon, Nov 01, 2004 at 04:52:26 (EST)
___ Ari -:- REIT Prices -:- Mon, Nov 01, 2004 at 05:25:11 (EST)
____ David E... -:- Re: REIT Prices -:- Mon, Nov 01, 2004 at 14:13:35 (EST)
_____ Terri -:- Re: REIT Prices -:- Mon, Nov 01, 2004 at 14:38:06 (EST)
______ Terri -:- REITs and TIPS -:- Mon, Nov 01, 2004 at 15:41:15 (EST)
_______ David E... -:- Re: REITs and TIPS -:- Mon, Nov 01, 2004 at 17:26:31 (EST)
________ Terri -:- Re: REITs and TIPS -:- Mon, Nov 01, 2004 at 18:40:23 (EST)
_________ Terri -:- I'll Take Value -:- Mon, Nov 01, 2004 at 19:52:29 (EST)
__________ David E... -:- Re: I'll Take Value -:- Tues, Nov 02, 2004 at 13:07:22 (EST)

Emma -:- Lowest Personal Saving Rate Ever -:- Sat, Oct 30, 2004 at 21:08:15 (EDT)
_
Terri -:- Re: Lowest Personal Saving Rate Ever -:- Sun, Oct 31, 2004 at 12:04:24 (EST)
_ Emma -:- Re: Lowest Personal Saving Rate Ever -:- Sat, Oct 30, 2004 at 21:17:54 (EDT)
__ Ari -:- Re: Lowest Personal Saving Rate Ever -:- Sun, Oct 31, 2004 at 06:02:02 (EST)
___ time -:- Re: Lowest Personal Saving Rate Ever -:- Sun, Oct 31, 2004 at 10:06:08 (EST)
____ El Gringo -:- Re:The wolf at the door -:- Sun, Oct 31, 2004 at 16:02:59 (EST)
____ Pete Weis -:- Re: Lowest Personal Saving Rate Ever -:- Sun, Oct 31, 2004 at 11:47:34 (EST)
_____ time -:- Re: Lowest Personal Saving Rate Ever -:- Sun, Oct 31, 2004 at 13:07:38 (EST)
______ Pete Weis -:- Re: Lowest Personal Saving Rate Ever -:- Sun, Oct 31, 2004 at 14:35:17 (EST)
_____ Terri -:- Negative Real Interest Rates? -:- Sun, Oct 31, 2004 at 12:29:08 (EST)
______ Pete Weis -:- Re: Negative Real Interest Rates? -:- Sun, Oct 31, 2004 at 13:32:13 (EST)
_______ Pete Weis -:- Precise definition -:- Sun, Oct 31, 2004 at 14:20:07 (EST)
________ Terri -:- Re: Precise definition -:- Sun, Oct 31, 2004 at 14:32:09 (EST)
_________ Pete Weis -:- Being convinced -:- Sun, Oct 31, 2004 at 15:18:02 (EST)
__________ Terri -:- Re: Being convinced -:- Sun, Oct 31, 2004 at 18:57:01 (EST)
__________ Terri -:- Re: Being convinced -:- Sun, Oct 31, 2004 at 16:01:49 (EST)
___________ Pete Weis -:- Re: Being convinced -:- Sun, Oct 31, 2004 at 18:44:45 (EST)
____________ Terri -:- Silence -:- Sun, Oct 31, 2004 at 19:00:25 (EST)

Terri -:- Energy Stocks -:- Sat, Oct 30, 2004 at 19:35:28 (EDT)
_
time -:- Re: Energy Stocks -:- Sat, Oct 30, 2004 at 20:01:12 (EDT)
__ Terri -:- Re: Energy Stocks -:- Sat, Oct 30, 2004 at 20:18:30 (EDT)
___ Terri -:- Weighing Sectoirs Stocks -:- Sat, Oct 30, 2004 at 20:36:53 (EDT)
____ time -:- Re: Weighing Sectoirs Stocks -:- Sat, Oct 30, 2004 at 22:12:23 (EDT)
_____ Terri -:- REITs -:- Sat, Oct 30, 2004 at 22:36:56 (EDT)
______ time -:- Re: REITs -:- Sun, Oct 31, 2004 at 09:54:38 (EST)
_______ Terri -:- Re: REITs -:- Sun, Oct 31, 2004 at 12:50:33 (EST)
________ time -:- Re: REITs -:- Sun, Oct 31, 2004 at 13:17:53 (EST)
_________ Ari -:- REITs are Stocks -:- Sun, Oct 31, 2004 at 14:09:02 (EST)
______ Ari -:- REIT Returns -:- Sun, Oct 31, 2004 at 05:55:41 (EST)
_______ Terri -:- Long Term REIT Returns -:- Sun, Oct 31, 2004 at 10:29:07 (EST)
_______ time -:- Re: REIT Returns -:- Sun, Oct 31, 2004 at 10:00:01 (EST)
___ Terri -:- Weighing Sectoirs Stocks -:- Sat, Oct 30, 2004 at 20:36:52 (EDT)
____ Terri -:- Forgive the Double Post -:- Sat, Oct 30, 2004 at 20:39:22 (EDT)

Emma -:- An End of Deflation in Japan -:- Sat, Oct 30, 2004 at 19:19:04 (EDT)
_
jimsum -:- The Effects of Deflation -:- Mon, Nov 01, 2004 at 10:00:08 (EST)
_ Pete Weis -:- Re: An End of Deflation in Japan -:- Sun, Oct 31, 2004 at 10:55:48 (EST)
__ Emma -:- Re: An End of Deflation in Japan -:- Sun, Oct 31, 2004 at 15:22:37 (EST)

Emma -:- Medicine Without Borders -:- Sat, Oct 30, 2004 at 18:09:20 (EDT)

Pete Weis -:- Per capita consumption of oil -:- Sat, Oct 30, 2004 at 12:19:57 (EDT)
_
Terri -:- Re: Per capita consumption of oil -:- Sat, Oct 30, 2004 at 14:05:37 (EDT)
__ Pete Weis -:- Re: Per capita consumption of oil -:- Sat, Oct 30, 2004 at 17:08:25 (EDT)
___ Terri -:- Re: Per capita consumption of oil -:- Sat, Oct 30, 2004 at 17:55:51 (EDT)

Terri -:- Economic Growth and Debt -:- Sat, Oct 30, 2004 at 06:21:58 (EDT)

Terri -:- Stocks and Bonds -:- Fri, Oct 29, 2004 at 17:59:16 (EDT)
_
Ari -:- Re: Stocks and Bonds -:- Sat, Oct 30, 2004 at 07:27:51 (EDT)
_ Jennifer -:- Re: Stocks and Bonds -:- Fri, Oct 29, 2004 at 19:50:36 (EDT)
_ time? -:- Re: Stocks and Bonds -:- Fri, Oct 29, 2004 at 19:29:17 (EDT)
__ Terri -:- Re: Stocks and Bonds -:- Sat, Oct 30, 2004 at 11:45:32 (EDT)
___ time -:- Re: Stocks and Bonds -:- Sat, Oct 30, 2004 at 20:00:02 (EDT)
__ Jennifer -:- Re: Stocks and Bonds -:- Fri, Oct 29, 2004 at 19:45:34 (EDT)
___ time -:- Re: Stocks and Bonds -:- Sat, Oct 30, 2004 at 09:42:32 (EDT)
____ Jennifer -:- Re: Stocks and Bonds -:- Sat, Oct 30, 2004 at 09:54:40 (EDT)

Terri -:- A Wageless Recovery -:- Fri, Oct 29, 2004 at 17:27:26 (EDT)

Mik -:- Good Luck with your elections Guys -:- Fri, Oct 29, 2004 at 16:50:47 (EDT)
_
Ari -:- Re: Good Luck with your elections Guys -:- Fri, Oct 29, 2004 at 17:10:18 (EDT)
__ Jennifer -:- Re: Good Luck with your elections Guys -:- Fri, Oct 29, 2004 at 20:07:27 (EDT)

Emma -:- China's Bank in Transition -:- Fri, Oct 29, 2004 at 13:18:54 (EDT)

Pete Weis -:- 'Not to worry' -:- Fri, Oct 29, 2004 at 09:56:08 (EDT)

John -:- Krugman interview in Texas Observer -:- Fri, Oct 29, 2004 at 07:10:03 (EDT)
_
Bobby -:- Re: Krugman interview in Texas Observer -:- Fri, Oct 29, 2004 at 14:05:41 (EDT)

Pete Weis -:- The 'insurance mess' -:- Thurs, Oct 28, 2004 at 20:57:45 (EDT)
_
Terri -:- The Ethics Mess -:- Fri, Oct 29, 2004 at 12:34:42 (EDT)
_ Terri -:- Re: The 'insurance mess' -:- Fri, Oct 29, 2004 at 05:33:17 (EDT)
__ Pete Weis -:- Systemic risk -:- Fri, Oct 29, 2004 at 10:31:12 (EDT)
___ Terri -:- Re: Systemic risk -:- Fri, Oct 29, 2004 at 12:37:40 (EDT)
____ Pete Weis -:- What 'awareness' -:- Fri, Oct 29, 2004 at 15:00:08 (EDT)
_____ Terri -:- Re: What 'awareness' -:- Fri, Oct 29, 2004 at 18:05:49 (EDT)

Emma -:- South Africa's Fences -:- Thurs, Oct 28, 2004 at 18:45:15 (EDT)
_
Mik -:- Re: South Africa's Fences -:- Fri, Oct 29, 2004 at 10:38:31 (EDT)
__ Emma -:- Re: South Africa's Fences -:- Fri, Oct 29, 2004 at 12:17:49 (EDT)

Terri -:- China Raises Interest Rates -:- Thurs, Oct 28, 2004 at 18:39:19 (EDT)
_
Ari -:- Re: China Raises Interest Rates -:- Thurs, Oct 28, 2004 at 19:40:13 (EDT)

Fernando Franco -:- THE TRRORIST ATTEMPPT IN SATURDAY -:- Thurs, Oct 28, 2004 at 16:45:06 (EDT)

Terri -:- The Trade Deficit -:- Thurs, Oct 28, 2004 at 15:34:28 (EDT)
_
El Gringo -:- Re:Foreign confidence... -:- Thurs, Oct 28, 2004 at 17:49:47 (EDT)
__ Terri -:- Monetary Policy Makers -:- Thurs, Oct 28, 2004 at 18:42:34 (EDT)

Emma -:- Old Industry and Consolidation -:- Thurs, Oct 28, 2004 at 14:17:59 (EDT)

Emma -:- Where Are the Economists? -:- Thurs, Oct 28, 2004 at 11:08:22 (EDT)

Pete Weis -:- 'Tipping over' -:- Thurs, Oct 28, 2004 at 10:21:26 (EDT)
_
Terri -:- 'Tipping over' Policy -:- Thurs, Oct 28, 2004 at 12:38:54 (EDT)

EZ -:- Conservative Magazine supports Kerry -:- Thurs, Oct 28, 2004 at 09:50:55 (EDT)

Terri -:- Market Patterns -:- Wed, Oct 27, 2004 at 17:39:05 (EDT)

Emma -:- Brokering Insurance -:- Wed, Oct 27, 2004 at 14:43:21 (EDT)
_
Pete Weis -:- Re: Brokering Insurance -:- Thurs, Oct 28, 2004 at 20:59:14 (EDT)

Joe Savitsky -:- Republican econ statistics -:- Wed, Oct 27, 2004 at 14:38:30 (EDT)
_
Pete Weis -:- Misery index -:- Wed, Oct 27, 2004 at 21:27:42 (EDT)
__ Ari -:- Republican Fakery -:- Thurs, Oct 28, 2004 at 07:17:44 (EDT)
__ setanta -:- Re: Misery index -:- Thurs, Oct 28, 2004 at 05:05:15 (EDT)
___ Ari -:- Great Response Peter -:- Thurs, Oct 28, 2004 at 07:22:21 (EDT)
_ Ari -:- Trolling -:- Wed, Oct 27, 2004 at 19:42:22 (EDT)
__ El Gringo -:- Re: Trolling -:- Wed, Oct 27, 2004 at 19:47:30 (EDT)
___ Ari -:- Re: Trolling -:- Wed, Oct 27, 2004 at 19:51:59 (EDT)
____ El Gringo -:- Re:Ari -:- Wed, Oct 27, 2004 at 20:09:27 (EDT)
_ El Gringo -:- Re: Republican econ statistics -:- Wed, Oct 27, 2004 at 18:43:57 (EDT)
__ Mik -:- Re: Republican econ statistics -:- Wed, Oct 27, 2004 at 19:08:40 (EDT)
___ El Gringo -:- Re: Mik -:- Wed, Oct 27, 2004 at 19:30:06 (EDT)
____ El Gringo -:- Re: Mik -:- Wed, Oct 27, 2004 at 21:28:06 (EDT)
_____ Mik -:- El Gringo -:- Thurs, Oct 28, 2004 at 18:00:13 (EDT)
______ El Gringo -:- Re: Mik -:- Thurs, Oct 28, 2004 at 18:31:53 (EDT)

El Gringo -:- Con Job Redux -:- Wed, Oct 27, 2004 at 13:56:17 (EDT)
_
Pete Weis -:- Re: Con Job Redux -:- Wed, Oct 27, 2004 at 19:53:42 (EDT)
__ El Gringo -:- Re: Con Job Redux -:- Wed, Oct 27, 2004 at 20:14:27 (EDT)
___ Pete Weis -:- Re: Con Job Redux -:- Thurs, Oct 28, 2004 at 01:00:54 (EDT)
____ David E... -:- CPI & TIPS -:- Thurs, Oct 28, 2004 at 14:02:54 (EDT)
_____ Terri -:- Individual Bonds or Funds -:- Thurs, Oct 28, 2004 at 15:30:06 (EDT)
_____ Terri -:- Re: CPI & TIPS -:- Thurs, Oct 28, 2004 at 14:21:12 (EDT)
______ David E.,.. -:- Re: CPI & TIPS -:- Thurs, Oct 28, 2004 at 19:21:45 (EDT)

Emma -:- Brazilian Infrastructure -:- Wed, Oct 27, 2004 at 13:16:28 (EDT)

Pete Weis -:- The Economist - 'Parable of the Cats' -:- Wed, Oct 27, 2004 at 10:17:46 (EDT)
_
Terri -:- Wonderful Posts -:- Wed, Oct 27, 2004 at 17:37:15 (EDT)

Pete Weis -:- Business Times - Singapore -:- Wed, Oct 27, 2004 at 09:52:18 (EDT)
_
Terri -:- Decline in the Dollar -:- Wed, Oct 27, 2004 at 12:31:51 (EDT)
__ Terri -:- Re: Decline in the Dollar -:- Thurs, Oct 28, 2004 at 06:11:51 (EDT)
__ El Gringo -:- Re: Decline in the Dollar -:- Wed, Oct 27, 2004 at 12:39:40 (EDT)
___ Terri -:- Re: Decline in the Dollar -:- Wed, Oct 27, 2004 at 13:56:00 (EDT)
____ El Gringo -:- Re: Decline in the Dollar -:- Wed, Oct 27, 2004 at 14:15:23 (EDT)
_____ Pete Weis -:- Chinese surplus US dollars -:- Wed, Oct 27, 2004 at 15:11:01 (EDT)
______ Terri -:- Chinese Strategic Oil Reserve -:- Wed, Oct 27, 2004 at 16:07:48 (EDT)

Setanta -:- Pumped-Up Pension Plays? -:- Wed, Oct 27, 2004 at 04:34:02 (EDT)
_
Ari -:- Re: Pumped-Up Pension Plays? -:- Wed, Oct 27, 2004 at 05:41:53 (EDT)
__ Institutional Investor -:- Re: Pumped-Up Pension Plays? -:- Wed, Oct 27, 2004 at 10:05:23 (EDT)
__ setanta -:- Re: Pumped-Up Pension Plays? -:- Wed, Oct 27, 2004 at 08:48:40 (EDT)

Emma -:- Subdued Technology Recovery -:- Tues, Oct 26, 2004 at 17:05:55 (EDT)

Emma -:- Economy Improves, Not Optimism -:- Tues, Oct 26, 2004 at 12:20:41 (EDT)

Terri -:- Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 12:06:22 (EDT)
_
Mik -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 12:30:09 (EDT)
__ Terri -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 13:31:45 (EDT)
___ jimsum -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 18:23:55 (EDT)
____ Terri -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 19:10:54 (EDT)
_____ Pete Weis -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 21:06:20 (EDT)
___ Mik -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 14:53:25 (EDT)
____ Terri -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 15:10:45 (EDT)
_____ bonds -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 16:51:40 (EDT)
______ johnny5 -:- Valuations were correct in 2000 -:- Tues, Oct 26, 2004 at 19:17:29 (EDT)
______ Terri -:- Re: Why Worry About the Dollar -:- Tues, Oct 26, 2004 at 17:54:39 (EDT)
_______ Mik -:- Re: Why Worry About the Dollar -:- Wed, Oct 27, 2004 at 18:54:09 (EDT)
________ Terri -:- Re: Why Worry About the Dollar -:- Wed, Oct 27, 2004 at 19:49:57 (EDT)

setanta -:- cupla questions... -:- Tues, Oct 26, 2004 at 07:13:19 (EDT)
_
Ari -:- Re: cupla questions... -:- Tues, Oct 26, 2004 at 10:50:45 (EDT)

Terri -:- Secure Investing in Bond Funds -:- Tues, Oct 26, 2004 at 06:55:57 (EDT)
_
bonds -:- Re: Secure Investing in Bond Funds -:- Tues, Oct 26, 2004 at 10:31:43 (EDT)
_ Pete Weis -:- Minimizing maximum risk -:- Tues, Oct 26, 2004 at 09:47:50 (EDT)
__ Terri -:- Re: Minimizing maximum risk -:- Tues, Oct 26, 2004 at 14:59:32 (EDT)
___ bonds -:- Re: Minimizing maximum risk -:- Tues, Oct 26, 2004 at 16:48:55 (EDT)
____ Terri -:- Re: Minimizing maximum risk -:- Tues, Oct 26, 2004 at 18:42:45 (EDT)
_____ bonds -:- Re: Minimizing maximum risk -:- Tues, Oct 26, 2004 at 20:50:06 (EDT)
__ Terri -:- The Great Crash -:- Tues, Oct 26, 2004 at 14:14:18 (EDT)

Harry Hutton -:- Colombian newspaper, 'Prince Krugman' -:- Mon, Oct 25, 2004 at 22:36:28 (EDT)
_
El Gringo -:- Re:Indeed -:- Tues, Oct 26, 2004 at 02:21:59 (EDT)
__ Terri -:- Cheers -:- Tues, Oct 26, 2004 at 06:57:12 (EDT)

Fuad Ahmad -:- misappropriations... -:- Mon, Oct 25, 2004 at 22:21:12 (EDT)

Emma -:- On the Dollar -:- Mon, Oct 25, 2004 at 18:20:20 (EDT)
_
Emma -:- The Dollar -:- Mon, Oct 25, 2004 at 19:05:14 (EDT)

Terri -:- Portfolio Allocation -:- Mon, Oct 25, 2004 at 15:52:04 (EDT)
_
Terri -:- Protecting the Economy -:- Mon, Oct 25, 2004 at 17:15:31 (EDT)
__ japan -:- Re: Protecting the Economy -:- Mon, Oct 25, 2004 at 20:23:59 (EDT)
__ johnny5 -:- Re: Protecting the Economy -:- Mon, Oct 25, 2004 at 17:40:21 (EDT)

Pete Weis -:- Can it happen again? -:- Mon, Oct 25, 2004 at 15:09:37 (EDT)
_
Ari -:- 1928 1929 1930 -:- Tues, Oct 26, 2004 at 05:25:37 (EDT)
__ Pete Weis -:- What are the....... -:- Tues, Oct 26, 2004 at 09:38:17 (EDT)
___ Terri -:- Re: What are the....... -:- Tues, Oct 26, 2004 at 14:11:19 (EDT)
____ Pete Weis -:- Re: What are the....... -:- Tues, Oct 26, 2004 at 21:20:12 (EDT)
_ Terri -:- We Can Invest Safely -:- Mon, Oct 25, 2004 at 15:56:19 (EDT)
__ Terri -:- Re: We Can Invest Safely -:- Mon, Oct 25, 2004 at 19:43:13 (EDT)

Emma -:- Pay to Play Insurance -:- Mon, Oct 25, 2004 at 12:25:47 (EDT)
_
Emma -:- Re: Pay to Play Insurance -:- Mon, Oct 25, 2004 at 13:14:45 (EDT)

El Gringo -:- Budget Failures -:- Sun, Oct 24, 2004 at 19:42:42 (EDT)
_
Terri -:- Re: Budget Failures -:- Sun, Oct 24, 2004 at 19:56:20 (EDT)
__ Ari -:- Re: Budget Failures -:- Mon, Oct 25, 2004 at 15:03:24 (EDT)
__ johnny5 -:- Irrational/Solvency -:- Sun, Oct 24, 2004 at 21:27:10 (EDT)
___ Terri -:- Re: Irrational/Solvency -:- Mon, Oct 25, 2004 at 12:35:11 (EDT)

Terri -:- International Investing -:- Sun, Oct 24, 2004 at 18:49:04 (EDT)

Emma -:- Hidden Costs of War -:- Sun, Oct 24, 2004 at 17:17:01 (EDT)

Emma -:- Wroker's Losses -:- Sun, Oct 24, 2004 at 14:50:59 (EDT)

krugman en francais -:- a french web page on paul krugman -:- Sun, Oct 24, 2004 at 12:22:49 (EDT)
_
Yann -:- Re: a french web page on paul krugman -:- Tues, Oct 26, 2004 at 02:39:14 (EDT)
__ krugman en francais -:- Re: a french web page on paul krugman -:- Wed, Oct 27, 2004 at 09:11:05 (EDT)

Emma -:- Free Schools in Africa -:- Sun, Oct 24, 2004 at 10:35:13 (EDT)

Terri -:- Federal Reserve Policy -:- Sun, Oct 24, 2004 at 09:41:05 (EDT)
_
Pete Weis -:- Re: Federal Reserve Policy -:- Sun, Oct 24, 2004 at 12:40:33 (EDT)
__ Terri -:- Fed Theory -:- Sun, Oct 24, 2004 at 13:21:36 (EDT)
___ Terri -:- Re: Fed Theory -:- Sun, Oct 24, 2004 at 17:15:20 (EDT)
____ Pete Weis -:- Re: Fed Theory -:- Sun, Oct 24, 2004 at 23:23:05 (EDT)
_ Terri -:- Re: Federal Reserve Policy -:- Sun, Oct 24, 2004 at 12:34:53 (EDT)

El Gringo alias el shepherd's son -:- Go, Paul Krugman, go! -:- Sat, Oct 23, 2004 at 20:44:39 (EDT)
_
Pete Weis -:- Congratulations to Paul krugman -:- Sun, Oct 24, 2004 at 02:36:04 (EDT)
__ Terri -:- We Love Paul Krugman -:- Sun, Oct 24, 2004 at 09:24:11 (EDT)

Emma -:- Chip Industry Changes -:- Sat, Oct 23, 2004 at 14:00:57 (EDT)

Emma -:- Rah-Rah for Google! Or Not -:- Sat, Oct 23, 2004 at 11:05:05 (EDT)
_
Emma -:- Google! Or Not -:- Sat, Oct 23, 2004 at 11:17:04 (EDT)

maurice frank -:- court info to stop another bent election -:- Sat, Oct 23, 2004 at 04:56:48 (EDT)

Pete Weis -:- 'Wake up America!' -:- Fri, Oct 22, 2004 at 20:37:51 (EDT)

Emma -:- Debt and Interest Rates -:- Fri, Oct 22, 2004 at 20:02:23 (EDT)
_
Emma -:- Circular Thinking... -:- Fri, Oct 22, 2004 at 20:53:02 (EDT)
_ Pete Weis -:- Re: Debt and Interest Rates -:- Fri, Oct 22, 2004 at 20:26:51 (EDT)
__ Terri -:- Re: Debt and Interest Rates -:- Fri, Oct 22, 2004 at 20:40:53 (EDT)
___ Pete Weis -:- Greenspan's present term -:- Fri, Oct 22, 2004 at 21:28:43 (EDT)
____ Terri -:- Re: Greenspan's present term -:- Sat, Oct 23, 2004 at 09:56:55 (EDT)
_____ Pete Weis -:- Greenspan's watch -:- Sat, Oct 23, 2004 at 11:21:48 (EDT)
______ Terri -:- Social Security -:- Sat, Oct 23, 2004 at 14:46:47 (EDT)
______ Pete Weis -:- Re: Greenspan's watch -:- Sat, Oct 23, 2004 at 11:43:08 (EDT)
_______ Pete Weis -:- Buffet & Greenspan -:- Sat, Oct 23, 2004 at 12:31:11 (EDT)
________ Pete Weis -:- Greenspan, Buffet, Spitzer, & derivatives -:- Sat, Oct 23, 2004 at 12:59:48 (EDT)
_________ Terri -:- Federal Reserve Policy -:- Sat, Oct 23, 2004 at 13:57:24 (EDT)

Terri -:- The Week that Was -:- Fri, Oct 22, 2004 at 18:27:10 (EDT)

Pete Weis -:- Oil or debt ? -:- Fri, Oct 22, 2004 at 15:17:50 (EDT)
_
Terri -:- Re: Oil or debt ? -:- Fri, Oct 22, 2004 at 16:51:21 (EDT)

Terri -:- Google -:- Fri, Oct 22, 2004 at 12:10:20 (EDT)
_
Mik -:- Re: Google -:- Fri, Oct 22, 2004 at 14:12:29 (EDT)
__ Terri -:- Re: Google -:- Fri, Oct 22, 2004 at 14:38:32 (EDT)
___ Mik -:- Re: Google -:- Fri, Oct 22, 2004 at 14:48:57 (EDT)
____ Terri -:- Re: Google -:- Fri, Oct 22, 2004 at 15:00:17 (EDT)
_____ Mik -:- Re: Google -:- Fri, Oct 22, 2004 at 15:04:11 (EDT)
______ Terri -:- Re: Google -:- Fri, Oct 22, 2004 at 16:55:58 (EDT)

Pete Weis -:- 'Forgoing dessert altogether' -:- Thurs, Oct 21, 2004 at 21:02:04 (EDT)
_
El Gringo -:- Re: 'Forgoing dessert altogether' -:- Sat, Oct 23, 2004 at 21:02:44 (EDT)
_ johnny5 -:- Why sam's club failed in Asia -:- Fri, Oct 22, 2004 at 03:24:06 (EDT)
__ El Gringo -:- Re: Why sam's club failed in Asia -:- Fri, Oct 22, 2004 at 10:12:53 (EDT)
__ El Gringo -:- Re: Why sam's club failed in Asia -:- Fri, Oct 22, 2004 at 10:09:47 (EDT)
_ johnny5 -:- Its not STANDARD of living, but COST of living -:- Fri, Oct 22, 2004 at 03:16:03 (EDT)
__ Mik -:- Re: Its not STANDARD of living, but COST of living -:- Fri, Oct 22, 2004 at 14:46:18 (EDT)

Anon -:- RSS Feeds? -:- Thurs, Oct 21, 2004 at 14:36:46 (EDT)
_
Anon -:- Re: RSS Feeds? -:- Fri, Oct 22, 2004 at 12:11:45 (EDT)
_ Anon -:- Re: RSS Feeds? -:- Fri, Oct 22, 2004 at 12:09:36 (EDT)
__ Bobby -:- Re: RSS Feeds? -:- Fri, Oct 22, 2004 at 16:24:03 (EDT)
_ Bobby -:- Re: RSS Feeds? -:- Thurs, Oct 21, 2004 at 15:37:32 (EDT)
__ Emma -:- Poll Graphs -:- Thurs, Oct 21, 2004 at 15:44:32 (EDT)
___ Bobby -:- Re: Poll Graphs -:- Fri, Oct 22, 2004 at 01:25:08 (EDT)
____ Emma -:- Thank You! -:- Fri, Oct 22, 2004 at 10:32:16 (EDT)
_____ Bobby -:- Re: Thank You! -:- Fri, Oct 22, 2004 at 16:21:31 (EDT)

Emma -:- Insider Profits -:- Thurs, Oct 21, 2004 at 14:33:34 (EDT)
_
Pete Weis -:- Re: Insider Profits -:- Thurs, Oct 21, 2004 at 17:41:00 (EDT)
__ Terri -:- Re: Insider Profits -:- Thurs, Oct 21, 2004 at 17:53:24 (EDT)

Pete Weis -:- Higher raw material and oil costs.... -:- Thurs, Oct 21, 2004 at 11:03:29 (EDT)
_
Terri -:- Re: Higher raw material and oil costs.... -:- Thurs, Oct 21, 2004 at 11:28:09 (EDT)
__ Pete Weis -:- Re: Higher raw material and oil costs.... -:- Thurs, Oct 21, 2004 at 11:38:55 (EDT)
___ Terri -:- Re: Higher raw material and oil costs.... -:- Thurs, Oct 21, 2004 at 12:58:58 (EDT)
____ Pete Weis -:- Re: Higher raw material and oil costs.... -:- Thurs, Oct 21, 2004 at 17:07:42 (EDT)
_____ Terri -:- Re: Higher raw material and oil costs.... -:- Thurs, Oct 21, 2004 at 18:01:58 (EDT)

El Gringo -:- The Rising Cost of Health Care -:- Thurs, Oct 21, 2004 at 10:36:12 (EDT)
_
Pete Weis -:- Re: The Rising Cost of Health Care -:- Thurs, Oct 21, 2004 at 10:55:16 (EDT)
__ Terri -:- Re: The Rising Cost of Health Care -:- Thurs, Oct 21, 2004 at 13:00:40 (EDT)
___ jimsum -:- Re: The Rising Cost of Health Care -:- Thurs, Oct 21, 2004 at 14:42:38 (EDT)
____ Terri -:- Re: The Rising Cost of Health Care -:- Thurs, Oct 21, 2004 at 15:38:52 (EDT)

johnny5 -:- Economists Mirror Polarized Country -:- Wed, Oct 20, 2004 at 15:52:30 (EDT)
_
Pete Weis -:- Re: Economists Mirror Polarized Country -:- Wed, Oct 20, 2004 at 21:39:48 (EDT)
__ jimsum -:- Re: Economists Mirror Polarized Country -:- Thurs, Oct 21, 2004 at 14:35:11 (EDT)

Erica -:- Krugman has always been right -:- Wed, Oct 20, 2004 at 14:47:42 (EDT)
_
jimsum -:- Re: Krugman has always been right -:- Thurs, Oct 21, 2004 at 14:23:50 (EDT)
__ Pete Weis -:- Re: Krugman has always been right -:- Thurs, Oct 21, 2004 at 17:15:22 (EDT)

Emma -:- Investing in Company Stock -:- Wed, Oct 20, 2004 at 14:29:09 (EDT)
_
Auros -:- Re: Investing in Company Stock -:- Wed, Oct 20, 2004 at 14:51:57 (EDT)
__ Terri -:- Company Stock Plans -:- Wed, Oct 20, 2004 at 15:03:50 (EDT)
___ johnny5 -:- Re: Company Stock Plans -:- Wed, Oct 20, 2004 at 15:35:49 (EDT)
____ Ari -:- Japan -:- Wed, Oct 20, 2004 at 16:04:27 (EDT)
_____ johnny5 -:- Re: Japan -:- Wed, Oct 20, 2004 at 16:15:50 (EDT)
______ Piranha -:- Marsh -:- Wed, Oct 20, 2004 at 19:58:12 (EDT)
_______ Ari -:- Re: Marsh -:- Wed, Oct 20, 2004 at 20:02:46 (EDT)

Emma -:- Not an Oil Tanker to Spare -:- Wed, Oct 20, 2004 at 12:00:20 (EDT)
_
Auros -:- Re: Not an Oil Tanker to Spare -:- Wed, Oct 20, 2004 at 14:49:02 (EDT)

Pete Weis -:- 'No Problemo' - Alan Greenspan -:- Wed, Oct 20, 2004 at 10:23:15 (EDT)
_
Terri -:- Interest Rates -:- Wed, Oct 20, 2004 at 12:51:09 (EDT)
__ Pete Weis -:- Re: Interest Rates -:- Wed, Oct 20, 2004 at 14:58:00 (EDT)
___ Terri -:- Re: Interest Rates -:- Wed, Oct 20, 2004 at 16:13:35 (EDT)

Pete Weis -:- The now famous 'soft patch' -:- Wed, Oct 20, 2004 at 10:15:01 (EDT)
_
Terri -:- Re: The now famous 'soft patch' -:- Wed, Oct 20, 2004 at 20:03:57 (EDT)

Pete Weis -:- Still cook'n the books -:- Tues, Oct 19, 2004 at 21:41:30 (EDT)
_
jimsum -:- Re: Still cook'n the books -:- Wed, Oct 20, 2004 at 09:49:06 (EDT)
__ Pete Weis -:- Re: Still cook'n the books -:- Wed, Oct 20, 2004 at 10:08:15 (EDT)

Pete Weis -:- Foreign investment in US -:- Tues, Oct 19, 2004 at 21:30:30 (EDT)
_
Auros -:- An October Surprise from China? -:- Wed, Oct 20, 2004 at 00:33:33 (EDT)
__ El Gringo -:- Re: An October Surprise from China? -:- Wed, Oct 20, 2004 at 02:32:11 (EDT)
__ johnny5 -:- Re: An October Surprise from China? -:- Wed, Oct 20, 2004 at 02:08:27 (EDT)
___ jimsum -:- Re: An October Surprise from China? -:- Wed, Oct 20, 2004 at 10:07:07 (EDT)
____ Auros -:- Re: An October Surprise from China? -:- Wed, Oct 20, 2004 at 14:43:49 (EDT)

Terri -:- The Dollar -:- Tues, Oct 19, 2004 at 16:29:56 (EDT)
_
El Gringo -:- Re: The Dollar -:- Tues, Oct 19, 2004 at 16:59:04 (EDT)
__ Terri -:- Re: The Dollar -:- Tues, Oct 19, 2004 at 17:19:46 (EDT)
___ Auros -:- Re: The Dollar -:- Wed, Oct 20, 2004 at 00:29:31 (EDT)
____ Terri -:- Re: The Dollar -:- Wed, Oct 20, 2004 at 10:32:13 (EDT)
_ Terri -:- Asia and the Dollar -:- Tues, Oct 19, 2004 at 16:32:59 (EDT)

Emma -:- Insurance Costs -:- Tues, Oct 19, 2004 at 15:33:06 (EDT)

Auros -:- A modest proposal. -:- Tues, Oct 19, 2004 at 14:37:30 (EDT)
_
Auros -:- Re: A modest proposal. -:- Tues, Oct 19, 2004 at 14:41:31 (EDT)
__ Emma -:- Re: A modest proposal. -:- Tues, Oct 19, 2004 at 14:57:18 (EDT)
___ johnny5 -:- Re: A modest proposal. -:- Tues, Oct 19, 2004 at 18:31:02 (EDT)
____ Auros -:- Johnny: Could you elaborate? -:- Wed, Oct 20, 2004 at 00:26:15 (EDT)
_____ johnny5 -:- Re: Johnny: Could you elaborate? -:- Wed, Oct 20, 2004 at 01:57:54 (EDT)
______ Auros -:- I think you misunderstand my proposal -:- Wed, Oct 20, 2004 at 14:39:46 (EDT)
_______ johnny5 -:- Re: I think you misunderstand my proposal -:- Wed, Oct 20, 2004 at 15:24:19 (EDT)
_ johnny5 -:- Re: Message Board Cleaning -:- Tues, Oct 19, 2004 at 18:16:09 (EDT)


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Subject: Asset Prices
From: Terri
To: All
Date Posted: Tues, Nov 16, 2004 at 16:07:01 (EST)
Email Address: Not Provided

Message:
Paul Krugman argued correctly that corporate earnings were actually flat from 1998 to 2000, though stock indexes rose in dramatic fashion. Corporations reported higher earning, but these higher earning did not appear in national income accounts. However stock prices took the indexes down from 2000 through 2002, and earnings have been generally robust since 2003. The market is pricey by historical standards, but the market has historically been priced too low. My sense is to expect moderate returns. My worry is that all American market sectors and asset classes seem pricey.

Subject: Inflation in Ireland
From: Emma
To: All
Date Posted: Tues, Nov 16, 2004 at 15:23:02 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/16/business/worldbusiness/16irishinflation.html?pagewanted=all&position= Boom Time's Inflation Proves Stubborn in Ireland By BRIAN LAVERY DUBLIN - Most people in Ireland realized it a while ago, and the government has finally acknowledged it: along with insufferable traffic jams and longer working hours, the Celtic Tiger boom of the 1990's left Ireland saddled with some of the highest prices in Europe. Inflation began climbing in 1998 and reached a peak of 7 percent in 2000, as the economy experienced double-digit growth. But now, officials in the Department of Finance proudly point to figures like those published last week, showing that inflation has fallen to a respectable 2.5 percent in the last year. But a recent report by a government-run research organization, the National Competitiveness Council - in one of its rare statements on a specific economic issue - found that Ireland was practically tied with Finland as the most expensive country in the euro currency zone, and that only Denmark, which does not use the euro, is more expensive. The change has been across the board, from groceries and clothing to services and utilities, and the price increases have caused a gradual series of social, as well as economic, effects. Housing prices are still rising quickly - up 14 percent in 2003, according to the Irish mortgage lender Irish Life and Permanent. Those high prices prevent young people from settling down in their own cities or cripple them with huge amounts of debt. By September, the rate of growth in housing prices had moderated slightly. But houses still averaged 252,431 euros ($324,636) nationwide and 330,603 euros ($425,169) in Dublin. Young couples furnishing new homes fly to Scotland on Ryanair, the low-budget airline, to shop at Ikea, because zoning laws prevent the company from opening its furniture warehouses in Ireland. In a weekly column, The Irish Times compares the prices of everyday goods, like microwave meals and electric toothbrushes, which range from 12.25 to 21.50 euros ($15.54 to $27.27). Travel agents say they book hundreds of Christmas shoppers each weekend on trips to New York. And consumers can be heard complaining about prices just about everywhere. 'You're spending 60 euros, where you used to spend 50 for the same amount of stuff,' said Brian Payne, a 40-year-old bookkeeper carrying two bags of groceries outside a Tesco supermarket in a central Dublin shopping mall. When he bought a television recently, Mr. Payne said, he sought out a discount electronics outlet because regular stores were too expensive, and then bought a generic model. 'I used to be able to get the name brand,' he said. And now that a pint of Guinness stout costs $5, and lagers like Heineken or Budweiser cost nearly $6, the Irish go out a lot less, and keg sales have fallen more than 5 percent in the last year, according to the Irish Brewers' Association. From 2000 to last year, the price of a pint rose 20 percent, or 70 cents, and has edged up further since. Beamish stout, Guinness's bitter rival, increased its sales by 140,000 pints last quarter when it promised to delay a price increase until next year, said Ruth Norton, marketing manager. The tourism industry, long a mainstay of the Irish economy, saw the warning signs first, because of feedback from international visitors, and the government cabinet minister for tourism has issued several stern warnings to hotels and restaurants that they would eventually price themselves out of the market. In a survey last year, 13 percent of visiting North Americans told the state agency Tourism Ireland that they were dissatisfied with 'value for money' on an Irish vacation, up from 4 percent in 2001. 'Consumers are definitely reacting,' said Jim Power, chief economist of Friends First Asset Management in Dublin. Growth in retail sales, which was 11 percent in 2001, tapered to around 2 percent this year, he said. Most analysts said that Ireland's period of runaway inflation was a result of some short-sighted government spending and some inevitable fiscal changes at the introduction of the euro, like rapid exchange rate fluctuations and ceding control of interest rates to the European Central Bank. But the analysts do not see high prices today as a problem. Inflation is a 'natural element' of Ireland's rapid economic growth, said Austin Hughes, an economist at IIB Bank, a mortgage lender with more than $9 billion in assets. 'It's a consequence rather than a leading indicator,' he said. And given the benefits of Ireland's economic growth in the last decade, 'it's probably a cost that we're willing to pay.' Businesses are also feeling the impact: energy costs are up more than 20 percent since 2000, and rents for retailers have almost doubled. But companies in the service sector keep margins high by passing price increases on to customers, said David Croughan, chief economist at the Irish Business and Employers' Confederation, an employers' lobby group.

Subject: World boycott of US goods & markets?
From: Pete Weis
To: All
Date Posted: Tues, Nov 16, 2004 at 12:41:21 (EST)
Email Address: Not Provided

Message:
While I believe there are enough fundamental problems with the US economy including massive debt and a huge and growing current account deficit combined with stock market and housing 'bubbles', certainly the Iraq quagmire is yet one more downside factor. I'm not sure the world will boycott US products over anger with Iraq and its general unilateral military policies, but it is a possibility. The following from The Colorado Springs Gazette: Journalist Predicts War in Iraq Will Plunge U.S. Economy into Downturn By Pam Zubeck The Gazette Friday 12 November 2004 Crystal City, Va. - President Bush's willingness 'to take a lot more body bags' from the Iraqi war will plunge the United States economy into a tailspin as European nations further distance themselves from the war with boycotts of American markets, a Pulitzer Prize winning journalist predicted on Friday. 'I just see very hard times ahead,' Seymour Hersh, who broke the Abu Ghraib prison detainee scandal story last spring in The New Yorker magazine, said in a keynote address to about 100 people attending the Military Reporters and Editors conference. Hersh, a legend in journalism circles since he exposed the My Lai massacre and its cover-up during the Vietnam War, earned the Pulitzer in 1969 for international reporting. Last spring, he again grabbed worldwide attention by reporting the abuse of Iraqi war detainees who were threatened with unmuzzled dogs, stripped naked and subjected to other forms of what some believe was torture. He said Bush's dismissal of opposition views on the war and his insistence the United States push ahead against an insurgency Hersh called 'the war we started' will have profound impact on the economy. 'This president believes in what he's doing. He is prepared to take a lot more body bags,' he said. 'He is going to fight this all the way. The bombing has gone up exponentially ... How are we going to end this if the president's convinced that he has to see this through?' He predicted Europe will find new ways to 'gang up on us.' Key NATO nations have resisted involvement in the war after the United Nations refused to sanction the military assault that began in March 2003. Some countries that did cooperate have since pulled out. 'You're going to see American profits disappear. American corporations are going to be in big trouble. It's going to be a mantra not to buy American,' he said. 'All our major manufacturers are reporting major slowdowns in Europe. You're going to see the dollar disappear. Economically, this country is going to be in trouble and he's going to continue to fight this war.' Hersh suggested the administration open talks with the insurgency, which he described as the only form of government existing in Iraq today, to end the war. He acknowledged that's not likely, given Bush's stance. Hence, he said, journalists' jobs are tougher because government officials won't speak openly about options, fearing retribution due to Bush's perspective that opposition is equivalent to treason. 'There are people here in this town (Washington, D.C.) at high levels and lower levels in the different agencies that know how bad it is,' he said. 'Getting them to talk is going to be the problem. I don't think we can.' Hersh also predicted that White House Chief Counsel Alberto Gonzales, nominated to replace John Ashcroft after he announced his resignation as attorney general on Tuesday, will face a tough confirmation hearing. He said military lawyers, who he said 'went crazy' in opposition to Gonzales' legal opinions involving interrogation policies, will testify against him. Those policies, some believe, led to the Abu Ghraib scandal.

Subject: Gunslingers and cowboys
From: Pete Weis
To: All
Date Posted: Tues, Nov 16, 2004 at 10:49:40 (EST)
Email Address: Not Provided

Message:
From the Seattle Times: A new kind of risk, and it's your fault To company risk and market risk, add ‘career risk’ -- the danger that career-minded money managers take too many chances to satisfy the public's unrealistic expectations. By Bill Fleckenstein I'd like to share an insight that finally became clear to me last week. (If everyone else has already figured this out, I'm sorry that I am the last one to know.) I think that what I'm about to discuss explains why the market has behaved in such an increasingly speculative, chaotic manner for about the last 10 years, versus how it behaved in the 1980s (or even the early 1990s, for that matter). When I started out in the investment business in 1982, most money was run by banks and investment-counseling firms. I was part of the latter community. Back then, I believe that the investment world tried to act pretty responsibly. They really did worry about risk, viewing the money entrusted to them as though it were their own. Banks and insurers check your credit. So should you. Opting out of a reckless environment One reason I left the investment-counseling business in late 1995 (in addition to my concerns about what Fed chief Alan Greenspan was doing) was that I could see the more reckless contingent was going to get the upper hand. As the public started to take charge of their money and turned it over to mutual funds, I realized that this development would create an environment where my concept of the best way to run money would not be particularly successful. In other words, there was no way I was going to be at the top of the performance sweepstakes, which is what folks demand. I believe that the behavior of the public helped drive the mutual-fund industry to the sort of gunslinger mentality that prevailed in the late 1990s and early 2000, where all the money flowed to the zaniest money managers who put up the biggest numbers. That mentality is similar in the hedge-fund community, where money has moved over the last few years. (It can be argued, however, that some of these people have actually put some of their own money at risk. So, they behave in a somewhat saner fashion.) Career risk vs. portfolio risk The bottom line is that we have bred a much more speculative, trading-oriented investment community. Instead of worrying about losing money, the overwhelming majority worries that they won't perform well enough on the upside. The fear of getting fired for not having made enough is the driving factor. In a recent article, respected investment strategist Jeremy Grantham, chairman of Grantham, Mayo, Van Otterloo & Co., described this brilliantly: “In markets where investors hand over their money to professionals, the major inefficiency becomes career risk. Everyone's ultimate job description becomes 'keep your job.' Career risk-reduction takes precedence over maximizing the client's return. Efficient career-risk management means never being wrong on your own, so herding, perhaps for different reasons, also characterizes professional investing. Herding produces momentum in prices, pushing them further away from fair value as people buy because others are buying.” That, ladies and gentlemen, is a perfect description of what the professional money-management business has become. Grantham went on to make a couple of insightful points: “Refusing, on value principle, to buy in a bubble will, in contrast, look dangerously eccentric. And when your timing is wrong, which is inevitable sooner or later, you will, in Keynes' words, 'not receive much mercy.'' He summed up what that means to the folks who try not to go with the herd and do the right thing: “Today the challenge is not getting the big bets right. It's arriving back at trend with the same clients you left with. . . .” Dislocation before a new/old way of doing business I myself continue to expect the investment business to revert to the saner style that I grew up with. This is not to say that the market then didn't do weird things, confound people or get out of whack. It did. It just wasn't anywhere near as maniacal as it has become. To repeat, I fully believe that we will eventually revert to a more conservative environment. But I think the only way that can happen is through some sort of a market dislocation, as I have been discussing for at least the last six months. Though it has not yet occurred, I still think it will at some point. I just don't see how the structure presently in place can unwind in anything but a violent manner that involves some dislocation. I think that if one approaches their own problems or “disputes” with the market by first knowing the personality of the enemy, as it were, they will be more successful. I know that in my own short-selling, when I act as though the guys I'm “fighting against” will behave in the manner I've described, I often do better. For example, I sometimes get out of the way because we're in the no-news period and I expect “them” to take stocks up, even though it doesn't make sense that “they” should. Oftentimes that tactic works better than sticking with my shorts, as I have done recently, with the view that the dire macro problems will matter. Of dilettantes and their wants I believe that the demands of individuals, consultants and committees that run employee-benefit plans -- people who are not really investment professionals and tend to want to buy high and sell low -- are partially responsible for the behavior of the professional investment community. Whether it's Joe and Jane Six-Pack deciding for themselves, or the committee that runs Joe and Jane Six-Pack's money, these tend not to be sophisticated investors. They think they've been around the investment markets, but most have really only grown up in a bull market. These are the folks who are not particularly good at risk management, and who are setting the incentives, as described by Jeremy Grantham, that have produced the market environment we are now in. Hopefully, that long-winded discussion will help folks deal with this environment. Toppling technical analysis from Mount Olympus Lastly, because of the moment-to-moment performance demands that people now perceive, and the advent of PCs, I believe technical analysis has become the vehicle of choice for doing “analysis.” That everybody has all the technical bells and whistles at their fingertips has made people believe too strongly in the merits of technical analysis. Example: A lot of people believe that the recent breakout in the S&P means the market must trade higher at the end of the year. And nothing else matters. Maybe they will get that right. But I think that, at some point, technical analysis will be the “big hook” in the market that will trap people. Technical analysis is a tool, like bottoms-up fundamental analysis or looking at the macro environment. It's just one tool -- not the be-all and end-all that folks seem to think. It's not surprising, given the environment that I have described, that technical analysis has been elevated to such high status. But folks who only believe in charts will ultimately come to learn that there's a lot more to it than that.

Subject: Correction
From: Pete Weis
To: Pete Weis
Date Posted: Tues, Nov 16, 2004 at 10:55:14 (EST)
Email Address: Not Provided

Message:
Above article from MSN Money, not the Seattle Times.

Subject: Jeremy Grantham
From: Pete Weis
To: Pete Weis
Date Posted: Tues, Nov 16, 2004 at 10:57:28 (EST)
Email Address: Not Provided

Message:
From the Boston Globe: Advice from a bear: panic By Steven Syre, Globe Columnist | November 16, 2004 Jeremy Grantham, Boston's most famous investing bear, exudes a kind of reassuring calm when he tells you that he has seen the stock market's future, and it's a train wreck. Grantham, the chairman of Grantham, Mayo, Van Otterloo, warned institutional clients in the late 1990s that the stock market was headed for a dangerous fall. He was early, which cost his firm big business, but ultimately right. His current warning is a different kind of bitter pill. ''We're faced with the most broadly overpriced asset class mix of my career, 35 years, and if I had a 50-year career, I think it would still apply,' Grantham says from his firm's offices overlooking Boston Harbor from Rowes Wharf. Grantham saw the market top of 2000 as perilous because investors could lose huge sums of money betting on growth stocks, but there were plenty of other types of assets that traded at bargain prices. Today, he believes the potential fall is not so steep, but there is hardly anyplace to hide. The hiding holes of 2000: bonds, real estate investment trusts, and value stocks. Try to find similar opportunities today. In its most recent quarterly letter to clients, Grantham's firm outlined a strategy for superior relative performance, faring better than the rest of the pack or an index. But what if the objective was actually to make money? ''Our summary advice on an absolute basis is much more painful to deliver though shorter: PANIC,' the letter said. ''Now is the time to lower risk and survive to fight another day with your assets as intact as you can manage.' Where to go? Grantham suggests emerging-market stocks and timber for institutional clients. He tells them to hold bonds with shorter durations and conservative stocks with a tilt away from US securities. If you were to imagine such a discouraging investment outlook to be a heavy burden on the messenger, Grantham would surprise you. At 66, he is an energetic bear armed with computers chock-full of historical data supporting his case. For much of the past five years, Grantham has been glad to stand as the investment world's combative bookend to Jeremy Siegel, the bullish Wharton professor and author, among others. Grantham has a long and impressive investing record in Boston. He cofounded Batterymarch Financial Management before creating his current firm with Richard Mayo and Eyk Van Otterloo 26 years ago. Its performance among its 53 separate investing strategies consistently beat benchmarks, but international investing has produced its strongest results. The firm paid a price for its dire stock-market warnings and conservative asset allocation beginning at the end of 1997. ''We never lost any business for 18 years, and then we lost 45 percent of our book of business in 2 years,' Grantham says. The firm shrank to about $20 billion dollars in assets under management by early 2000, losing big in one of history's great bull markets, but has since climbed back to manage $70 billion. But the comeback has been built on a similarly gloomy message. Grantham says the Standard & Poor's 500 stock index should logically bottom out at 725, from its current level of 1,183, though he won't venture a guess about when. He says the consensus view that stocks are fairly valued today is wrong, built on overly optimistic expectations for corporate profits. If profit forecasts are too high, so are today's stock prices, Grantham says. He has scads of data on the market's long-term trends to back him up. Grantham has been right before, but he's also been wrong on other market calls. And getting it right at the wrong time can be expensive, too. Many of Boston's best money managers disagree with Grantham's warnings today, but they take the messenger very seriously.

Subject: Re: Jeremy Grantham
From: Emma
To: Pete Weis
Date Posted: Tues, Nov 16, 2004 at 15:32:28 (EST)
Email Address: Not Provided

Message:
Well, if I understand properly, Grantham is arguing the danger lies not in technology cenetered growth stocks as in 2000, but in many sectors and assets classes. In 2000, health care stocks, energy stocks, public utility stocks, REITs, commercial and residential property, and bonds were attractively priced. In 2004, finding attractively priced assets is quite difficult. Hmmm.

Subject: Re: Jeremy Grantham
From: Terri
To: Pete Weis
Date Posted: Tues, Nov 16, 2004 at 14:22:05 (EST)
Email Address: Not Provided

Message:
Interesting and important articles, but I wish the article on Jeremy Grantham spelled out clearly the reason for the fears. Can you elaborate?

Subject: Trailing earnings vs projected earnings
From: Pete Weis
To: Terri
Date Posted: Tues, Nov 16, 2004 at 15:34:40 (EST)
Email Address: Not Provided

Message:
'We use a growth model with an explicit corporate sector and find that the market is correctly valued.' - Ellen R. McGrattan and Edward C. Prescott (2000) Terri. Jeremy Grantham as well as others like Warren Buffet always insist that the only reliable earnings measure is 'trailing earnings' measured with 'GAAP' accounting. It's also important to know that even SEC requirements regarding 'GAAP' accounting have been considerably relaxed since the 1980's. For instance, pension funding prior to the 80's was considered an expense for employees who were vested. That is stiil the case but a change in the 80's by the SEC allowed US corporations to claim an automatic 9-10% annual earnings increase in their pension plans (whether or not the pension actually gained or lost) and furthermore, even though this money is supposed to be set aside for retirees, corporations are allowed to actually add the pension gains (again whether or not there were any) to their own earnings. For instance General Motors has a pension obligation of over $70 billion and about a year ago had to shore it up by selling about $17 billion in corporate bonds. So while the interest to be paid on the bonds go down as an expense (possibly, however GM could have called this an extraordinary expense and not counted it against its earnings - I'm not sure whether they did or not) they are able to claim a 10% gain on the added $17 billion principle along with a 10% gain on the rest of the pension assets they control and claim it as as corporate earnings. Executive salaries are, of course, expenses which must be subtracted from corporate earnings. However, lucrative stock options are not required to be considered an expense. Recent years have seen stock options go through the veritable roof. Buffet has been on a crusade to require US corporations to include options as an expense - so far to no avail. My point here - even GAAP trailing earnings are skewed higher than actual earnings nowadays when compared to the past. But Wall Street likes to use projected future earnings as their measuring stick. No one really has any idea what future earnings will be like, since there are so many factors which effect it. The above quote from Wall Street people back in 2000 illustrates my point ('growth model' is Wall Street speak for projected future earnings). Below is the context from which the quote was taken: Is the stock market overvalued? Ellen R. McGrattan and Edward C. Prescott Quarterly Review, 2000, issue Fall, pages 20-40 Abstract: The value of U.S. corporate equity in the first half of 2000 was close to 1.8 times U.S. gross national product (GNP). Some stockmarket analysts have argued that the market is overvalued at this level. We use a growth model with an explicit corporate sector and find that the market is correctly valued. In theory, the market value of equity plus debt liabilities should equal the value of productive assets plus debt assets. Since the net value of debt is currently low, the market value of equity should be approximately equal to the market value of productive assets. We find that the market value of productive assets, including both tangible and intangible assets and assets used outside the country by U.S. subsidiaries, is currently about 1.8 times GNP, the same as the market value of equity.

Subject: Re: Trailing earnings vs projected earnings
From: Terri
To: Pete Weis
Date Posted: Tues, Nov 16, 2004 at 17:10:08 (EST)
Email Address: Not Provided

Message:
Warren Buffett has complained that pension fund estimated returns skewed earnings far more than failing to count option grnats as an expense. However, there appears to be more counting of options as an expense and estimated returns for pension funds have been lowered. Has the quality of reported earnings improved? A nice new study would be useful.

Subject: sum up of my thesis on Krugman
From: krugman en francais
To: All
Date Posted: Tues, Nov 16, 2004 at 04:15:46 (EST)
Email Address: steven.coissard@free.fr

Message:
Hi, I translated a sum up of my doctoral thesis on Paul Krugman (sump up 50 pages, thesis 521 pages) It can't explain everything but I can't translate 521 pages. So if someone wants to read it, it 's here. You can find a content in english to my doctoral thesis too. http://steven.coissard.free.fr/page_mes_articles.htm

Subject: Re: sum up of my thesis on Krugman
From: Jennifer
To: krugman en francais
Date Posted: Tues, Nov 16, 2004 at 17:17:11 (EST)
Email Address: Not Provided

Message:
Nicely done, Steven Coissard. The translation was well done, and is easily read. Nice.

Subject: Re: sum up of my thesis on Krugman
From: Emma
To: krugman en francais
Date Posted: Tues, Nov 16, 2004 at 16:24:34 (EST)
Email Address: Not Provided

Message:
http://steven.coissard.free.fr/page_mes_articles.htm The English summary of your thesis and history of Paul Krugman's work is fascinating, and I much appreciated reading it. Wish I knew French, for the rest. Thank you so much.

Subject: Investor Costs
From: Terri
To: All
Date Posted: Mon, Nov 15, 2004 at 20:51:44 (EST)
Email Address: Not Provided

Message:
The Vanguard S&P Stock Index has returned 12.17% since September 1986. Funds that cost an investor 2 percentage points a year generally strike me as far too expensive. Such a cost is 16.4% of the yearly average market gain. There are managers who are worth the cost, but they must be carefully sought out indeed. Actually the costs will be higher given high turnover of mutual funds.

Subject: Re: Investor Costs
From: Jennifer
To: Terri
Date Posted: Tues, Nov 16, 2004 at 05:43:21 (EST)
Email Address: Not Provided

Message:
This is just what John Bogle has been teaching investors for years. For several weeks, I have been reading John Bogle. These comparisons are most important and Vanguard has allowed us returns that are fair in cost and elating in effect.

Subject: Re: Investor Costs
From: Institutional Investor
To: Terri
Date Posted: Mon, Nov 15, 2004 at 22:18:22 (EST)
Email Address: Not Provided

Message:
who pays 2% for a mutual fund? The average equity fund fee is around 1.5%, lower for fixed income. On top wouldn't you hire a manager because they can exceed their benchmark, not match it. To start subtracting a fee from a benchmark and then apply that to an investment manager doesn't make much sense to me. Additionally mutual fund returns are reported net of fees, so whatever costs you were insinuating through turnover are netted out in their returns they report.

Subject: Re: Investor Costs
From: Jennifer
To: Institutional Investor
Date Posted: Tues, Nov 16, 2004 at 05:51:54 (EST)
Email Address: Not Provided

Message:
These numbers are quite correct. Warren Buffett has taught just this importance of cost for years, which is why we are so content with Berkshire Hathaway holdings along with Vanguard.

Subject: Re: Investor Costs
From: El Gringo
To: Institutional Investor
Date Posted: Mon, Nov 15, 2004 at 22:33:33 (EST)
Email Address: nma@hotmail.com

Message:
'The average equity fund fee is around 1.5%, lower for fixed income. ' Institutional Investor, how much was it 5 years ago?

Subject: Re: Investor Costs
From: Institutional Investor
To: El Gringo
Date Posted: Mon, Nov 15, 2004 at 22:43:27 (EST)
Email Address: Not Provided

Message:
no idea, just grabbed it off fool.com, i deal more with institutional fes, which are much lower, more like 75 bps for equity for small accounts ($25million and lower), and 30-40 bps for fixed income. Once you start getting into accounts with $100million , then you get some real nice price breaks. Index fees end up around 4-5 bps for equity when you get into the bigger accouts.

Subject: Re: Investor Costs
From: El Gringo
To: Institutional Investor
Date Posted: Mon, Nov 15, 2004 at 22:54:04 (EST)
Email Address: nma@hotmail.com

Message:
'30-40 bps' = beats per second? (just kidding)

Subject: Re: Investor Costs
From: El Gringo
To: El Gringo
Date Posted: Mon, Nov 15, 2004 at 23:03:11 (EST)
Email Address: nma@hotmail.com

Message:
Jokes aside, Institutional Investor, I think I'll probably never forget this game : http://www.pkarchive.org/new/Dow36000Silly.html

Subject: Re: Investor Costs
From: El Gringo
To: El Gringo
Date Posted: Mon, Nov 15, 2004 at 23:18:05 (EST)
Email Address: nma@hotmail.com

Message:
A propos: Monte-Carlo method? Oh, bingo, I, won!

Subject: Re: Investor Costs
From: El Gringo
To: Terri
Date Posted: Mon, Nov 15, 2004 at 21:40:01 (EST)
Email Address: nma@hotmail.com

Message:
Terry's an investor...

Subject: Re: Investor Costs
From: El Gringo
To: El Gringo
Date Posted: Mon, Nov 15, 2004 at 21:49:21 (EST)
Email Address: nma@hotmail

Message:
Sorry Terri, should I have hurt you in any way, but I really do not like numbers

Subject: Re: Investor Costs
From: Terri
To: El Gringo
Date Posted: Mon, Nov 15, 2004 at 22:00:21 (EST)
Email Address: Not Provided

Message:
Then, think through the argument and the heck with numbers :) Besides, your posts are full of numbers...

Subject: Re: Investor Costs
From: El Gringo
To: Terri
Date Posted: Mon, Nov 15, 2004 at 22:12:12 (EST)
Email Address: nma@hotmail.com

Message:
..all these numbers are worthless (relatively seen) anyway...

Subject: Re: Investor Costs
From: Ari
To: El Gringo
Date Posted: Mon, Nov 15, 2004 at 21:49:16 (EST)
Email Address: Not Provided

Message:
Defined benefit pension plans are disappearing in America. Almost all of us have to learn to invest. That means me... An honest discussion of all these investment issues is extremely important.

Subject: Re: Investor Costs
From: Ari
To: Ari
Date Posted: Mon, Nov 15, 2004 at 21:53:31 (EST)
Email Address: Not Provided

Message:
El Gringo Contribute to this discussion for your posts are useful. Simply coming to understand indexing has been a major gain for me.

Subject: Re: Investor Costs
From: El Gringo
To: Ari
Date Posted: Mon, Nov 15, 2004 at 22:30:30 (EST)
Email Address: nma@hotmail.com

Message:
Oh, well Ari, I do normally use the Monte-Carlo method to get my numbers... , just kidding;)

Subject: The Dollar Adjustment
From: Terri
To: All
Date Posted: Mon, Nov 15, 2004 at 16:39:36 (EST)
Email Address: Not Provided

Message:
http://www.morganstanley.com/GEFdata/digests/latest-digest.html The Armageddon Foil Stephen Roach (New York) Spinning a tale of global imbalances does not exactly make me the most popular person in the investment community. In large part, that's because many take great umbrage at the implications global rebalancing have for the US economy. Current-account adjustments, dollar weakness, deficit reduction, and a rebuilding of national saving are widely perceived to be an unusually painful price for America to pay to put itself and the world back on a sounder footing. I have been on the receiving end of that push-back for some time, and that same response was very much in evidence at our just-completed annual investment conference at Lyford Cay. I'll be the first to admit that we may have been guilty of overkill in making the case for global rebalancing at this year's conference. Not only was it the focus of my remarks but it was very much on the mind of two outside speakers — Pete Peterson, Chairman of Blackstone and author of the best-selling book, Running on Empty, and Jeffrey Sachs, Professor at Columbia University and one of globalization's most provocative advocates. Peterson focused on the worrisome juxtaposition of America's profound saving shortfall and some $45 to $74 trillion of unfunded liabilities — especially Medicare and Social Security. Sachs spoke of a deficit-constrained America that was likely to have an increasingly difficult time of maintaining its leadership role in the global economy. This is not the message a group of inherently bullish investors wants to hear. In the discussion that followed, the focus was on what it would take for America to change its seemingly reckless ways. Peterson shrugged and admitted, 'It will probably take a crisis.' That's when the light bulb went on for most of the assembled investors. Crises are, of course, very rare events — outcomes that may be worthy of concern but not worthy of guiding baseline investment decisions. Even if you buy into the Armageddon scenario — and former Fed Chairman Paul Volcker is on record attaching a 75% probability to a dollar crisis at some point in the next five years — timing is next to impossible to predict. Consequently, as soon as investors are able to associate global rebalancing with a low-probability crisis scenario, they inevitably breathe a collective sign of relief and get back to the basics of asset allocation. I've seen this response repeatedly in my travels around the world in the past year, and I saw it again this year at Lyford Cay.

Subject: Dollar Adjustment
From: Terri
To: Terri
Date Posted: Mon, Nov 15, 2004 at 17:21:24 (EST)
Email Address: Not Provided

Message:
There are, in fact, three possible endgames that can spin out of the global rebalancing framework: For starters, I could be dead wrong in worrying about global imbalances. After all, many believe that a 'new symbiosis' has emerged between American consumers and Asian producers and financiers. All it takes is the vision of an expanded dollar bloc, and imbalances quickly vanish into thin air. The crisis is at the other end of the spectrum — probably triggered by a foreign buyer's strike of US Treasuries that would then spark a dollar crash and a spike in US interest rates. But there is a third alternative — the in-between outcome of a measured venting of global imbalances that need not be associated with a wrenching crisis. In my view, the measured venting outcome is the most likely of the three possibilities. That would entail a managed but sustained decline in the dollar, a gradual increase in real US interest rates, a moderation of growth in interest-rate sensitive components of US domestic demand, and a related rebuilding of private saving. It would also require a regeneration of domestic demand elsewhere in the world — gradually transforming Asia and Europe from savers to spenders.

Subject: Optimism
From: Terri
To: Terri
Date Posted: Mon, Nov 15, 2004 at 18:30:23 (EST)
Email Address: Not Provided

Message:
My own view is that the odds are now shifting in favor of the measured-venting strain of global rebalancing — a more optimistic stance than I have previously held. Three factors recently have come into play that have encouraged me — oil, China, and the dollar. With oil prices down about 15% over the past two-and-a-half weeks, the likelihood of a full-blown energy shock has receded a bit. I have long maintained that the $50 threshold is a very dangerous price point for a vulnerable global economy. So far, that threshold was breached for only about five weeks. I have no idea what lies ahead for oil prices, but if they hold at or below present levels, then any disruption to global demand will be limited. As for China, my latest visit left me much more encouraged than before I arrived. The possibility of a boom-bust endgame for an overheated Chinese economy was a worrisome wildcard for a world that is now being heavily influenced by the 'China factor.' To the extent that the Chinese downside now seems limited, I have tempered my concerns in that regard. The dollar's recent decline is equally encouraging. Despite being characterized as 'brutal' by ECB President Trichet, I believe the renewed depreciation of the US currency is a very welcome development for an unbalanced world. In real terms, the broadest measure of the dollar has basically only retraced the run-up that occurred in the first nine months of this year — leaving the index about 15% below its February 2002 peak. For a US economy with a current account deficit of 5.7% and rising, this adjustment is modest, at best. In my view, there is at least another 10–15% to go on the downside. The trick will be for the world to manage the coming currency realignment in a fashion that is fair and equitable to all countries and regions on the other side of that trade. What this means, of course, is that Asia now has to give and accept its role in accommodating the dollar's adjustment. I have made two treks to Asia in the past six weeks, and my sense is that Asian officials are now increasingly resigned to this responsibility. Japan and China are, of course, the linchpins to pan-Asian currency adjustments. While the latest Japanese GDP statistics were surprisingly soft, officials in Japan are nearly unanimous in believing that the Japanese economy is now strong enough to withstand the pressures of yen appreciation. In China, the near-term verdict is more guarded, but I get the sense in Beijing that the move to a more flexible foreign-exchange mechanism — either widening the bands on the existing dollar peg and/or shifting to a peg against a basket of currencies — is now likely to come sooner rather than later.

Subject: Ivory Coast: Things Fall Apart
From: Emma
To: All
Date Posted: Mon, Nov 15, 2004 at 14:18:54 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/15/international/africa/15africa.html? Turmoil in Ivory Coast: Once Again, Things Fall Apart By SOMINI SENGUPTA Long after the precolonial gold city of Timbuktu faded from glory and Dakar's status as the capital of French West Africa expired, even after Monrovia's cosmopolitanism crumbled and the lights went out of Lomé's once thriving nightlife, there was Abidjan. Ivory Coast's largest city and commercial center, Abidjan was a port and a destination for millions of West African strivers. For more than 30 years after independence, Ivory Coast's autocratic founding president, Félix Houphouët-Boigny, kept the doors wide open to French business interests and turned the country into the world's largest cocoa exporter. The towering Hôtel Ivoire, overlooking the steamy lagoons that course through the city, was a symbol of the aspirations of a modern West African republic. Today, just over a week after clashes erupted between pro-government protesters and French troops, French citizens continue to leave Abidjan by the thousands, at a cost of more than $5.9 million to their government, according to Paris. Incinerated remains of shops and houses dot the city. A jailbreak in the city's main prison let loose as many as 4,000 hardened criminals. The failure of a peace accord reached last year has left the door open to a new round of war between the government of President Laurent Gbagbo and the rebels who control the country's northern half. Perhaps most worrying of all, ethnic tensions between the peoples of north and south make the country's reunification a daunting challenge. More and more, Abidjan looks as though it is going the way of Kinshasa, Congo's onetime boomtown, whose tree-lined boulevards and hulking skyscrapers have lately surrendered to the tropical mold. Indeed, scenes from Abidjan over the past week looked uncomfortably familiar to Hervé Ludovic de Lys, a native of Mali who was working for an American-financed aid project in Kinshasa in 1991, when an army-led pillage of that city prompted evacuations of foreigners. 'In a matter of weeks, Kinshasa was emptied of all its expatriate community,' said Mr. de Lys, now the Dakar-based West Africa regional chief of the United Nations Office for the Coordination of Humanitarian Affairs. 'It's never fully recovered.' The fires that engulf Abidjan today threaten not just Ivory Coast. In a region of porous borders, contested natural resources and a surplus of guns and gunmen, no conflicts are self-contained. Virtually all Ivory Coast's neighbors are vulnerable. After more than a decade of bloodshed, Liberia and Sierra Leone have settled into a hard-won peace but still struggle with the problem that fueled conflict in the first place, namely a generation of frustrated young men to whom war signals economic opportunity. To the north, Guinea simmers with political and ethnic tensions. Former fighters in Liberia interviewed by Human Rights Watch said they had been solicited to fight in Guinea both for and against the repressive government of President Lansana Conté. It would surprise no one in the region if Liberian and Sierra Leonean veterans were lured now into Ivory Coast's conflict. Despite millions invested to demobilize child soldiers in Sierra Leone and Liberia, economic prospects remain dim for young men across the region. The fighting in Ivory Coast 'could really pull in these roving combatants who, despite significant efforts to incorporate them back into society in Liberia and Sierra Leone, still feel there would be economic gain,' said Corinne Dufka, the West Africa researcher for Human Rights Watch. 'They are lured by the short-term promise of whatever benefits they can get from looting.' Last week, on the Liberia-Ivory Coast border, a new act opened in the long-running drama of West Africa's refugee crisis. The United Nations refugee agency reported that 6,000 to 10,000 Ivoirians, many of them women and children, had begun piling into flimsy fishing boats and crossing a narrow river into Liberia. Veterans of the region's unending conflict, they told United Nations workers that they did not want to wait until full-scale fighting broke out and the river became impassable.

Subject: Teamsters Find Pensions at Risk
From: Emma
To: All
Date Posted: Mon, Nov 15, 2004 at 11:45:10 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/15/business/15teamster.html? Teamsters Find Pensions at Risk By MARY WILLIAMS WALSH In the 1960's and 1970's, the Teamsters' huge Central States pension fund was a wellspring of union corruption. Tens of millions of dollars were loaned to racketeers who used the money to gain control of Las Vegas casinos. Administrative jobs were awarded to favored insiders who paid themselves big fees. A former Teamster president and pension trustee was convicted of trying to bribe a United States senator. Yet for nearly half a million union members who are expecting the fund to pay for their retirement, those may have been the good old days. Since 1982, under a consent decree with the federal government, the fund has been run by prominent Wall Street firms and monitored by a federal court and the Labor Department. There have been no more shadowy investments, no more loans to crime bosses. Yet in these expert hands, the aging fund has fallen into greater financial peril than when James R. Hoffa, who built the Teamsters into a national power, used it as a slush fund. The unfolding situation holds a hard lesson for others with responsibility for retirement money. What may appear as a sensible, conventional approach to investing - seeking a diversified mix of growth and income investments for the long term - can wreak havoc when applied to a pension fund, especially one in a dying industry with older members who are about to make demands of it. But the kinds of investments that make sense for such a fund - like long-term bonds that will mature as members enter retirement - are not attractive to most money managers, because they generate few fees. Consequently, very few pension funds use such strategies today. At the end of 2002, the pension fund had 60 cents for every dollar owed to present and future retirees - a dangerous level. In a rough comparison, the pension fund for US Airways' pilots had 74 cents for every dollar it owed in December 2002, just before it defaulted. During the bear market after the technology bubble burst, Central States' assets lost value as its obligations to retirees ballooned, causing a mismatch so severe that the fund had to reduce benefits last winter for the first time in its 49-year history. 'There never were benefit cuts in the 1970's,' said Wayne Seale, 52, a long-haul driver from Houston and one of about 460,000 Teamsters participating in the fund. 'We were happy. We were being taken care of.' If the pension fund fails, it will be taken over by a government insurance program. In that case, some Teamsters would lose benefits. Hoffa and his successors had put an extraordinary 80 percent of Central States' money into real estate. Instead of hotels, casinos and resorts, its new managers - first Morgan Stanley and later Bankers Trust, Goldman Sachs and J. P. Morgan - invested the money mostly in stocks, and to a lesser extent, in bonds. At the end of 2002, about 54 percent of the fund's assets were in stocks, somewhat less than the average corporate pension fund, which had about 74 percent of assets in stocks that year, according to Greenwich Associates, a research and consulting firm. Federal law calls for fiduciaries to invest pension assets the way a 'prudent man' would, and the strategy used for Central States would certainly be familiar to wealthy individuals, philanthropic trusts, university endowments and other pension funds. The fund's investment results in recent years closely track median annual returns for corporate pension funds, according to Mercer Investment Consulting. The assets lost 4.5 percent of their value in 2001 and 10.9 percent in 2002, but gained 25.5 percent in 2003, according to the fund's executive director and general counsel, Thomas C. Nyhan. Morgan Stanley and J. P. Morgan declined to comment. Goldman Sachs defended its record, pointing out that it had exceeded its benchmarks in a very tough market. But the Central States situation shows that using stocks or other volatile assets to secure the obligations of a mature pension fund greatly increases the risk of getting caught short-handed in a down market. If that happens it can be nearly impossible to bring the ailing pension fund back. This is what has happened recently to pension funds at United Airlines and US Airways.

Subject: Teamsters Find Pensions at Risk...
From: Emma
To: Emma
Date Posted: Mon, Nov 15, 2004 at 21:06:08 (EST)
Email Address: Not Provided

Message:
'Stocks are not a hedge against long-term fixed liabilities,' said Zvi Bodie, a finance professor at Boston University who has long challenged conventional pension investment strategies. 'For many, many years, right down to the present day, the dominant belief among pension investment people is fundamentally wrong. Now that's a big problem.' The record of a second big Teamsters' pension fund, covering members in the West, bolsters Mr. Bodie's arguments. The Western Conference of Teamsters fund has long shunned stocks and uses a totally different investment approach, a portfolio of 20- and 30-year Treasury bonds and other high-grade fixed-income securities that are scheduled to make payments when its retirees will be claiming their money. The Western Conference pension fund was not perceptibly hurt by the bear market. If the Central States were a younger pension fund, it could wait for the stock market to improve and bolster its value. But it already has more than 200,000 retirees collecting benefits of more than $2 billion a year.

Subject: Privatization Anyone?
From: Terri
To: Emma
Date Posted: Mon, Nov 15, 2004 at 14:03:16 (EST)
Email Address: Not Provided

Message:
This may be an object lessen in how Social Security privatization could go terribly wrong. If Wall Street can botch investing the Central States Teamster's Pension Fund through a 22 year bull market in stocks and bonds, then private account holders could be in serious danger.

Subject: Re: Privatization Anyone?
From: Emma
To: Terri
Date Posted: Mon, Nov 15, 2004 at 21:09:48 (EST)
Email Address: Not Provided

Message:
Simply investing in long term bonds from 1982 on, the Central States Teamster's Pension Plan would have no trouble meeting retirement obligations. How could pension fund managers made such mistakes? This example is quite sad and quite frightening.

Subject: Re: Privatization Anyone?
From: Institutional Investor
To: Emma
Date Posted: Mon, Nov 15, 2004 at 22:41:09 (EST)
Email Address: Not Provided

Message:
first off, I don't think many people understand how pension plans work. Pensions usually don't have one manager overseeing all the assets. They usually have multiple managers running different asset classes. These are usually overseen by an investment consultant chosen by the board of trustees. The board of trustees in many cases is made up of both labor and management. I think this article was written from the perspective of just trashing the management of pension plans or trying to be an alarmist. Pension plans have made some mistakes, but I think this is just a typical pessimist. A lot of the underfunding status can be attributed to the historic low interest rates. If long term rates were to increase 1-2% over the next few years, many of these plans would be sufficiently funded, but using the somewhat quirky accounting system to measure liabilities it appears as if the whole pension industry is going to blowup. These same plans that are underfunded were overfunded by 30-35% in the late 90s (look into the airlines funding, you'll be surprised to see they were overfunded). Its pretty easy to look back and say you should have invested in long bonds to meet obligations, but do you think anyone would believe they should not be invested of equity because of the chance of 3 years of -20% returns.

Subject: Re: Privatization Anyone?
From: Terri
To: Terri
Date Posted: Mon, Nov 15, 2004 at 14:05:55 (EST)
Email Address: Not Provided

Message:
If the issue is really returns to Social Security participants in future, then examine the possibility of investing a portion of contributions in the Total American Stock Market Index. My sense is Social Security reform means undoing Social Security.

Subject: Loan volume desperation
From: Pete Weis
To: All
Date Posted: Mon, Nov 15, 2004 at 10:03:20 (EST)
Email Address: Not Provided

Message:
Thanks to ARMs, mortgage holders are in double trouble 09:18 PM CST on Sunday, November 14, 2004 By Danielle DiMartino / The Dallas Morning News Double. That's basically what interest rates were in November 1994 vs. today. That was also the last time Americans were taking out adjustable-rate mortgages at today's record pace. Back then, when the 10-year Treasury yield was about 8 percent, ARMs made sense. At today's 4-percent level, such a choice is plain disturbing. The Mortgage Bankers Association reported last week that the percentage of new loans being written with adjustable rates hit 35.3 percent in the week ended Nov. 5, matching the 1994 record. And this in the same week that purchasing slowed and borrowing rates rose. I'm just thinking out loud here, but this may not be one of those records we'd want to cheer about. SMR Research in New Jersey specializes in consumer finance research. What better group to weigh in on this troubling trend? 'People usually turn to ARMs when rates spike so they can save some money,' said George Yacik, vice president of SMR. 'Today, people are buying the most possible home, with the lowest payment available, at the prodding of their mortgage broker.' Many of these people are stretching themselves beyond reason, he said, and will run into serious problems down the road. 'ARMs let people borrow extraordinary amounts of money compared to their incomes,' Mr. Yacik added. It's not as if the history of mortgage rates is shrouded in mystery. We know that last year, you could get a mortgage with an interest rate about a half-percent lower than today. And we know that at this time last year, the Federal Reserve had not raised interest rates four times and all but explicitly stated that it had every intention of hiking again. (I know, I know – mortgage rates don't move in lockstep with Fed action. They march to the beat of the 10-year Treasury. Even so, they're up by half of what the Fed has risen and look to be going higher as the dollar heads south.) Try as I might, I cannot grasp the concept of consciously taking on a payment you know is going to rise. Maybe I just don't get it. Maybe I'm behind the times. Mr. Yacik cites ingenuity in the mortgage industry as the reason ARM volume is perversely rising in the face of rising rates. 'A lot of the reason is lenders are trying to keep up their loan volumes,' he said. 'That means getting as many people qualified to buy as much home as they possibly can.' Problem is, many of these new-fangled loans have yet to be tested outside some number cruncher's office. I'm sure there are sensitivity analyses out there attesting to the soundness of an interest-only, no-down-payment, adjustable-rate with a why-pay-PMI-when-you-don't-have-to piggyback-on-the-side loan. In fact, no study can correctly predict the Armageddon scenario I fear. And why is that? Inflation-adjusted home price appreciation the likes of which we're experiencing in the current real estate cycle has never been documented. Not in the 1980s. Not in the 1920s. Not ever.

Subject: Re: Loan volume desperation
From: Ari
To: Pete Weis
Date Posted: Mon, Nov 15, 2004 at 10:47:49 (EST)
Email Address: Not Provided

Message:
Are housing and mortgage statistics compiled by any government agency, so they can be studied in a methodical way? The conclusions drawn are ominous, but a data source would help.

Subject: Re: Loan volume desperation
From: jimsum
To: Ari
Date Posted: Mon, Nov 15, 2004 at 16:08:41 (EST)
Email Address: jim.summers@rogers.com

Message:
I'd like to know why such a huge increase in housing prices isn't reflected in the inflation numbers. Housing is a major cost for most people, but a 50% or so rise in housing prices has apparently had almost no effect on inflation. As I recall, the costs of servicing a mortgage are part of CPI, not the price level of housing; but doesn't that lead to a kind of circular statistic? Inflation depends on (mortgage) interest rates which are affected by inflation. I guess this is yet another illusion that inflation is lower than it really is.

Subject: Re: Loan volume desperation
From: Terri
To: jimsum
Date Posted: Mon, Nov 15, 2004 at 17:19:09 (EST)
Email Address: Not Provided

Message:
Housing costs rise as interest rates and corresponding mortgage rates rise. So far short term interest rates have risen with the Fed tighenings while long term rates have been remarkably stable. Should long term interest rates rise meaningfully there will be more of a rise is the consumer price index. Property taxes are rising because houses are assessed at higher values, but tax rates do not appear to be climbing.

Subject: About the Drug Companies
From: Emma
To: All
Date Posted: Sun, Nov 14, 2004 at 15:36:10 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/14/books/review/14HALL.html? 'The Truth About the Drug Companies' and 'Powerful Medicines': The Drug Lords By STEPHEN S. HALL DURING the past year, when I was driving my children to school, I'd hear the same advertisement on the radio again and again. You've probably heard it too: as somber music played in the background, a young man, his voice cracking, explains how he developed a rare and deadly form of cancer. He wonders if he will ever play baseball with his son, and then relates how, thanks to a company called Novartis and its new cancer treatment (never mentioned, but a drug called Gleevec), he's been given a new lease on life. What is most fascinating about this ad is that it should seem necessary. As Marcia Angell points out in ''The Truth About the Drug Companies: How They Deceive Us and What to Do About It'': ''Truly good drugs don't have to be promoted. A genuinely important new drug, such as Gleevec, sells itself.'' So why advertise a cancer drug that cures a fatal leukemia and has no competition? The answer, of course, is that Novartis is not advertising Gleevec, but the company itself -- and the virtues of the drug industry as a whole. Why? Because, as Angell notes, a ''perfect storm'' of indignation -- on the part of consumers, regulators and even doctors -- may be developing around the pharmaceutical business. In just one week this summer, the news included reports that Schering-Plough pleaded guilty to cheating Medicaid; the city of New York sued leading pharmaceutical companies, including Amgen, Bayer, Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson and Merck, for inflating costs and defrauding taxpayers; Janssen Pharmaceutica Products admitted it had withheld from the public information about potentially fatal side effects in a schizophrenia drug it markets; and Wyeth settled yet another in the multibillion dollars' worth of lawsuits against it by people who suffered permanent injury from use of the fen-phen weight-loss drugs. All this against a broad public perception of price-gouging, lack of innovation and bombastic self-congratulation. And that brings me back to the Novartis ad. An alternative history for Gleevec is recounted in both Angell's methodical multicount indictment of the drug industry and Jerry Avorn's entertaining jeremiad, ''Powerful Medicines: The Benefits, Risks and Costs of Prescription Drugs.'' In this less heroic version, several decades of dogged research by academic scientists -- much of it paid for by American taxpayers through the National Institutes of Health -- had teased out the molecular details of chronic myelogenous leukemia, a rare and fatal hematological cancer. Researchers at Novartis (then Ciba-Geigy) created several compounds that in theory might throw a monkey wrench into the process by which blood cells become cancerous. But these potential miracle drugs sat on the shelf untested, until Brian Druker, a researcher at the Oregon Health and Science University, asked for the compounds and became the first to discern their anticancer properties in the lab dish. Even that wasn't enough. As Avorn tells it, ''Novartis had so little interest in committing resources to the drug's development that cancer researchers had to resort to the bizarre tactic of sending a petition to the company's C.E.O., signed by scientists in the Leukemia and Lymphoma Society of America, imploring him to make more drug available for clinical studies.'' Novartis has overcome its lack of enthusiasm -- it now charges $27,000 for a year's supply of Gleevec. But those heart-warming ads, now the centerpiece of the Novartis corporate identity, say more than intended about how today's pharmaceutical industry takes credit where little is due. As both Angell and Avorn lay out in painstaking, often enraging, detail, a self-serving mythology -- promulgated on a scale possible only in a business with annual worldwide revenues of $400 billion -- has enveloped the pharmaceutical industry. Angell and Avorn cut through the haze, arguing persuasively that Americans are paying an enormous amount of money for some very mediocre medicines. The rising voices of disillusionment have the credentials to back up their scorn.

Subject: Has anything really changed?
From: Pete Weis
To: All
Date Posted: Sun, Nov 14, 2004 at 14:43:32 (EST)
Email Address: Not Provided

Message:
Small investors are beginning to get hyped up once again as yet another stock rally appears in a year where many stock indexes have lost ground when real rates of return (factoring in dollar drop) as opposed to nominal rates of return are considered. The investing public tends to have a short memory. It is therefore important to ask ourselves if anything has really changed in the last 5 years? Our economy and ultimately the profits of business depends on a middle class with growing wealth and a growing ability to consume the products of our economy. Lest we forget the recent past, here are a number of pieces written in various newspapers around America during the economic depths of 2002: Sweet for Execs, Sweat for Others L. A. Times – by Carolyn Ziegler Davenport – July 22, 2002 Corrupt firms have coasted as employees sank (7/20/02) - As a former Dilbertina in corporate America, it seems to me that something important is missing in the current efforts to diagnose and treat a very bad case of corruption. The malady is not limited to 'a few bad apples,' nor will it yield to new regulations, important as they are. The infection is systemic, reflecting a 20-year change in corporate culture that converted full-time employees to temporary workers, all but eliminated corporate investment in communities and gutted strong companies to 'maximize shareholder value.' The resulting, and temporary, increases in stock prices and reductions in operating costs (at the expense of employees) fueled an obscene rise in executive salaries. Employees and communities were the immediate losers in the new corporations. Now we see that shareholders can also lose. Employees once were valued members of a corporate family. They worked an eight-hour day and were paid a fair salary that included a company-paid pension plan and decent medical-dental insurance. They may also have had a 401(k), or one of its predecessors, but this was not a replacement for a traditional pension. In return, most employees willingly gave their best efforts and loyalty. Shareholders received a regular return on investment in the form of dividends. They didn't have to sell their stock for immediate return and could endure the normal ups and downs of the business cycle, knowing that good companies invested for the future. Both employees and investors were usually in for the long term. Somewhere in the mid-1980s, 'paternalism' gave way to 'entrepreneurship.' Of course, corporate managers bear no relationship to true entrepreneurs. But the illusion led many to believe they deserved to live like robber barons and kings. Companies that once referred to employees as 'part of the family' became 'lean and mean' places of temporary employment, with employees hired and fired as needed. This was sold to employees as 'taking charge of one's career.' Divisions were sold off, producing instant revenue and juicing up executive compensation. It is no wonder that today's corporations do not value 'older' workers. They know too much. Attention, young people: In the 1930s, people died to establish the eight-hour workday, and until recent years it was the norm. There is something wrong when today's children are fed packaged dinners by a nanny and parents eat remnants while standing over the sink at 10 p.m. Employers know this. It was possible to overlook the loss of personal time and such hard-won benefits as company-paid pensions and medical care when it seemed we were all going to be rich. Now that that's over, perhaps we can rebuild our work environment into something fair. Dethroning the CEO is a beginning. Prior to the 1990s, extraordinary wealth was the realm of the true entrepreneur--Edison, Ford, Gates, Disney and others who, warts and all, created something of value. Many of today's CEOs created nothing; at best they managed well what they inherited. Businesses should start again to reinvest in employees and the community. This was once touted as being good for business and for shareholders. It still is. Accountants and economists can start speaking in plain language. Congress can establish independent governing boards and enact effective regulations. But without a change of values, greed and fraud will simply take a different form. Carolyn Ziegler-Davenport, who now works at Southwestern University School of Law, was a corporate employee for 17 years. Losing My Stake in the Economy New York Times – by Robert Hemsley – July 22, 2002 (7/20/02) - EVERETT, Wash. I work operating industrial machinery at a paper mill that is owned by a global corporation. My mill was built in the 1920's, when the stock market was soaring, F. Scott Fitzgerald was writing about the rich and Babe Ruth was hitting home runs for the Yankees. I get paid by the hour and do not understand the markets. I do not belong to a country club or own a suit. I just want to work at the mill until I retire. My mill has survived the Depression, a world war, even a couple minor earthquakes. But I worry if it can survive Ken Lay. Small investors like me — encouraged by politicians, financial advisers and CNBC — poured our retirement savings into the stock market. Now we are dismayed that the corporate captains have abandoned accountability while the crew sinks with the ship. Perhaps I am looking for excuses for the recent poor performance of my 401(k) plan, but I wonder if the market is fair. In 2001, the average chief executive's pay was more than $11 million, according to Pearl Meyer & Partners, an executive-compensation consulting firm. Executive pay has been climbing steadily for the past two decades and has outpaced employee pay. Two decades ago, C.E.O.'s were paid about 40 times more than the average hourly employee; now they make more than 500 times the wage of the average hourly employee. Last year the C.E.O. of my company made 592 times more than I did. I wonder if that makes me underpaid or the C.E.O. overpaid. Recently management told hourly employees at my mill to make concessions or risk losing our jobs. We made the concessions last autumn, but last spring the C.E.O. received a stock 'gift' worth $1.4 million. This isn't capitalism, it's avarice. I am not naïve. I know about the robber barons of the late 19th century and others throughout history who have abused the system. But never has the gap between executives and employees been greater. This disparity threatens the capitalist system itself. When employees make concessions while executives take bonuses, the bonds of common purpose are broken. Contrast this with the Marine Corps, which is structured so that enlisted personnel and officers work together for a common purpose. The Marine Corps commandant runs an organization with 172,600 men and women, oversees an annual budget of some $13.2 billion and is paid $163,177 annually — just 13 times more than the pay of a new private in boot camp. The system is successful because of a tradition of shared risks and rewards. All employees want their company to succeed, and I am proud to work where I do. I imagine my concern about my company's share price is as great as my C.E.O.'s; a portion of my 401(k) is in company stock. I recognize my job depends upon my company making a profit. But I wonder if corporate executives appreciate the role workers play in their success. Free enterprise is a system of risks and rewards. As it now stands, employees suffer most of the risks, while executives enjoy most of the rewards. Robert Hemsley is a member of the Association of Western Pulp and Paper Workers Union. Capitalism With Conscience Common Dreams – by Robert C. Hinkley – July 22, 2002 (7/16/02) - In his recent speech to Wall Street, President Bush stated, 'In the long run, there's no capitalism without conscience.' There is little doubt as to the truth of this assertion, but where is the conscience going to come from that is necessary to assure capitalism's future? Today's capitalism is driven by large corporations. In addition to sometimes defrauding their own shareholders, big corporations regularly despoil the environment, violate human rights and the dignity of their employees, endanger the public health and safety with dangerous or untested products and damage the welfare of the communities in which they operate. These actions are more illustrative of an absence of conscience than its presence. President Bush has said that the barrel just has a few bad apples whose shenanigans have called into question the trustworthiness of everyone else. He wants to fix this by forming corporate SWAT teams at the SEC and threatening CEOs and other corporate bigwigs with stiffer criminal penalties for their misbehavior. We are deluding ourselves if we think that this is going to bring (or restore) conscience to capitalism. Corporations are managed by groups of people acting collectively. Frequently, these people act on the advice of experts from the legal, accounting and banking worlds. Still other groups carry out the plans of the people making the decisions. Everyone knows that pinning criminal responsibility on individuals in this situation is almost impossible. Corporate managers are not going to change their behavior out of fear of prison terms they know they will never have to face. Despite the president's assertion to the contrary, there is something wrong with capitalism. What's wrong with it is that its engine, the corporation, has no conscience itself. Under the corporate law, the corporation is dedicated to the unbridled pursuit of profit. The law in all fifty states says that directors must use their best efforts to maximize profits for shareholders. Directors may be sued if they violate this duty. Everybody who works for a corporation knows it is their job to keep this from happening by helping the company make money. There is no element of conscience in this duty. Maximizing profits is pure self-interest. This dedication to the pursuit of self-interest is the reason corporations act without conscience and, ultimately, why capitalism is largely without conscience. For there to be capitalism with conscience, we must change the corporation to promote respect for the environment and other elements of the public interest. This change must promote socially responsible corporate behavior throughout the corporation irrespective of who is the CEO or whether he or she is a good apple or a bad one. Capitalism with conscience requires that all managers understand the pursuit of profits should not result in the destruction of the public interest. For this to be achieved, the duty of directors must be changed. I propose we do this by changing the corporate law to include a legally enforceable Code for Corporate Citizenship. In its most succinct form, the Code would simply add the following 24 words to the duty of directors to make money: but not at the expense of the environment, human rights, the public health or safety, the welfare of communities or the dignity of employees. The effect of the Code will be to create new duties for directors to protect the environment, human rights, the public health and safety, the welfare of our communities and the dignity of employees. These new duties should be enforceable in much the same way that shareholders are now able to hold managers responsible for not acting in the best interest of the shareholders- -by civil lawsuits brought by or on behalf of the people whose interest the corporation damages. The Code will require directors to pursue corporate profits only in ways that do not damage the environment or any of the four other elements of the public interest it protects. In a sense, it will free directors and other people in the corporation to follow their conscience (sometimes sacrificing profits to protect the public interest), without fear of being sued by shareholders. The Code for Corporate Citizenship will improve the profit motive not eliminate it. It will allow capitalism to evolve to its next logical step by providing what the president has correctly stated it cannot survive without--conscience. Robert C. Hinkley is a corporate lawyer and former partner in the New York law firm Skadden, Arps, Slate, Meagher & Flom LLP. He now resides in Brooklin, Maine. WTO Protesters Appear Prophetic Seattle Post-Intelligencer – by Sean Gonslaves – July 22, 2002 (7/16/02) - What about states' rights? Before Enron, WorldCom and the rest of the Wall Street hustler stories broke, in this most recent wave of corporate criminality, anti-globalization protesters and other factions of what I loosely refer to as the economic justice movement were derided by even the liberal media as being senseless when it comes to economics. But now that the bad apple theory has been exposed as a red herring offered by unregulated free-market worshippers, those so-called idiots who took to the streets of Seattle in 1999 appear to be, well, prophetic. The muted message coming out of the protests has been: There's something wrong with the global economic system itself -- namely, a lack of democratic accountability. And now, with even our business-is-king president conceding the point, we can finally have a discussion about corporate responsibility and social ethics without some F.A. Hayek or Milton Friedman fanatic drowning out opposition voices by using meaningless political epithets like 'you're a socialist, Marxist, communist, liberal.' Late last week, The Wall Street Journal reported, 'Ultimately, the proposals Mr. Bush advanced in (his) speech on Wall Street may well serve as the floor rather than the ceiling for Washington action.' Following the president's address, the Senate moved to go beyond Bush's timid proposals, voting 97-0 to establish sweeping new powers to target corporate fraud, creating a new corporate-fraud chapter in the federal criminal code. The Senate also voted 96-0 to toughen criminal penalties for white-collar crimes, such as pension fraud, mail fraud and conspiracy -- a provision that would, according to the Journal, 'allow courts to mete out the same punishments to guilty executives as now apply to drug kingpins.' The essence of what the Senate was trying to do was captured by Vermont Democrat Patrick Leahy when he said: 'If you steal a $500 television set, you can go to jail. Apparently if you steal $500 million from your corporation and your pension holders and everyone else, then nothing happens. This makes sure something will happen.' That's an implicit admission that our criminal justice system has long served the interest of the wealthy at the expense of the less affluent. And not that anyone was expecting it, but the president could have appointed an independent counsel to investigate Vice President Dick Cheney's tenure at Halliburton, amid allegations by the conservative legal watchdog group Judicial Watch that the oil-field services business headed by Cheney engaged in fraudulent accounting practices from 1999 to 2001. It kind of puts the Clinton-Whitewater affair in a whole new perspective. So now that the momentum has shifted toward greater corporate accountability, maybe the ideas coming out of such organizations as the Program on Corporations, Law and Democracy (POCLAD) will get broader consideration. That will remind us that the sovereignty rights of real people come before so-called corporate rights, as the framers of our Constitution intended (see www.poclad.org). It was through pro-corporate judicial activism in the early 1900s that the Constitution and concept of private property found therein came to be interpreted as justification for the legal absurdities we have today in which individual rights and liberties meant for flesh-and-blood human beings are extended to corporations. Want some relevant summer reading? Check out POCLAD's collection of essays and speeches called 'Defying Corporations, Defining Democracy.' In that book, I found this gem from an 1890 New York Court of Appeals case, involving the North River Sugar Refining Corp. Writing on behalf of the court, Justice Finch declared: 'The judgment sought against the defendant is one of corporate death ... The life of a corporation is, indeed, less than that of the humblest citizen ... Corporations may, and often do, exceed their authority only where private rights are affected. When these are adjusted, all mischief ends and all harm is averted. 'But where the transgression has a wider scope, and threatens the welfare of the people, they may summon the offender to answer for the abuse of its franchise or the violation of its corporate duty. The (North River Sugar Refining) corporation has violated its charter, and failed in the performance of its corporate duties, and that in respects so material and important to justify a judgment of dissolution ... All concur.' Corporations used to be under the authority of the states in which they were chartered. Where are states' rights advocates on this issue today? Why are they not echoing the sentiments of our great nation's founders -- such people as Thomas Jefferson, who spoke of the need 'to crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country'? Employee Advocate: To read 1999 WTO protest comments, click the link below: Duke And The WTO Protest Are We Angry? You Bet. Fool.com – by Bill Mann – July 22, 2002 We received a trade association press release Friday, hailing the defeat of Sen. McCain's 'assault on stock options,' calling it a 'bipartisan effort in support of high-tech workers.' A bipartisan assault on investors is more like it. No one on Capitol Hill seems to understand that accounting for stock options has exactly zero economic effect on a company. What they're supporting is not high-tech workers, but corporate greed and a touch of blackmail. Bill Mann's coming out swinging. (7/16/02) - I hope by the end of this effort, Taryn Lynds, director of public communications with the American Electronics Association (AeA), wishes she had never heard of me, or The Motley Fool. I know she's going to rue sending us a copy of a press release hailing the defeat of accounting stock options. AeA is comprised of more than 2,700 high-tech company members. These members make up an enormous slice of the American economy, including such massive beasts as Microsoft (Nasdaq: MSFT), AOL Time Warner (NYSE: AOL), and Cisco (Nasdaq: CSCO). Among its members are the worst abusers of stock options grants in the market, with companies that routinely give away hundreds of millions of shareholder value to insiders as performance-based incentives. This is not an effort to get companies to rein in executive compensation. I'm not a big political animal, and I'm certainly not one to stoke the flames of class warfare. If they want to pay executives millions of dollars, and the shareholders approve, well, by all means, they should. But as an individual investor, I find the arguments against stock options accounting so disingenuous that I can't understand how people don't see them for what they are: self-interested ways to give insiders enormous pay packages without disclosing the effect to shareholders. Seriously, these options are worth billions to those who receive them. Not expensing them treats the options as if they've come out of thin air. Someone bears a cost, and that cost should be represented. That someone is the existing shareholder. For the last time (which means that it won't be for the last time): Options expensing has no economic effect! The cost to shareholders -- in the form of dilution -- is exactly the same, either way. Companies are trying to make their income statements look as good as possible. Congressmen: AeA's arguments supporting high-tech workers in regard to stock options are snow jobs. Companies are afraid that if they have to show the true economic cost of options, earnings will be lower, and their share prices will drop. Big deal! If stock options provide a distorted picture of performance to the end shareholder, then we're not talking about making financial statements look worse. We're talking about making them look accurate. Where else could you say, 'Well, if we lie, it looks better...'? Oh yeah, Washington. Never mind. Ah, but what about the rank-and-file employees of these companies? Some companies say that these employees will be denied a valuable form of compensation if the company expenses options. Read that paragraph above once again. Options expensing has no economic effect. So, if a company is going to take options away just because it has to expense them, it's saying, 'It's OK to do so, as long as we don't have to tell people the cost....' That's not an argument based on the righteousness of the cause. There's a word for companies that curtail options to the rank and file, simply because of expensing: blackmail. Earnings presented to shareholders that do not include stock options expensing are deceptively high because they overstate the amount of economic return an investor should expect. Coca-Cola (NYSE: KO) finally gets it. So does The Washington Post Co. (NYSE: WPO). Winn-Dixie (NYSE: WIN) and Boeing (NYSE: BA) have understood this for years. Warren Buffett has understood it for years, calling the current treatment of stock options 'absurd.' Ah, but the AeA felt good enough about itself to declare 'victory.' When the AeA 'won,' shareholders lost The victory the AeA claims, dear shareholder, is over you. And if you own shares in a company in the AeA, the company is paying dues to an organization that's fighting your interest in determining the true cost of a company's employee compensation. One would think that a trade association representing so many public companies would be more careful than to poke the hornet's nest of angry shareholders. I have crafted a letter of response to Taryn Lynds of the AeA, expressing my displeasure at its self-interest and anti-shareholder stand on stock options. I pointed out that among AeA's members are the worst abusers of stock options: companies that give mega-grants to executives, that give away 8%, 9%, 10% per year to employees. This, by the way, is the same organization that lobbied hard against stock option expensing last time around (thank you, Sen. Joe Lieberman), and vociferously fought the Financial Accounting Standards Board's banning of pooling interest accounting methods for acquisitions, claiming that it would be disastrous for the technology industry. Guess what? All of those acquisitions used a pooling method that turned out to be a basket of snakes. But the current turmoil and shareholder anger offer individual investors an opportunity to say to public companies, 'Enough is enough. You can hide compensation costs to shareholders, but we refuse to be among them.' AeA and other lobbying firms have held sway in Washington forever, and they will continue to. But in order for their plots to keep stock options hidden to be successful, they need individual investors to play along. Well, I won't. I control The Rule Maker Portfolio. Tomorrow, we're selling one company in the portfolio, an AeA member. In the next few weeks, we will continue to purge AeA member companies from the portfolio. I'm also going to sell the stock of AeA members out of my own portfolio. With each sale, I'm going to send a brief letter to the company's investor relations department. It will say: Dear Sir/Ma'am: It is with some regret that I inform you of my intention to sell my entire position in your stock. I don't doubt that yours is a fine company. I would not have invested otherwise. However, I am appalled by the position the AeA, a trade association to which your company belongs, has taken in regard to employee stock options expensing. My investment dollars support you, and, in a small way, those dollars are paid to an organization that holds my right to proper accounting of compensation in contempt. Your continued membership in and support of the policies of the AeA reveals the level of contempt in which you hold shareholders. Until your company either leaves the AeA or enacts a shareholder-friendly employee stock options policy, which includes expensing, you should expect me to continue on my campaign of getting others to sell your stock. Sincerely, Bill Mann Companies eager to hide stock option compensation expenses in fear of a stock sell-off can't be pleased by a sell-off of their shares as a result of their failure to give owners proper accounting. Care to join me? While you're at it, why don't you send a note to your senators and representatives, telling them about what you're doing? I have no ill will toward these companies, nor do I find it particularly pleasant to sell things that I may not wish to sell. Doesn't matter. This is right. Do you hear me, AeA? You may have the big money, but in this matter, you are in the wrong. Fool on! Bill Mann, TMFOtter on the Fool Discussion Boards Bill Mann is senior editor for investing at the Motley Fool. He's also, in spite of the sentiment put forth here, a net buyer of stocks at this time. He has beneficial interest in Cisco. The Motley Fool has a disclosure policy.
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-- Expensing Of Options Inevitable Washington Post – by Kathleen Day – July 21, 2002 (7/20/02) - Securities and Exchange Commission Chairman Harvey L. Pitt said yesterday that it is inevitable that publicly traded companies will have to treat stock options as an expense. Pitt, who has said he does not favor counting options as an expense, hasn't altered his view, an SEC spokesman said after Pitt's statement. But Pitt believes that given the current political and economic environment, the change in accounting is certain to come. 'The question isn't whether stock options should be expensed,' Pitt said during an appearance at the National Press Club. 'The question is when and how.' He said, however, that even before such a major change, other fundamental issues about stock options should be addressed that would align the incentives for management with the interests of shareholders. The granting of stock options, for example, should be tied to a company's long-term financial goals, rather than short-term goals, such as quarterly or yearly results, he said. Pitt added that publicly traded companies should require that shareholders approve stock option plans, saying he has asked the New York Stock Exchange and the Nasdaq Stock Market to make that a requirement for all companies trading on those markets. Also, he said, stock option grants should be approved by independent directors of the company not tied to management. Pitt also said corporations should not be able to make up the losses for top executives when their stock options fall in value because of poor company performance. Only when those issues are addressed, he said, would it make sense to deal with the question of how to account for stock options. Financial regulators and other experts have been pressing since the early 1990s to change the way corporations treat options on their profit-and-loss statements. But the companies that use them -- especially many high-tech firms and financial services companies -- have pushed hard to retain favorable treatment. The current rule gives companies the best of both worlds. Unlike salaries, the cost of granting options does not need to be subtracted from earnings, although companies must include an explanation in a footnote of how earnings would be affected if they were counted. But when the options are exercised, the company is entitled to a tax deduction. Options do have costs for investors, diluting the value of their shares. Perhaps more important, critics say, options create an incentive for executives to push for short-term stock market gains, whether or not such a strategy is beneficial to the company in the long run. Only a handful of companies now treat options as an expense. But the number is growing. Just this week, Coca-Cola Co., The Washington Post Co. and Dole Food Co. announced that they will do so. According to a report by Bear Stearns & Co., 38 companies would have experienced an earnings decline of more than 50 percent last year if they had been required to deduct options as an expense, and 20 percent of the profit reported by Standard & Poor's 500 companies would have been erased. Mark Nebergall, president of the Software, Finance and Tax Executives Council, a trade group opposed to changing the rules, said the revision is not inevitable. The Financial Accounting Standards Board, which sets accounting rules, has not revised the rule, and Congress will be hesitant to get involved, Nebergall said. He argued that treating options as expenses is hard to do reliably when companies don't know how much their employees will be able to profit from them. 'It's a step backwards in terms of clarity,' he said. Staff writer Renae Merle contributed to this report.
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-- Stop the Culture of Corporate Greed Bernie.House.gov - Congressman Bernie Sanders – July 20, 2002 (7/11/02) - There is a cancer eating away at the heart of corporate America and its name is “greed.” It is becoming increasingly apparent that more and more large corporations will do anything, legal or otherwise, to fatten the already huge compensation packages of their CEO’s and other senior executives. As we have seen in recent years these corporations lie about their financial statements, cheat or move abroad to avoid paying their fair share of taxes, cut the pensions and health benefits of their employees and throw loyal workers out on the street as they move their plants to China. At the same time many of them line up for billions in corporate welfare from the federal government. Let’s be clear. We’re not just talking about a “few bad apples,” such as Worldcom, Enron, Xerox, Adelphia, Tyco, Merck, and Arthur Anderson. According to a recent study by the Huron Consulting Group, over the past five years nearly 1,000 companies were forced to correct their financial statements. The “greed culture” in the United States today is almost beyond belief. CEOs of major corporations now make over 500 times what their employees earn. In addition, they receive bonuses, golden parachutes, stock options, lavish retirement plans, and a wide range of other very generous benefits. The result is that the richest 1% now own more wealth than the bottom 95% and we have, by far, the most unfair distribution of wealth and income in the industrialized world. At WorldCom, where profits were overstated by $3.8 billion, 17,000 jobs have been lost. Their accounting fraud has cost shareholders some $150 billion, including billions in lost pension assets. Meanwhile, former WorldCom CEO Bernard Ebbers received personal loans from the company of more than $408 million that he still has not paid back. In addition, John Sidgmore, the current WorldCom CEO, has sold more than $87 million of WorldCom stock since 1997. Scott Sullivan, the former WorldCom Chief Financial Officer, has sold more than $45 million in WorldCom stock since 1995. If you add it up, just 5 people at WorldCom received over $600 million in loans, compensation, and stock over the past few years. Furthermore, according to the Citizens for Tax Justice, while WorldCom reported $16 billion in earnings to its shareholders between 1996 and 2000, it reported less than a billion dollars of taxable income to the IRS - thus avoiding millions in taxes. As a member of the House Financial Services Committee I have had a chance to confront the leaders of Arthur Anderson at public hearings. But while it is important to make these individuals answer for their crimes, we should not forget the broader questions because these executives represent just the tip of the iceberg. First, what is going on in our country today that allows for the kind of corporate thievery that we are seeing? Secondly, beyond political posturing and sound-bites, what are elected officials really going to do about it? How do we change the culture in this country, and the role of the Congress and the White House, so that we put an end to this outrageous corporate behavior once and for all? In my view, the most important thing that Congress can do is to put an end to the culture of money and campaign contributions that now permeates Washington. Since 1990, accountants and their PACs have given $57.4 million to federal candidates and political parties. In addition, big business has made $522 million in campaign contributions to both political parties during the 2001-2002 election cycle alone. One would be very naïve not to understand that these huge campaign contributions have played an important role in turning Congress away from addressing the issues of corporate greed and fraud. In fact, right now, the Republican Leadership and the President are working hard for another $1 trillion in tax breaks for the richest two percent of the population. While Congress has recently made progress in campaign finance reform by banning unlimited soft money, much more needs to be done. Ultimately, we need to move to public funding of elections so that candidates are no longer dependent upon the wealthy and large corporations for their contributions. Secondly, we need a much stronger regulatory system so that auditors cannot cook the books, and corporations cannot avoid paying the taxes they owe. In the short term, SEC Chairman Harvey Pitt should resign because of the very strong conflicts of interest that he has. As a former accounting lobbyist, Mr. Pitt successfully lead the efforts against auditing reform. Third, new criminal penalties must be established to hold corporate leaders accountable for what goes on in their companies, and that puts them in jail when they break the law. CEOs and corporate directors who destroy thousands of jobs and cheat Americans out of billions deserve stiff penalties for the crimes they commit. Fourth, corporations that break the law should be prohibited from receiving government contracts. WorldCom receives $1.7 billion every year in government contracts. If they are found to have broken the law, these contracts must end immediately. Finally, from an economic development perspective, the federal government should stop providing corporate welfare to the large multi-nationals who are closing down plants here and moving to China and Mexico. Instead, we should begin helping those companies, often small and medium size business as well as worker-owned companies, who are trying to increase jobs in the United States.
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-- The Corporate ‘Crawfishing’ Has Begun Associated Press – by Karen Talley – July 18, 2002 (7/16/02) - NEW YORK (Dow Jones/AP) - The Securities and Exchange Commission is hitting a nerve with its new requirement that corporate executives swear to the accuracy of their financial statements. A number of companies are asking if they can modify the information in their recent financial results before signing on the dotted line, according to an SEC spokesman. Under an order by the SEC, chief executives and financial chiefs at companies with more than $1.2 billion in revenue have to swear under oath in writing that their financial results are complete and accurate. The deadline for most companies is Aug. 14. The SEC's response to the requested 'modifications,' which have mostly been coming from corporate counsels, is an unequivocal no. 'This is black or white, there is no grey,' said SEC's John Nester. 'Either you attest to the accuracy of the figures' in financial results 'or you go into the pile that doesn't comply.' Companies in the noncompliance pile will have the opportunity to explain why they aren't comfortable endorsing their report, and even if the reasons are valid, the hesitation could create some discomfort or even backlash as word gets out. 'No one wants to be in the explanation pile,' Nester said. 'But that's how it's going to be. Our goal is to supply a very clear picture of who's been in compliance and who has not.' The fact that some companies are asking for permission to do a bit of extra work on their already-filed reports did not surprise many market watchers. 'I kind of expected it,' said Howard Barlow, managing director at Cypress Strategies. 'It's well known that many companies make a practice of massaging their numbers.' The SEC's order is expected to be broadened in the months ahead to include many more companies, but already some of these smaller firms are approaching the SEC about certifying their reports. The companies see such a move as providing a seal of approval that could serve as an inducement to investors looking for honest businesses, analysts said. Let the Corporate ‘Crawfishing’ Begin
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-- Money is Buying Policy New York Times – by Kevin Phillips – July 18, 2002 (7/17/02) - GOSHEN, Conn. — America is at a turning point. Corporate scandals, the fall of the stock markets, the sudden mobilizations in Washington of the last few weeks to legislate against some of the more egregious corporate abuses: they all indicate that the nation's attitude toward business is changing. It is potentially a bigger change than many politicians realize. What's unnerving them is that the payback from the market bubble of the late 1990's is becoming apparent to Main Street. The charts of the downside since March 2000 are starting to match the slope of the earlier three-year upside. Not that it's a new phenomenon. In the Gilded Age of the late 19th century and again in the Roaring Twenties, wealth momentum surged, the rich pulled away from everyone else and financial and technological innovation built a boom. Then it went partially or largely bust in the securities markets. Digging out is never easy. But this time, the deep-rooted nature of 'financialization' in the United States that developed in the 1980's and 90's may make it even tougher. Near the peak of the great booms, old economic cautions are dismissed, financial and managerial operators sidestep increasingly inadequate regulations and ethics surrender to greed. Then, after the collapse, the dirty linen falls out of the closet. Public muttering usually swells into a powerful chorus for reform — deep, systemic changes designed to catch up with a whole new range and capacity for frauds and finagles and bring them under regulatory control. Even so, correction is difficult, in part because the big wealth momentum booms leave behind a triple corruption: financial, political and philosophic. Besides the swindles and frauds that crest with the great speculative booms, historians have noted a parallel tendency: cash moving into politics also rises with market fevers. During the Gilded Age, the railroad barons bought legislatures and business leaders bought seats in the United States Senate. In the last years of the 19th century, one senator naïvely proposed a bill to unseat those senators whose offices were found to have been purchased. This prompted a colleague to reply, in all seriousness, 'We might lose a quorum here, waiting for the courts to act.' Over the last two decades, the cost of winning a seat in Congress has more than quadrupled. Legislators casting votes on business or financial regulation cannot forget the richest 1 percent of Americans, who make 40 percent of the individual federal campaign donations over $200. Money is buying policy. Speculative markets and growing wealth momentum also corrupt philosophy and ideology, reshaping them toward familiar justifications of greed and ruthlessness. The 1980's and 1990's have imitated the Gilded Age in intellectual excesses of market worship, laissez-faire and social Darwinism. Notions of commonwealth, civic purpose and fairness have been crowded out of the public debate. Part of the new clout and behavior of finance is so deep-rooted, however, that it raises questions that go far beyond the excesses of the bubble. In the last few decades, the United States economy has been transformed through what I call financialization. The processes of money movement, securities management, corporate reorganization, securitization of assets, derivatives trading and other forms of financial packaging are steadily replacing the act of making, growing and transporting things. That transformation has many roots. Finance surged in the 80's partly because deregulation removed old ceilings on interest rates and let financial institutions offer new services. The rising stock market, in turn, drew money from savings accounts into money market funds and mutual funds, turning the securities industry into a huge profit center. Computers underpinned the expansion of everything from A.T.M.'s to scores of new derivative instruments by which traders could gamble with such dice as Treasury note futures or Eurodollar swaps. Meanwhile, the Federal Reserve and Treasury Department proved during the 80's and 90's that nothing too bad could happen in the financial sector, because Washington was always ready with a bailout. Supported so openly, rescued from the stupid decisions and market forces that pulled down other industries, the finance, insurance and real estate sector of the economy overtook manufacturing, pulling ahead in the G.D.P. and national income charts in 1995. By 2000, this sector also moved out front in profits. It also became the biggest federal elections donor and the biggest spender on Washington lobbying. The effects have been profoundly inegalitarian — and not just in the loss of manufacturing's blue-collar middle class. In the last two decades, as money shifted from savings accounts into mutual funds, promoting the stock markets and the money culture, corporate executives became preoccupied with stock options, compensation packages and golden parachutes. 'More' became the byword. In the new management handbook as rewritten by finance, the concerns of employees, shareholders and even communities could be jettisoned to raise stock prices. Major companies could make (or fake) larger profits by financial devices: writing futures contracts, investing in stocks, juggling pension funds, moving low-return assets into separate partnerships and substituting stock options for salary expenses. Enron was only the well-publicized tip of a large iceberg. A century ago, putting a new regulatory framework around abuses of the emergent railroad and industrial sectors became a priority. This effort largely succeeded. Whether another such framework must be put in place around finance in order to safeguard household economic security is a question that at the very least calls for a national debate. Whether the current proposals are the beginnings of that debate or mere window dressing remains to be seen. Kevin Phillips is the author of 'Wealth and Democracy: A Political History of the American Rich.'
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-- Pay for Pretense New York Times – by Gretchen Morgenson – July 16, 2002 (7/14/02) - Why would Bristol-Myers Squibb use incentives to induce its wholesale customers to buy more products than they needed last year, a practice that may have resulted in overstated revenue at the company? The Securities and Exchange Commission is investigating the company, which has said that its sales practices are proper. And why would Merck & Company include in its revenue in recent years $14 billion in co-payments that consumers made for prescriptions that the company did not actually receive and that did not show up in net income? Kenneth C. Frazier, general counsel at Merck, said the methodology accurately reflects the company's results, and that the revenue recognition is appropriate. Both questions may share this answer: during the market boom, investors paid close attention to sales growth, and rising sales became crucial to rising stock prices. But there's another, troubling answer to the queries. In both companies, executives stood to benefit personally by higher revenue because of the way in which their compensation was calculated. According to Merck's proxy statement, executive bonuses are determined by comparing growth in revenue and earnings per share to those of its peers in health care. Recording an extra $14 billion in sales — 10.5 percent of the company's total sales in the relevant period — cannot have hurt those comparisons. And last year, Bristol-Myers started a new long-term incentive plan that based payouts partly on sales growth. Previously, they were based on total shareholder return versus its peers and earnings growth. On Thursday, the company said that regulators were scrutinizing last year's sales for potential overstatement. Richard J. Lane, the former president of the company's worldwide medicines group, left Bristol-Myers in April when its chairman announced that wholesalers were holding hundreds of millions of dollars in excessive inventories of company products and that this year's revenue would fall as a result. A spokeswoman said the company would not comment on whether Mr. Lane would be returning any of the $2.145 million restricted stock award given to him as part of his long-term compensation last year. He also made $1.25 million in salary and bonus. Mr. Lane did not return a call seeking comment. Then there is WorldCom. In determining its top executives' bonuses last year, the proxy says, the company assessed revenue, earnings and the market value of its common stock. But it also used an unusual measure: billings by WorldCom under service agreements with its customers. Customer billing records are among the documents that the S.E.C. requested from WorldCom last March as part of its investigation into the company's accounting practices. It is far too simple to conclude that executive compensation plans can serve as a road map to where corporate cheating might go on, but it is becoming distressingly clear that the pay-for-performance philosophy that was supposed to align executives' interests with shareholders' has been badly distorted. 'Pay for pretense' may be a better name for it, given some of the accounting shenanigans that have emerged. William R. Thomas, who runs the Capital Southwest Corporation, a publicly traded investment company in Dallas, is deeply troubled by what he calls the corruption of capitalism by officers and directors of big corporations and dismayed that few chief executives have vowed to eliminate the rot. 'Their unbridled greed is poisoning the system that has been the source of our nation's wealth,' he said. 'The impending takeover of corporate America by self-serving elitist managers may prove to be far more damaging to capitalism than anything Karl Marx could have conceived.' Amen.
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-- The Hypocrisy of Wall Street Culture New York Times – by Kate Jennings – July 15, 2002 (7/14/02) - In 'The Devil's Dictionary,' Ambrose Bierce famously defined a corporation as 'an ingenious device for obtaining individual profit without individual responsibility.' Bierce and his wicked definition came to mind when President Bush called for a 'new ethic of personal responsibility in the business community' during his Wall Street speech. Bierce would've been delighted at the coincidence. To many of us, the president's rhetoric on Tuesday was all gaping gum, no teeth. If by chance, though, he was being sincere, Mr. Bush was knocking himself out for nothing because, as Bierce's definition implies, the structure of American corporations is inimical to the 'new' ethic he was espousing. Despite the efforts of many fine people, American corporations are notorious for daddy-knows-best, brook-no-dissent cultures where personal responsibility more often dies than flourishes. They are also secretive, self-referential environments where transparency, Mr. Bush's other hobbyhorse, is unlikely to be embraced in any form, accounting or otherwise, except as window-dressing. I make these observations as someone who worked for much of the 1990's as a speechwriter at two major Wall Street financial services corporations. Until then, I'd had no experience of closed societies and rigid hierarchies; perforce, to survive, I had to turn myself into something of an anthropologist. One paradox was hard to miss: When I crossed the thresholds of those downtown skyscrapers, I went from a one-person, one-vote democracy — messy, noisy, infuriating, but democratic — to a netherworld where fear was the primary management tool and dossiers, censorship, misinformation and various forms of surveillance were standard practice. To me, corporations seemed not merely autocratic but totalitarian; the engines of America's fabled democratic society are anything but. To heap paradox on paradox, because I worked with investment bankers I was surrounded by free-market fundamentalists who roamed the globe preaching a triumphant gospel of deregulation from which all freedoms would flow, yet returned to a bureaucratic roost perfectly Soviet in its rigidity. The fall of the Berlin Wall, followed by the tech boom, had 'turbo-charged' — to use a favorite piece of business jargon — their sense of superiority and rightness in all things, not just economic. Of course, free markets were allowed to be free only when it suited bankers; when Long-Term Capital Management faced collapse, instead of allowing it to fail, as the market was clearly dictating, they bailed it out to save themselves. In fact, derivatives-related debacles were piling up faster than car wrecks on a foggy highway. Cost of doing business, said the bankers. Harbingers of much worse to come, said prescient students of financial scandals. One can argue that corporations, like the armed forces, have to be autocratic. But delivering goods and services in an efficient, competitive manner doesn't require the same unquestioning loyalty as fighting wars. Disciplined teamwork, yes, but not blind obedience. From my experience, corporate employees, while understanding the need for unity, are hungry for real debate, not scripted events. Without it, they know, there is no intellectual growth — just executive mind-sets growing thick and wrinkly as elephant hide. Every now and again, employees revolt against being treated as children. I remember a meeting where someone got the bright — and career-undermining — idea of polling the assembled managing directors on whether they thought the firm's strategy, as just outlined by the chief executive, would succeed; they were to punch in their responses on handheld devices, to be instantly flashed up on a screen in a way that would be hard to ignore. Against all rules of corporate decorum, a majority voted no, the firm's strategy wouldn't succeed. Loud gasp. As stunning as this moment was, it was just as stunningly passed over; the meeting continued as if the vote had never happened. In any sane, responsive world, the C.E.O. would've stopped the proceedings and started a debate as to why the managing directors felt that way. The frustration in the hall was palpable. Yet such high-handedness is accepted. Executives not only routinely ignore their employees, they appease the market whenever necessary by firing large quantities of them — all done with impunity. It was not until the events of the last months, however, that many shareholders became aware of the extent to which they, too, are but pawns in management's game. They didn't have to lose their portfolios and pensions to learn this, because there has long been one dead giveaway of corporate disdain for shareholders: All over the United States, when the season arrives for annual shareholder meetings, corporations convene them in out-of-the-way places to dissuade shareholders from attending and asking pesky questions. To return to Ambrose Bierce. Under the entry for 'riches' in 'The Devil's Dictionary,' instead of a definition, you will find three quotes: 'A gift from Heaven signifying, `This is my beloved son, in whom I am well pleased.' ' — John D. Rockefeller 'The reward of toil and virtue.' — J. P. Morgan 'The savings of many in the hands of one.' — Eugene Debs On which Bierce — prince of curmudgeons, king of cynics, long may he be read and emulated — wisely refused to expand. Kate Jennings is the author of 'Moral Hazard,' a novel.
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-- Paid in Planes, Perks, and Automobiles Fortune – by Jeremy Kahn – July 14, 2002 (Monday, July 22, 2002 issue) - Perhaps the most shocking thing about Dennis Kozlowski's $18 million New York crash pad, which was apparently paid for by--and never disclosed to--Tyco shareholders, is that his perk didn't really seem all that shocking. But was it legal? That's the key question to ask about rampant, over-the-top CEO giveaways. The answers are seldom black and white. One thing is clear: CEOs can negotiate whatever compensation they please. 'It would be impossible to exaggerate what they can ask for,' says Ken Werner, an executive compensation lawyer at Day Berry & Howard in Boston. Cars, private club memberships, home loans, and moving expenses are common goodies, according to Werner. But most company bylaws state that any senior executive's employment contract should be approved by the board. Tyco is investigating Kozlowski's living arrangement, as well as $13 million in 'relocation' loans he allegedly approved without the board's knowledge for former general counsel Mark Belnick. (Tyco has filed suit against Belnick; his lawyer calls these claims 'malicious and baseless.') The rules governing what companies must tell shareholders are even cloudier. The SEC says that any perk worth more than $50,000 must be counted toward the CEO's compensation and included in the proxy statement. Any perk worth more than 25% of the total of all these extras must be detailed in a footnote. But there is plenty of wiggle room. Say the CEO of a construction firm asks his workers to build an addition to his house. The rules say the perk should be valued based on the 'incremental cost' to the company, but 'you could argue that it's zero if those workers would have otherwise been idle,' says Stan Keller, a lawyer at Palmer & Dodge. Patrick McGurn, director of corporate programs for Institutional Shareholder Services, says the SEC hasn't been policing perks because it has limited resources and didn't realize until now how frequently companies flout the rules. Corporations can buy homes--supposedly to entertain customers--furnish them with priceless art, and then let an executive live there. The imputed rental income from the home should be disclosed to shareholders and the IRS, but in many cases it isn't. In New York alone, GE owns four executive apartments, including an $11.3 million pad recently purchased for CEO Jeffrey Immelt, that aren't disclosed. GE spokesman Gary Sheffer says the non-business use of these apartments doesn't meet the $50,000 threshold for SEC disclosure. Perhaps the most abused perk is corporate jets, which companies often insist their CEOs travel on for 'security' reasons. But there is vast potential for abuse, especially if the CEO schedules board meetings in locales conveniently near his vacation home and calls the flights 'all business.' Greg Hutchings, the former CEO of British industrial conglomerate Tomkins, stepped down after a dispute with the company over his use of the corporate jets (which he maintained he flew for legitimate business purposes). Former RJR-Nabisco CEO Ross Johnson is rumored to have once used a jet to fly his dog home. We always knew that CEOs lived a dog's life.
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-- How Stock Options Lead to Scandal New York Times – by Walter M. Cadette– July 13, 2002 (7/12/02) - MILLBROOK, N.Y. — In his speech about corporate fraud and abuse, President Bush mentioned stock options only once — and then to endorse an existing proposal to require shareholder approval of all options plans. His endorsement is welcome, but it is woefully inadequate: the stock-options culture is at the root of the current scandals on Wall Street. Options, which are not counted as an expense and thus inflate earnings, bring with them a powerful incentive to cheat. They hold out the promise of wealth beyond imagining. All it takes is a set of books good enough to send a stock price soaring, if only for a while. If real earnings are not there, they can be manufactured — for long enough, in any case, for executives to cash out. This, in essence, is what happened at Enron, WorldCom, Xerox — indeed, at quite a long list of companies. That list is bound to grow, judging by the findings of a study I published with two colleagues last year. We examined operating earnings — profits from ongoing operations excluding nonrecurring items like sales of assets — of firms in the Standard & Poor's 500 index. In comparing these earnings to net income (a company's total profits, including one-time gains or losses and other nonrecurring charges), we found that operating earnings have exceeded net income every year for 20 years. This is counterintuitive. Especially during the go-go years of the 1990's, companies often boosted their net income compared to their operating earnings by selling valuable assets — a subsidiary, for example, that had been bought years earlier at a low price. The implication is clear: in many instances, corporations recast operating expenses as nonrecurring charges and, to a lesser extent, recast nonrecurring income as operating revenue. Especially notable was the free and often deceptive use of restructuring charges to polish operating results. More important, firms succeeded, with help from Wall Street, in persuading investors to focus on the operating numbers, even though in many cases they knew those numbers to be inflated. In all, according to our study, corporate America appears to be overstating its earnings by at least 20 percent. About half of the exaggeration reflects the lack of any recorded expense for options; the other half, manipulated operating earnings. The conventional wisdom holds that options encourage good management and better corporate governance because they align the interests of executives and shareholders. Nothing could be further from the truth. Most shareholders — that is, the vast majority of the public that buys stock on the market — have the potential for loss as well as gain. With an option, the potential for loss is quite small; if the share price falls below the option price, the option simply becomes worthless. But the potential for gain is huge. The asymmetry encourages executives to downplay risk, if not ignore it, in the quest for returns. That is why the 90's produced burdensome excess capacity in many industries, especially telecommunications and the technology industry, where option awards are most common. For executives, it made sense to go for broke with expansion plans. Big option payoffs came only with rapid growth, not with steady earnings. So what can be done? There can be no real reform without honest accounting for stock options. A decade ago, the Financial Accounting Standards Board recommended that options be counted as a cost against earnings, like all other forms of compensation, but corporate lobbyists resisted and Congress did their bidding. Alan Greenspan and Warren Buffett, among others, are calling for the same change now, but it remains to be seen whether the accounting profession can act without Congressional interference. Treating options like other forms of pay would make executive compensation transparent, diminish the temptation to cook the books and make managers less inclined toward excessive risk-taking. The president's speech, unfortunately, was not as strong as it should have been. And whether Congress is up to the job of reform is questionable. It may fall to investors — individuals and institutions — to force the necessary change.

Subject: Re: Has anything really changed?
From: Terri
To: Pete Weis
Date Posted: Sun, Nov 14, 2004 at 15:32:30 (EST)
Email Address: Not Provided

Message:
Excellent posts! The cautionary reminders are needed. But, stock prices should indeed reflect nominal returns to business and not real returns. This appears to be a moderately expensive stock market, so the gains are sensible. Earnings have slowed from high to moderate levels, but earnings seem enough to make sense of the market rise.

Subject: Re: Has anything really changed?
From: Terri
To: Terri
Date Posted: Sun, Nov 14, 2004 at 16:14:21 (EST)
Email Address: Not Provided

Message:
What has changed since 2002, is that corporate earning have risen continually. From 2000 through 2002, the stock market became increasingly less expensive. Since 2002, stocks prices have risen but earnings have risen jsut as fast. Sure I would like a less expensive market, but I can not command that it be so. I do not have chase the hottest stocks such as REITs, but I find no choice but to be part of the broad market. Gauging the price of stocks by the value of the dollar, does not make sense to me. A weak dollar will raise foreign earnings, and could easily bolster many stocks. I am still sanguine about the stock market.

Subject: Do you believe those earnings?
From: Pete Weis
To: Terri
Date Posted: Sun, Nov 14, 2004 at 20:33:40 (EST)
Email Address: Not Provided

Message:
And do you really think the markets are only 'moderately' expensive? Are you factoring in the loss in the dollar to determine real rather than nominal gains in your investments?

Subject: Re: Do you believe those earnings?
From: Ari
To: Pete Weis
Date Posted: Mon, Nov 15, 2004 at 10:36:51 (EST)
Email Address: Not Provided

Message:
'Are you factoring in the loss in the dollar to determine real rather than nominal gains in your investments?' Why not just invest in the Europe Index as well as in American stock indexes? Then we are protected against a loss in value of the dollar while still not trying to guess the direction of the market too closely.

Subject: Re: Do you believe those earnings?
From: Jennifer
To: Pete Weis
Date Posted: Mon, Nov 15, 2004 at 06:07:37 (EST)
Email Address: Not Provided

Message:
Currency values are always changing, but I have never heard an analyst explain how to use a currency value to distinguish nominal and real earnings. I know vaguely what this means, but have no idea how to use to value of the dollar to determine real earnings. When we buy an index fund can we be reasonably sure that most of earnings are properly stated? This stock market does not seem too expensive given the earnings numbers First Call posts. I stay in my indexes since they are making steady gains for 2 years.

Subject: Invest from a global perspective
From: Pete Weis
To: Jennifer
Date Posted: Mon, Nov 15, 2004 at 14:27:10 (EST)
Email Address: Not Provided

Message:
'Currency values are always changing, but I have never heard an analyst explain how to use a currency value to distinguish nominal and real earnings.' Sad but true - few if any brokers or analysts talk about the direction or performance of the currency in which a particular stock or asset is denominated. As is being widely reported, the dollar has fallen some 10% against a 'basket of currencies' in the last year. To figure one's real return on investment we would need to factor in this 10% loss. Ari is right - investing in euro denominated assets gives one's investment a currency boost.

Subject: Re: Invest from a global perspective
From: Jennifer
To: Pete Weis
Date Posted: Mon, Nov 15, 2004 at 15:54:48 (EST)
Email Address: Not Provided

Message:
Finally, I understand. The question you are raising is how much of a gain in the value of an asset should be discounted because of the weaker purchasing power of a currency?

Subject: Re: Do you believe those earnings?
From: Terri
To: Pete Weis
Date Posted: Sun, Nov 14, 2004 at 21:43:05 (EST)
Email Address: Not Provided

Message:
Please explain to me why I should worry about the loss in value of the dollar in terms of earnings. When the British pound was allowed to float in 1991, and lost about 20% in value in a few weeks, there was a subsequent gain in British stock prices in pounds. Stocks are a hedge against inflation or the loss in value of a currency, are they not? What am I missing?

Subject: Re: Do you believe those earnings?
From: Terri
To: Terri
Date Posted: Sun, Nov 14, 2004 at 21:51:09 (EST)
Email Address: Not Provided

Message:
Since I own broad indexes and sectors, I believe the earnings are generally correct. There are problem areas of course, but they do not strike me as general in the American or European markets. The major concern now for me is interest rates. I can easily become more cautious if valuations deteriorate. The year has been fine for stocks and bonds, so I am hopeful. But, I never miss your thoughts and articles!

Subject: On The Cost of Drugs
From: Emma
To: All
Date Posted: Sun, Nov 14, 2004 at 10:25:13 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/14/business/yourmoney/14drug.html?pagewanted=all&position= Do New Drugs Always Have to Cost So Much? By EDUARDO PORTER AMERICAN politicians are so perplexed about how to deal with prescription drug prices that the best solution they can offer is to effectively import a Canadian law - by buying drugs subject to Canadian government price controls - rather than pass one of their own. There are, however, more straightforward ways to get cheaper drugs than by borrowing price fixes from across the border. Some economists say the government can reduce pharmaceutical prices by changing how the nation pays for innovation. Prescription drugs are expensive by design. They cost a lot to invent but are relatively cheap to make, so companies receive patents from the government that grant them a monopoly and enable them to sell the medicine at a premium. In doing so, the idea goes, drug makers recoup their investments in research and development and are encouraged to invent more. But some economists say that there is no inexorable economic reason for drug prices to be as high as they are. 'Patents are one way to get medical innovation, but they are not a fact of nature,' said Michael R. Kremer, an economics professor at Harvard. 'It is worth looking for alternatives.' Strong patent protection has allowed substantial spending on innovation. American drug companies invested $33 billion in it last year, according to the Pharmaceutical Research and Manufacturers of America, a lobbying group. But this arrangement has a measurable economic cost, keeping drugs from consumers who would buy them if they were priced like other competitive commodities - marginally above production costs. That is not the only inefficiency that patents breed. In the insured health market, where neither patients nor their doctors actually pay for drugs, drug companies are subject to all manner of perverse incentives. For instance, they can reap more from investing in marginal improvements over existing therapies - and buying ads to persuade patients to pay big markups for them - than from investing in riskier, ground-breaking drugs. The Food and Drug Administration has classified only about 20 percent of the drugs developed over the last 10 years as qualitative breakthroughs. Even though they spend more on research, pharmaceutical companies are finding fewer new drugs. In a report this year, the F.D.A. said that the way drugs are developed 'is becoming increasingly challenging, inefficient and costly.' One alternative is to have the government pay directly for research, which some economists say could maintain innovation while reducing drug prices. The government already spends almost $30 billion a year on basic drug research at National Institutes of Health laboratories and at universities, much of which results in new drugs. It would be relatively straightforward to extend this to cover the research now done in drug company labs, economists say. There are other alternatives. For example, the government could compensate drug companies for their inventions as an incentive for them to keep innovating. How to determine how much an innovation is worth? One possibility would be for the government to selectively buy patents at a premium over the price a private bidder was willing to offer, and then put them into the public domain, Professor Kremer said. Aidan Hollis, an assistant professor of economics at the University of Calgary in Alberta, devised a different approach: the government would set up a fund to compensate drug companies based on how much their new drugs improve the quality of life and how often they were used. These alternatives would carry several benefits, economists say. In addition to making drugs available at lower prices, they would make it much less profitable for pharmaceutical companies to spend millions of dollars to develop drugs, like Nexium and Clarinex, that are protected by patents but offer little improvement over similar drugs already on the market. The goal is not to spend less to develop new drugs, Professor Hollis said, but to get more therapeutic bang for the buck - by channeling investment to where it matters most - as well as to increase access to the resulting drugs. 'This can be done within the same budget as we devote to pharmaceuticals now,' he said.

Subject: Merck and Vioxx
From: Emma
To: All
Date Posted: Sun, Nov 14, 2004 at 06:52:53 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/14/business/14merck.html?hp&ex=1100494800&en=9d9c398ab2a955a2&ei=5094&partner=homepage Despite Warnings, Drug Giant Took Long Path to Vioxx Recall By THE NEW YORK TIMES This article was reported and written by Alex Berenson, Gardiner Harris, Barry Meier and Andrew Pollack. In May 2000, executives at Merck, the pharmaceutical giant under siege for its handling of the multibillion-dollar drug Vioxx, made a fateful decision. The company's top research and marketing executives met that month to consider whether to develop a study to directly test a disturbing possibility: that Vioxx, a painkiller, might pose a heart risk. Two months earlier, results from a clinical trial conducted for other reasons had suggested such concerns. But the executives rejected pursuing a study focused on Vioxx's cardiovascular risks. According to company documents, the scientists wondered if such a study, which might require as many as 50,000 patients, was even possible. Merck's marketers, meanwhile, apparently feared it could send the wrong signal about the company's confidence in Vioxx, which already faced fierce competition from a rival drug, Celebrex. 'At present, there is no compelling marketing need for such a study,' said a slide prepared for the meeting. 'Data would not be available during the critical period. The implied message is not favorable.' Merck decided not to conduct a study solely to determine whether Vioxx might cause heart attacks and strokes - the type of study that outside scientists would repeatedly call for as clinical evidence continued to show cardiovascular risks from the drug. Instead, Merck officials decided to monitor clinical trials, already under way or planned, that were to test Vioxx for other uses, to see if any additional signs of cardiovascular problems emerged. It was a recurring theme for the company over the next few years - that Vioxx was safe unless proved otherwise. As recently as Friday, in newspaper advertisements, Merck has argued that it took 'prompt and decisive action'' as soon as it knew that Vioxx was dangerous. But a detailed reconstruction of Merck's handling of Vioxx, based on interviews and internal company documents, suggests that actions the company took - and did not take - soon after the drug's safety was questioned may have affected the health of potentially thousands of patients, as well as the company's financial health and reputation. The review also raises broader questions about an entire class of relatively new painkillers, called COX-2 inhibitors; about how drugs are tested; and about how aggressively the federal Food and Drug Administration monitors the safety of medications once they are in the marketplace. The decisions about how to test Vioxx were made in a hothouse environment in which researchers fiercely debated how the question should be pursued, and some even now question whether the drug needed to be withdrawn. It also took place amid a fierce battle between Vioxx and Celebrex in which federal regulators said marketing claims ran ahead of the science. Today Merck faces not only Congressional and Justice Department investigations, but also potentially thousands of personal-injury lawsuits that could tie the company up in litigation for years and possibly cost it billions to resolve. In late September, more than four years after that May 2000 meeting, Merck announced that it was pulling the drug off the market because a long-term clinical trial showed that some patients, after taking the drug for 18 months, developed serious cardiovascular problems. The data that ultimately persuaded the company to withdraw the drug indicated 15 cases of heart attack, stroke or blood clots per thousand people each year over three years, compared with 7.5 such events per thousand patients taking a placebo. But the company never directly tested the theory that it used to explain the worrisome results of the clinical trial in 2000. Merck was criticized for what some charged was playing down the drug's possible heart risks; in one case, it received a warning letter from the Food and Drug Administration for minimizing 'potentially serious cardiovascular findings.'' And when outside researchers found evidence indicating Vioxx might pose dangers, Merck dismissed their data. In 2001, Dr. Deepak L. Bhatt, a cardiologist at the Cleveland Clinic, proposed to Merck a study of Vioxx in patients with severe chest pain. Merck declined, saying the patients proposed for the study did not reflect typical Vioxx users. In Dr. Bhatt's view, the company feared what it might find if it directly examined the dangers of Vioxx, one of Merck's biggest products, with sales last year of $2.5 billion. 'They should have done a trial like this,' Dr. Bhatt said. 'If they internally thought this drug was safe in patients with heart disease, there was no reason not to do it.' Merck executives said last week that the company acted responsibly, voluntarily withdrawing Vioxx as soon as it had clear evidence the drug was harmful. And they said that even if they had conducted the type of study they discussed internally and rejected in 2000, the company might not have detected Vioxx's risks any sooner. 'Merck wasn't dragging its feet,'' said Kenneth C. Frazier, the company's general counsel. 'It's pretty hard for me to imagine that you could have done this more quickly than we did.' The F.D.A., which Merck consulted, also agreed that designing a trial to specifically assess Vioxx's cardiovascular risks would have been difficult and, unless constructed to provide benefits to patients, would have been unethical as well. But the F.D.A. itself is now under scrutiny for its handling of Vioxx. Congressional investigators are looking at whether the agency, which is charged with protecting Americans from dangerous medicines, was too lax in its monitoring of the mounting evidence against Merck's drug. Internal memos show disagreement within the F.D.A. over a study by one of its own scientists, Dr. David Graham, that estimated Vioxx had been associated with more than 27,000 heart attacks or deaths linked to cardiac problems. So far, no clinical evidence has linked the next best-selling version, Celebrex, to cardiovascular risks. But its maker, Pfizer, has acknowledged that its other COX-2 drug, Bextra, has been shown to pose risks to patients after heart surgery. Scientists outside the company say there is evidence that Bextra's problems may affect wider groups of patients.

Subject: Business Ethics
From: Ari
To: All
Date Posted: Sat, Nov 13, 2004 at 21:35:25 (EST)
Email Address: Not Provided

Message:
Two subjects that economists are paying scant attention to are the investigations of Eliot Spitzer, now on insurance brokers and insurers; and, the problems surrounding the use of Vioxx and possibly Bextra long after warnings about the drugs were steadily sounded. The Vioxx of the warning on Vioxx was so complete, the only reason the drug was pulled from the market was because Merck was trying to expand its use and funded a double blind study thinking there was a separate use for the drug.

Subject: An important issue......
From: Pete Weis
To: Ari
Date Posted: Sun, Nov 14, 2004 at 13:42:22 (EST)
Email Address: Not Provided

Message:
for many reasons beyond pushing dangerous products on the public or swindling customers with insurance products meant to enrich the insurer at the considerable expense of the public. From article after article, some of which I posted on this site from time to time, detailing how companies falsify (much of it legally)their earning numbers, it's evident little has been done to clean up the corruption on Wall Street. It's why folks like Warren Buffet won't participate in these recent market rallies. There has always been some corruption, but in the last tweny years or so it has gradually reached fairly extreme levels. When you have someone like Eliot Spitzer taking on these issues, it's as if he is entering into a vacuum - a vacuum left by a federal government which is neglecting to do its duty by going after this corruption. We have lies being put out there to cover other lies. But at some point down the road there will be more and more truth leakage and I think there will be a loss of confidence by the investing public. Sadly, I have already lost confidence in the markets for the time being and am investing in a way which benefits from the downward slide of America's unit share of stock, the US dollar. Until our government can begin to bring down its budget deficits and government regulatory agencies are funded and given a mandate to really cleanup the corruption, I see no other way to focus my investing. Unfortunately, it will take a true crisis to get the public's attention before there will be enough overwhelming demand for real change and real enforcement - similar to the dangerous intersection where nothing is done until the severe accident with multiple deaths finally forces the issue.

Subject: Re: An important issue......
From: jimsum
To: Pete Weis
Date Posted: Mon, Nov 15, 2004 at 15:08:10 (EST)
Email Address: jim.summers@rogers.com

Message:
I think it is going to take even more than a true crisis to get the public's attention; even when the public notices the crisis, they may not recognize the solution to the problem. For the last few decades we have been continually told that the government only messes up the economy. The only thing we ever hear about business regulation is that red tape costs lots of money -- and that hurts us all because we all own stock. Until it is recognized that the government can actually solve economic problems by passing laws, we will get the same old suggested 'solution' for all economic problems: more subsidies and tax loopholes for business owners.

Subject: Re: An important issue......
From: Jennifer
To: jimsum
Date Posted: Mon, Nov 15, 2004 at 15:52:06 (EST)
Email Address: Not Provided

Message:
Think about the problem we are having with flu vaccine. Other governments that arrange for production of the vaccine with multiple suppliers, have had no difficulty insuring a proper supply. There are instances and sectors where markets need over-sight and supplementing by government. Health care surely seems such an instance and sector.

Subject: Re: An important issue......
From: Emma
To: Pete Weis
Date Posted: Sun, Nov 14, 2004 at 20:19:58 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/14/business/yourmoney/14watch.html?pagewanted=all&position= GRETCHEN MORGENSON Sometimes It Takes a Sherlock ALTHOUGH the truly brazen accounting frauds of recent years are fading from view - remember Cendant, Enron and WorldCom? - investors must stay vigilant for bookkeeping practices that, while legal, mask a company's true condition. Such is the advice of Robert A. Olstein, astute stockpicker and overseer of the Olstein Financial Alert fund. Mr. Olstein, a 37-year market veteran, is a master of analyzing financial statements and spotting anomalies that understate or overstate performance. As Mr. Olstein explains, accounting rules require a lot of estimates, and that gives considerable wiggle room to company managers. 'All corporations use some aggressive assumptions in the application of generally accepted accounting principles as management is heavily incentivized to make the numbers,' he said. 'When the numbers deviate from economic reality, you have to adjust them before reaching conclusions about future estimates and valuations.' While not every investor can pick apart financial statements the way Mr. Olstein can, they still have to be on guard. Happily, Mr. Olstein has revealed some of the tricks of his trade. To illustrate how managers' assumptions can lead investors astray, Mr. Olstein cited two examples. In one case, the deviations from economic reality translate to an overpriced stock; in the other, an underpriced stock. The overpriced stock, according to Mr. Olstein, belongs to the Computer Sciences Corporation, a provider of information technology outsourcing and professional services. Mr. Olstein's fund is short 500,000 shares of Computer Sciences stock, 1 percent of the assets under his management. Computer Sciences generated sales of almost $15 billion in fiscal 2004 and has a market value of $10 billion. Its shares closed on Friday at a 52-week high of $55.22, or 19 times reported earnings. The company provides services to its customers under contracts and recognizes revenues from those contracts using certain assumptions. Expenses associated with the business of Computer Sciences are either deducted immediately from its revenues or capitalized, which means that it deducts them over time. This is known as amortization. The company won $17.2 billion in new business in fiscal 2004, up from $7.7 billion in 2003. One of its biggest revenue producers is outsourcing contracts on which it capitalizes many costs. Despite declaring that its new contracts are less capital intensive, Computer Sciences said that in fiscal 2004 capitalized costs on outsourcing contracts were $458.7 million, up 282 percent from the $120.2 million recorded in 2003. But revenues are growing at only half that rate, raising a red flag for Mr. Olstein. The company may also be underestimating how much it is setting aside for doubtful accounts, essentially bills that it expects will not be paid, Mr. Olstein said. At the end of fiscal 2004, the figure was $50.5 million, 1.4 percent of gross accounts receivable. Compare this with fiscal 2001, when the allowance for such accounts was 3.2 percent of accounts receivable; in 1998, it was 5 percent. Mr. Olstein questions another aspect of Computer Sciences' results: the increased profitability in long-term contracts that so handily offsets increased costs at the company. Mr. Olstein said this one-time benefit effectively made the company's cost of sales look lower than it was and its income appear higher. So he docks the company's earnings by 15 cents a share for 2004. Computer Sciences reported earnings from operations of $2.83 a share in fiscal 2004. But Mr. Olstein said that his more conservative accounting assumptions took the number down. O.K., get out your pencils: Mr. Olstein deducts 55 cents a share to bring down capitalized costs on outsourcing contracts to a figure that is in line with the growth in revenues; he deducts an additional 10 cents a share to reflect a larger allowance for doubtful accounts; 8 cents comes out for what he calls the company's too-lenient amortization of software costs and 15 cents a share is deducted to reflect the one-time profitability spurt in long-term contracts. A reversal of reserves in the second quarter of 2004 added 2 cents a share to the full-year earnings reported by Computer Sciences; Mr. Olstein would deduct that as well. The result is $1.93 in earnings, by Mr. Olstein's reckoning, which means that Computer Sciences shares are trading at 28 times earnings, far higher than what investors think they are paying.

Subject: Re: An important issue......
From: Emma
To: Pete Weis
Date Posted: Sun, Nov 14, 2004 at 19:29:57 (EST)
Email Address: Not Provided

Message:
I know the feeling.

Subject: Re: Business Ethics
From: Ari
To: Ari
Date Posted: Sun, Nov 14, 2004 at 10:46:51 (EST)
Email Address: Not Provided

Message:
Here is the proper reading! The warning on Vioxx was so completely masked, the only reason the drug was pulled from the market was because Merck was trying to expand its use and funded a double blind study thinking there was a separate use for the drug,

Subject: Re: Business Ethics
From: Jennifer
To: Ari
Date Posted: Sun, Nov 14, 2004 at 06:18:12 (EST)
Email Address: Not Provided

Message:
There will be an attempt by the Administration and majority in Congress to greatly tighten the recourse consumers have to the courts to protect themselves against and gain compensation for defective products. Thousands of patients on Vioxx have suffered needlessly, have had heart attacks, because warnings about the drug were not heeded.

Subject: Pfizer and Bextra
From: Emma
To: All
Date Posted: Sat, Nov 13, 2004 at 21:19:32 (EST)
Email Address: Not Provided

Message:
http://ea.nytimes.com/cgi-bin/email? New Study Links Pfizer's Bextra, Similar to Vioxx, to Heart Attacks By GARDINER HARRIS The incidence of heart attacks and strokes among patients given Pfizer's painkiller Bextra was more than double that of those given placebos, according to preliminary results of a study presented yesterday at the American Heart Association meeting in New Orleans. The study, which pooled data from 5,930 patients taking part in 12 trials, found 2.19 times the number of heart attacks or strokes among patients given Bextra, compared with those given placebos. Merck recently withdrew Vioxx, a drug similar to Bextra, after a longer and better-controlled study showed that it doubled the risk of heart attack and stroke. 'The magnitude of the signal with Bextra is even higher than what we saw in Vioxx,' Dr. Garret A. FitzGerald, a cardiologist and pharmacologist at the University of Pennsylvania, said in an interview after presenting the data. 'This is a time bomb waiting to go off.' Susan Bro, a spokeswoman for Pfizer, said that a heart problem with Bextra appeared only in studies involving patients at very high risk for heart disease who were undergoing cardiac surgery - a disclosure Pfizer made on Oct. 15. Other studies of Bextra involving 8,000 patients with arthritis who were followed for 6 to 52 weeks found no heart problems, she said. Dr. FitzGerald is one of the world's leading experts in COX-2 drugs, a class of medicine that includes Vioxx, Bextra and Celebrex, which is also made by Pfizer. Vioxx had sales of $2.5 billion last year, while Celebrex had sales of $1.8 billion and Bextra $687 million. Celebrex and Bextra have been on their way to bigger sales this year. In previous studies, Dr. FitzGerald was among the first to explain why COX-2 inhibitor drugs, which were developed to cure pain without causing ulcers, might create heart troubles. Dr. Curt Furberg, professor of public health sciences at Wake Forest University School of Medicine, helped conduct the study that Dr. FitzGerald announced yesterday. 'Basically, we showed that Bextra is no different than Vioxx, and Pfizer is trying to suppress that information,' Dr. Furberg said.

Subject: REITs and Earnings?
From: Terri
To: All
Date Posted: Sat, Nov 13, 2004 at 20:46:25 (EST)
Email Address: Not Provided

Message:
What seems most interesting about the Real Estate Investment Trust Index, is the earnings growth rate. REIT earnings over the last 3 years have actually declined, while the prices of the stocks have steadily climbed. REITs are climbing on property price appreciation alone. When price appreciation ends, REITs could be in some trouble.

Subject: Investment Costs and costs and costs
From: Terri
To: All
Date Posted: Sat, Nov 13, 2004 at 18:42:37 (EST)
Email Address: Not Provided

Message:
A friend just sent me an investment portfolio that was put together several years ago by an adviser at Bank America. The portfolio is rather large. What startled me was the way in which the only thing that seemed to matter to the adviser was making sure the funds chosen had absurdly high yearly fees and 5% sales charges. Since the portfolio is quite large, simply increasing the size of investments in a given fund with a sales charge could easily have been used to cut the size of the charge. Nope. The idea of most investment companies gaining access to private Social Security accounts, strikes me as most dangerous. Wonder what Eliot Spitzer thinks?

Subject: Re: Investment Costs and costs and costs
From: Institutional Investor
To: Terri
Date Posted: Sun, Nov 14, 2004 at 11:04:58 (EST)
Email Address: Not Provided

Message:
'What startled me was the way in which the only thing that seemed to matter to the adviser was making sure the funds chosen had absurdly high yearly fees and 5% sales charges' Did you ask anything else about how the portfolio was constructed as opposed to just the fee schedules? Did you find out if the person used mean variance optimization and/or monte carlo simulation to construct the asset allocation? What assumptions were used? I have no doubt that the fund fees may be high, but that may be to off set your friends willingness to pay hard dollars for the advisors services. Most people don't want to pay anywhere from 500-2500 dollars for a plan when they hear other companies will not charge a fee (when in reality they are getting money through sales charges or commissions from each mutual fund).

Subject: Re: Investment Costs and costs and costs
From: Jennifer
To: Institutional Investor
Date Posted: Sun, Nov 14, 2004 at 12:09:09 (EST)
Email Address: Not Provided

Message:
Why should I want mean variance optimization or a Monte Carlo simulation to use for building my portfolio? A couple of index funds, a sector here and there, and some bonds and I am more than pleased. When an adviser speaks in terms I do not understand, my inclination is to find another adviser. And, I have a background in statistics.

Subject: Re: Investment Costs and costs and costs
From: David E...
To: Jennifer
Date Posted: Sun, Nov 14, 2004 at 18:05:24 (EST)
Email Address: Not Provided

Message:
Jennifer, arent you curious to know the SD of risk, your geometric rate of return, and the correlation of your assets? Might not there be some surprises there? Here is a source for user friendly, reasonably priced MVO software. Link. They offer discounts if you have purchased W. Bernstein's 'The Four Pillars of Investing' and/or 'The Intelligent Asset Allocator'. It was hard work, but worthwhile. I looked at many advisor's portfolio's that advisor's will build, but they were all cookie-cutter. The standard portfolio wouldnt take advantage of the large % of TIPS/REITs that I had already bought. Plus I couldnt bear the thought of giving up control and the .5% or 1.0% of return that advisor's cost. So I searched and found assets to buy that gave me the same sense of value that I had when I bought TIPS and REIT's in 2000. And these new assets correlated well with my old purchases.

Subject: Re: Investment Costs and costs and costs
From: Jennifer
To: David E...
Date Posted: Sun, Nov 14, 2004 at 18:34:48 (EST)
Email Address: Not Provided

Message:
Thanks Institutional and David and Terri: Having bought TIPS and REITs in 2000, when the values were excellent, do you simply hold the REITs forever and the TIPS till maturity? Do you simply build from these purchases but always but to hold thereafter?

Subject: Re: Investment Costs and costs and costs
From: David E...
To: Jennifer
Date Posted: Mon, Nov 15, 2004 at 01:41:18 (EST)
Email Address: Not Provided

Message:
TIPS and REITs work for a inflation/income tilt. That is good now. Maybe later, if there is enough growth, I can move to a 30/70 bonds/equity mix. My plans shouldnt look anything like your plans. That is the benefit of doing your own plan it can be exactly tailored for you. Try out the MVO, it has a 30-day free trial. :) :)

Subject: Re: Investment Costs and costs and costs
From: Institutional Investor
To: David E...
Date Posted: Mon, Nov 15, 2004 at 09:18:42 (EST)
Email Address: Not Provided

Message:
'Maybe later, if there is enough growth, I can move to a 30/70 bonds/equity mix' the value of the optimizer is severely diminished if you start trying to time when the stock market will pick up. The expected return and standard deviation in the model are usually based on 10 yr projections. If you are switching your allocation ever year, I wouldn't even bother with MVO.

Subject: Re: Investment Costs and costs and costs
From: David E...
To: Institutional Investor
Date Posted: Mon, Nov 15, 2004 at 12:10:32 (EST)
Email Address: Not Provided

Message:
My point, obviously not clear, is that as a retiree, if I successfully make it 20 years into my retirement with a growing portfolio. I will have less risk of running out of money for the remaining period of time. At that point it might be smart to increase the portfolio's equity allocation. Thanks Institutional Investor, I have enjoyed and used your comments on this board.

Subject: Timing and Timing
From: Terri
To: Institutional Investor
Date Posted: Mon, Nov 15, 2004 at 11:25:02 (EST)
Email Address: Not Provided

Message:
The idea of buying for the long run is important and adds considerable value to a portfolio, but it can not be the only rule. There are times when you have to judge that a sector is especially attractive in value and be willing to buy.

Subject: Re: Timing and Timing
From: Institutional Investor
To: Terri
Date Posted: Mon, Nov 15, 2004 at 12:17:13 (EST)
Email Address: Not Provided

Message:
'There are times when you have to judge that a sector is especially attractive in value and be willing to buy.' not at all, what you just stated is market timing. If you don't think it is, please explain to me your idea of market timing. Once you stop investing according to your asset allocation and make judgement calls on what investments are attractive at a given point in time, you are timing the market. If you think you can tell what sector is more attractive relative to the rest of the market, thats good for you, but there is no reason to deny that you are timing when assets are attractive. Using MVO and monte carlo analysis together will take into consideration buying assets when they are performing both positively and negatively. If you start buying assets based on what you believe isattractive, you lose the value gained through MVO. You are basically just ignoring the standard deviation and correlation that is provided in the MVO model and picking assets based on returns. The focus on returns should be when the capital market assumptions are made and you are determining what the anticipated return will be over a longer period of time, ie 10 years.

Subject: Re: Timing and Timing
From: Terri
To: Institutional Investor
Date Posted: Mon, Nov 15, 2004 at 12:50:09 (EST)
Email Address: Not Provided

Message:
Institutional Investor Market timing is changing your portfolio allocation when you think assets are attractive enough to change. Agreed. Though I rarely sell assets, I will make different purchases now and then because an asset class seems to be on sale. I am not prepared to abandon the strategy, because I believe I can gain an adge with selective buying. Increasing holdings in the Europe Index because the dollar appeared significantly over-valued these last several years, seemed sensible. Will I hold European assets for a decade or forever? That is a tough question. Well, I am learning and you are most convincing.

Subject: Re: Timing and Timing
From: Institutional Investor
To: Terri
Date Posted: Mon, Nov 15, 2004 at 15:07:34 (EST)
Email Address: Not Provided

Message:
'Though I rarely sell assets, I will make different purchases now and then because an asset class seems to be on sale' it doesn't matter if you don't sell, my point is, you are timing the market if you buy sectors based on how favorable you view them. Personally, I think it is extremely unlikely in the long term for an individual to consistently select the best sectors in the market. I would much rather prefer to be fully diversified than to make calculated bets that one particular sector will outperform the rest of the market. My question is to you terri is if you think you can pick the attractive sectors in the market, why don't you believe in active management for each subclass (ie large value, large growth, etc). Is it just the fee structure is too high, or do you not believe managers can pick the best companies over the long term? I would think a person who believes they can pick the best asset classes, would believe investment managers could pick the best companies.

Subject: Fine Managers
From: Terri
To: Institutional Investor
Date Posted: Mon, Nov 15, 2004 at 15:21:11 (EST)
Email Address: Not Provided

Message:
Institutional Investor There are indeed managers who are exceptional stock pickers, and asset pickers. Vanguard has Health Care and several other funds that are run with exceptional ability. There is Berkshire Hathaway. Of course there are managers of such ability. Paying for fine management does not deter me, though I notice that low fees gives fine managers an added edge.

Subject: Re: Investment Costs and costs and costs
From: Jneeifer
To: David E...
Date Posted: Mon, Nov 15, 2004 at 05:53:32 (EST)
Email Address: Not Provided

Message:
When you acquire TIPS and REITs for your portfolio do you buy them separately, or do you buy the Vanguard funds? I do not have the knowledge to acquire stocks and bonds separately, so I use only Vanguard funds and favor indexes. This week I will begin to use multiple variance optimization analysis. I have some firm goals on paper now.

Subject: Re: Investment Costs and costs and costs
From: David E...
To: Jneeifer
Date Posted: Mon, Nov 15, 2004 at 12:33:24 (EST)
Email Address: Not Provided

Message:
My portfolio is over 90% Vanguard indexes, I am a happy Vanguard indexer. You will have fun using the optimizer. The insights from the optimizer will give you confidence. But to make sure I understood the data, I analyzed it before I put it in the optimizer. I verified that I could calculate for myself standard deviations, arithmetic means, geometric means and correlations. It has been 40 years since my statistics class, thank goodness Excel makes all those calculations much easier than then.

Subject: Re: Investment Costs and costs and costs
From: Jennifer
To: David E...
Date Posted: Mon, Nov 15, 2004 at 13:07:50 (EST)
Email Address: Not Provided

Message:
Statistics is fun for me. My sister and I are going at this together. These threads keep me thinking.

Subject: Re: Investment Costs and costs and costs
From: Jennifer!
To: Jneeifer
Date Posted: Mon, Nov 15, 2004 at 05:54:43 (EST)
Email Address: Not Provided

Message:
Spelling can by fun!

Subject: The Missing Link
From: David E...
To: David E...
Date Posted: Sun, Nov 14, 2004 at 18:08:18 (EST)
Email Address: Not Provided

Message:
www.effisols.com

Subject: Re: Investment Costs and costs and costs
From: Institutional Investor
To: Jennifer
Date Posted: Sun, Nov 14, 2004 at 13:30:28 (EST)
Email Address: Not Provided

Message:
'Why should I want mean variance optimization or a Monte Carlo simulation to use for building my portfolio?' MVO is the foundation for building a portfolio. The following is definition i got off the web which should make it understandable. Mean-variance optimization was developed by Nobel Laureate Harry Markowitz as a way to create optimal portfolios based on risk and return trade-offs. The optimization uses return, risk and correlation forecasts to combine assets into portfolios that maximize return for different levels of risk. A graph of all of these optimal portfolios is called the efficient frontier. http://www.decisioneering.com/monte-carlo-simulation.html the link above describes monte carlo simulation. 'A couple of index funds, a sector here and there, and some bonds and I am more than pleased' you might be pleased, but you don't have an optimal or efficient portfolio. Just because you have different funds doesn't mean you are well diversified. I think a lot of people understand that you should diversify, but don't know how to do it efficient. Haphazardly allocating different amounts to different funds may not help you, unless you know the correlations behind the assets. You can think of it like cooking, just because you combine some eggs, flour, oil, yeast, etc and put it in the oven, it doesn't mean you are will end up with bread. If you don't have the proper allocations your end result will more than likely not achieve your goals (although it seems many people do not have a specific goal in mind, rather a general goal)

Subject: Re: Investment Costs and costs and costs
From: Jennifer
To: Institutional Investor
Date Posted: Sun, Nov 14, 2004 at 14:41:51 (EST)
Email Address: Not Provided

Message:
Thank you so much for the clear explanation. I have also just been reading about the principles, and your points make sense. What I also now understand is the importance of setting specific goals, rather than simply setting aside investment funds regularly. Our faith in advisers can be renewed :).

Subject: Re: Investment Costs and costs and costs
From: Terri
To: Jennifer
Date Posted: Sun, Nov 14, 2004 at 15:25:36 (EST)
Email Address: Not Provided

Message:
There are terrific advisers and they deserve the same in clients. There are advisers in name alone, whose bidding is only of the company for which they work. The adviser in question have a terrific client who has no hesitation in paying for fine service, but the service was questionable at the least and the direction of investment was never explained in a comprehensible manner. 'Trust me' must be an earned remark.

Subject: Re: Investment Costs and costs and costs
From: Institutional Investor
To: Terri
Date Posted: Sun, Nov 14, 2004 at 15:59:37 (EST)
Email Address: Not Provided

Message:
while I agre that 'trust me' should be earned, at the same time I would ask for a clear explanation about how the portfolio was constructed. If you can't get that, then you find another advisor. You'll always find people trying to rip you off in any industry, its just a matter of the buyer doing their research and asking questions from the seller. While fees can eat away at returns, asset allocation accounts for the majority of your return. The most famous work on asset allocation was the brinson paper saying 90% of returns are due to asset allocation. Vanguard offers another study on their website, attributing 75% to asset allocation.

Subject: Asset Allocation
From: Terri
To: Institutional Investor
Date Posted: Sun, Nov 14, 2004 at 16:20:55 (EST)
Email Address: Not Provided

Message:
Institutional Investor: http://flagship2.vanguard.com/VGApp/hnw/VanguardViews?FW_Event=vviewsnewsletters&chunk=/freshness/News_and_Views/news_ITVsummer2003_PCN_asset_PB_CO_AO.html&Season2=Summer&Year2=2003 The Vanguard team patterned its research after a landmark 1986 study conducted by Gary P. Brinson and associates ('Determinants of Portfolio Performance,' Financial Analysts Journal, July/August 1986) of 91 institutional pension plans. Mr. Brinson and colleagues found that asset allocation explained 93.6%, on average, of the quarterly variation in the plans' returns around their average returns. A follow-up study by the group in 1991 ('Determinants of Portfolio Performance II,' Financial Analysts Journal, May/June 1991) confirmed this, with results indicating that asset allocation explained 91.5%, on average, of the variation in the plans' returns. The IC&R team based its study on a large and robust data set—420 actively managed balanced mutual funds that had at least five years of returns between 1962 and 2001—to see if the Brinson studies' findings still applied today. Importantly, the periods covered by our study included the wild run-up in stock prices during the late 1990s and the broad stock market's subsequent decline that began in March 2000. Our researchers isolated the impact of asset allocation by creating hypothetical portfolios based on each fund's long-term, or 'policy,' allocation. The returns from this hypothetical portfolio represented the returns a fund would have earned if it had simply held index funds for each asset class in its 'policy' asset allocation. Each fund's real-world return reflected some combination of this policy return and returns (positive or negative) generated by stock selection and market-timing. On average, our study found, 77% of the short-term variability in the returns of these funds (around their averages) could be attributed to their asset allocation policies. Even during bear markets, asset allocation explained 69% of the return variability among the funds. Our study found that active-management strategies, such as market-timing and security selection, reduced, on average, the return that could have been earned by a policy portfolio simply made up of index funds.

Subject: Re: Asset Allocation
From: Institutional Investor
To: Terri
Date Posted: Sun, Nov 14, 2004 at 20:26:00 (EST)
Email Address: Not Provided

Message:
terri, thats a brief review of the paper i was referring to, unfortunately the paper is only available if you have institutional access to vanguard. The paper is something like 10-12 pages with a lot more detail, but you covered the overall theme. The one point missed is the volatility a investor is willing to accept. While its easy to look at beginning and end points to see how much you would make, the most difficult part of investing for many people is continuing to invest in an asset class even after it just lost them 20% of their portfolio. Unfortunately, its times like this when people will start to wait and time when they should go back into a particular asset class.

Subject: Re: Asset Allocation
From: Terri
To: Terri
Date Posted: Sun, Nov 14, 2004 at 17:57:34 (EST)
Email Address: Not Provided

Message:
'Since asset allocation plays such a critical role in determining performance, we have the same simple advice for a 30-year-old or a 70-year-old investor: Once you've identified your goals, objectives, and risk tolerance, your asset allocation decision should be your highest priority,' Vanguard's Catherine Gordon said. Consider the difference between an 80% stock and 20% bond allocation and a 20% stock and 80% bond mix. During the 15 years ended December 31, 2002, the stock-heavy portfolio returned 11.5%, turning an initial investment of $10,000 into $51,002; the bond-heavy allocation returned 10.6%, transforming a $10,000 investment into $45,231. This difference provides a simple illustration of just how important asset allocation is.

Subject: Karl Legerfeld on Sale
From: Emma
To: All
Date Posted: Sat, Nov 13, 2004 at 16:52:43 (EST)
Email Address: Not Provided

Message:
Damp and Pushy, but What a Reward: $99 Designer Frock BY RUTH LA FERLA On a giant H&M billboard at 31st Street and 10th Avenue in Manhattan, Karl Lagerfeld looms like a stern Inquisitor, wearing a black frock coat, white collar, dark glasses and an expression so dour it seems to hard to avoid asking: Would you buy a suit from this man? For hundreds of shoppers storming H&M's New York flagship on Fifth Avenue Friday, angling for a piece of Mr. Lagerfeld's cheap chic on the day the chain, the Swedish-based mass retailer, introduced a line of his clothes in its stores, the answer was: You bet. 'This is like a rock concert,' said Hugo Chung, 28, a graduate student at New York University, just before diving toward the main floor racks, which were clotted with bargains for men and women: $59 for narrow black wool trousers, $99 for a silk cocktail dress, $129 for a black sequined wool dinner jacket. Those prices are less than the sales tax on one of Mr. Lagerfeld's $4,000 suits for Chanel. Some shoppers waited in the rain for an hour before the store opened at 9 a.m., eager to snap up the fruits of the first collaboration between Hennes & Mauritz, based in Stockholm, and a high-profile fashion designer. The line includes accessories, a fragrance and 30 items of clothing, most of them in black and white. The collection is available at 19 of the 75 H&M stores in the United States and at half of its 1,000 stores in 20 other countries. The line sold out within hours at most of the European stores, H&M said. In Milan, the store at the Piazza San Babila was mobbed, Bloomberg News reported, with customers elbowing others aside as they grabbed dresses off racks even before they reached the sales floor. 'It looks like rugby without rules,' a bystander told a reporter for the news service. Here in New York, where 1,000 people shopped the store at Fifth Avenue and 51st Street in the first hour, most of the stock was gone by closing time, a spokeswoman said last night, and the store hoped to get an additional shipment by this morning.

Subject: Karl Lagerfeld Sale
From: Emma
To: Emma
Date Posted: Sat, Nov 13, 2004 at 16:54:22 (EST)
Email Address: Not Provided

Message:
Sales of the collection far exceeded projections, said Sanna Lindberg, the president for United States operations. Clutching a black sequined dinner jacket and tuxedo shirt, Heather Sopczynski, 35, who works in marketing at Revlon, seemed barely able to take in her good fortune. 'This is like getting a little piece of Chanel,' she said. Her friend, Antonette Bivona, 35, a product developer for Revlon, chimed in, 'Talk about star power - this is just like Target.' She was referring to the similar mass-meets-class collaboration between the Target discount chain and the designer Isaac Mizrahi. H&M's venture with Mr. Lagerfeld, who designs for Chanel in Paris and Fendi in Milan, is part of its plan to perk up profits, which rose last year at the slowest pace in three years. 'The company is jumping on a very popular bandwagon of borrowing interest from other successful names in the luxury business,' said Candace Corlett, a partner at WSL Strategic Retail, a New York consulting firm. Consumers may be responding, Ms. Corlett suggested, because 'they are feeling the trickle-down of affluence.' Alliances between famous designers and mass market retailers, she added, 'give shoppers the chance to buy their own small piece of a status brand.' H&M is also seeking to broaden its customer base. 'We want to bring in people who had not shopped at H&M before,' said Jennifer Uglialoro, a spokeswoman for the company in New York.

Subject: Re: Karl Lagerfeld Sale
From: Jennifer
To: Emma
Date Posted: Sat, Nov 13, 2004 at 17:44:21 (EST)
Email Address: Not Provided

Message:
Our kind of sale. So much for saving this month.

Subject: Another look at the jobs number
From: Pete Weis
To: All
Date Posted: Sat, Nov 13, 2004 at 12:54:25 (EST)
Email Address: Not Provided

Message:
We'll need to see how the coming months compare to get a firmer idea of where the job market is headed. I believe it is overall wage growth which is key. From the Dallas Morning News: A yellow flag on jobs data 08:46 PM CST on Thursday, November 11, 2004 By DANIELLE DiMARTINO / The Dallas Morning News For all the celebration last week over the October labor report, the news didn't look so good to Merrill Lynch economists who dared to analyze the data. 'We realize that we are just about the only ones out of the Wall Street economic houses not dancing in circles over the October payroll report,' wrote David Rosenberg, chief economist at Merrill. The Nov. 5 jobs report revealed that the economy churned out 337,000 jobs in October, nearly double even the most optimistic predictions from Wall Street. Merrill's conclusion: When it comes to jobs, quantity doesn't equate to quality. 'Hurricane effect' Digging in reveals that about 150,000 jobs were added by the construction, fast-food and hotel industries and temporary workers. Mr. Rosenberg attributes a majority to a 'hurricane effect,' largely from construction in the Southeast. Hiring was also highly concentrated. The 'diffusion index,' which measures the percentage of industries hiring, fell to 56.8 from 59.2 in September. This stands in stark contrast to the 68 readings recorded in April and March, the last time we saw 300,000 months. 'Over two-thirds of the job gain last month was centered in just one-quarter of the employment pie,' Mr. Rosenberg said. Companies also loaded up on part-timers, 'not a sign of momentum in terms of business confidence,' he wrote. The number of people working part time for 'economic reasons' jumped by 280,000 in October. That may be because 22.2 percent have been looking for a job for 27 weeks or more. A great number Let me acknowledge that 337,000 is a great number. But did it justify analysts' dismissal of June through September? 'Of course, the mantra in prior months was that the payroll report was a flawed survey,' Mr. Rosenberg wrote. 'Lo and behold, now it's the real deal.' Even with the upward revisions, the average gain over the last five months is 171,000, which barely keeps up with natural growth in the labor force. That helps explain why the labor force participation rate remained at September's low of 65.9 percent, well off its 67.3 percent April 2000 peak. In all, Mr. Rosenberg figures the economy is still about 4 million jobs shy of being fully employed. His solution for a market that refuses to acknowledge anything but the best news? 'Just keep hikin', Mr. Greenspan. Don't stop 'til we start seeing employment go down,' he advised.

Subject: What Should the Fed do?
From: Jennifer
To: Pete Weis
Date Posted: Sun, Nov 14, 2004 at 06:24:11 (EST)
Email Address: Not Provided

Message:
Does David Rosenberg want to Fed to keep raising interest rates? If employment is still weak, why would an economist want higher interest rates? Please explain the final lines of the article.

Subject: Re: What Should the Fed do?
From: Ari
To: Jennifer
Date Posted: Sun, Nov 14, 2004 at 09:38:50 (EST)
Email Address: Not Provided

Message:
Possibly the last lines are sarcasm? If the Fed is worried about employment, the last thing needed are more short term interest rate increases.

Subject: Re: Another look at the jobs number
From: Terri
To: Pete Weis
Date Posted: Sat, Nov 13, 2004 at 14:24:12 (EST)
Email Address: Not Provided

Message:
Where is the danger? The danger is not simply anemic job creation ever since March 2001 when the recession began, but wage and benefits growth that is barely keeping up with inflation. What worries me more is a Federal Reserve induced slwoing of growth that hurts the labor market.

Subject: Re: Another look at the jobs number
From: Ari
To: Terri
Date Posted: Sat, Nov 13, 2004 at 18:11:03 (EST)
Email Address: Not Provided

Message:
The latest stories about employment have it that Alan Greenspan believes that most important figure is the unemployment rate, which is fairly low. The Fed is not paying so much attention to job creation. As long as the rate of unemployment stays low, short term interest rates will be raised.

Subject: Social Security and Medicare
From: Jennifer
To: All
Date Posted: Sat, Nov 13, 2004 at 11:13:54 (EST)
Email Address: Not Provided

Message:
There are a group of debt mongers, mongering end of the world figures for affording Social Security and Medicare. The figures are stretched out over much of a century, when we have trouble planning accurately for 5 or 10 years, and the figures are so glum as to suggest we begin asking our parents not to bother going on living past 60. Nonsense. Social Security is fine for another 38 years, and we can surely extend the fineness beyond with ease if we care to. We can as well afford to care for our parent's medical needs. Enough with the end of the world stories that are simply designed to erode support for Social Security and Medicare, and the heck with those who need the programs.

Subject: Re: Social Security and Medicare
From: jimsum
To: Jennifer
Date Posted: Mon, Nov 15, 2004 at 12:14:18 (EST)
Email Address: jim.summers@rogers.com

Message:
I agree that there is no real problem with Social Security; we can predict the effects of the aging of the population quite easily. Predicting Medicare is the hard one, as there are both demographic and inflation problems with health care costs. But it looks like Medicare will be a worse problem than Social Security. I don't think we will be able to easily afford the likely increases in Medicare, however. The cost of health care is rising much faster than inflation, and as the population ages, that is an additional load on the system. We might be able to keep up with Medicare increases, but only if every other area of government spending is frozen. The real problem is that you are only listing two time bombs in government financing; besides Social Security and Medicare there is also the large and growing debt to deal with. Even if the debt is never repaid, interest payments will slowly increase as the debt rises; so we have to add escalating interest payments on top of the other two problems. Whether Medicare and Social Security will be easily fixable is debatable; but if the current system is apparently unaffordable (taxes only cover about 80% of the budget), there is no way it will be affordable in a decade or two.

Subject: Insuring Our Benefits?
From: Emma
To: All
Date Posted: Sat, Nov 13, 2004 at 10:36:24 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/13/business/13insure.html Spitzer Sues Broker Used for Workplace Insurance By JENNY ANDERSON The New York attorney general's investigation into abuses in the insurance industry escalated yesterday with a lawsuit accusing a California broker of fraudulent practices that led to higher premiums for employees at some of the nation's leading companies. The attorney general, Eliot Spitzer, sued Universal Life Resources, accusing the firm of steering business to insurers like MetLife, Prudential and Unum Provident in exchange for millions of dollars in payments, which, until 2003, were not properly disclosed. The insurance coverage was bought for employees of companies like Viacom and Intel. The complaint also contends that Universal Life inflated certain fees relating to benefit enrollment materials, ultimately passing that cost onto the client's employees. Mr. Spitzer's lawsuit against Universal Life is the second against an insurance broker since his investigation of the industry began last spring. The investigation's focus has been on bid-rigging by brokers of commercial insurance, resulting in a lawsuit against Marsh & McLennan, the biggest insurance broker, on Oct. 14. Like Marsh, Universal Life is another influential middleman, but in the area of employee benefits: the life, disability and accident insurance a company obtains for its workers. While the earlier lawsuit portrayed corporations as the victims, investigators said the latest action directly affected individuals. 'This case brings the insurance industry fraud that we have uncovered to the ordinary consumer, where monthly premiums have been inflated by the gamesmanship and illegal conduct of U.L.R. and the carriers,' Mr. Spitzer said yesterday. 'This conspiracy to defeat competition and push business not to the lowest-cost provider but to the company willing to make a payoff is destroying competition.' A lawyer for Universal Life, Bob Cleary of the firm of Proskauer Rose, declined to comment other than to say that the attorney general's office had not sent him a copy of the complaint. Universal Life, based in San Diego, is a small but powerful company with only about 80 employees. Since 1994, the closely held company has acted as an insurance broker to more than four million employees of big American corporations.

Subject: A Rising Euro
From: Emma
To: All
Date Posted: Sat, Nov 13, 2004 at 10:19:55 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/13/business/worldbusiness/13euro.html In Europe, Rising Euro Gathers Much Angst By MARK LANDLER FRANKFURT - Bruno E. Sälzer insists he is too busy to worry about exchange rates. But Mr. Sälzer, chairman of the German fashion house Hugo Boss, has kept a watchful eye on the galloping euro. 'We're still doing fine,' he said in an interview Friday, as the euro skirted another record of $1.30 against the dollar. 'Even if it goes to $1.40, that would be O.K. But above that, it would be a problem.' Europe is in the midst of another bout of angst about its currency, which has risen nearly 7 percent in the last two months, amid signs the Bush administration will tolerate a prolonged weakness in the dollar. The skittishness has been compounded by new data showing that Europe's recovery sputtered in the third quarter - dragged down by its two anchor economies, Germany and France. Each grew just 0.1 percent, compared with the previous three months, well below expectations. The reason the rising euro is viewed with such alarm is because it could choke off the exports - like Hugo Boss shoes and Mercedes sedans - that have been the engine of Europe's recovery. In Germany, where consumer spending is moribund, exports supply what little momentum the country has. But the strengthening euro is only one of multiple forces buffeting Europe. Rising oil prices were probably the bigger culprit for the latest weak numbers, according to economists. In France, which released new figures Friday, exports and consumer spending were both sluggish. 'French consumption was extremely strong at the beginning of this year,' said Nicolas Sobczak, an economist at Goldman Sachs in Paris. 'We knew there would be a correction, but it was deeper than we expected.' The bad news in France and Germany more than offset better results in Belgium and Greece, to leave the 12-nation 'euro zone' with an overall growth rate of 0.3 percent in the third quarter. Greece reaped a one-time gain from the Olympic Games, which brought tourists and trade to Athens. Now, the European Commission and private economists are scrambling to reduce their forecasts for the rest of this year and 2005. While nobody is hoisting the red flag of recession, some economists said that growth in Germany, at least, was at risk of petering out entirely. Jörg Krämer, the chief strategist at Invesco, an asset management company in Frankfurt, said there was a significant risk that Germany could suffer zero growth for a time. 'I've been labeled a pessimist,' he said, 'but even a pessimist can be overly optimistic.' Mr. Krämer's pessimism is widely shared in this case, because most economists expect the euro to rise further in 2005. The persistent budget and trade deficits in the United States, and the reluctance of Asian countries to let their currencies rise in value against the dollar, suggest that the euro will continue to absorb the bulk of the pressure from a weak dollar. At its current rate of increase, the euro would hit $1.40 by the middle of January. On Friday, it was trading up a bit from the day before, but down from its peak on Wednesday of $1.3006. 'We have to accept that we are in a long-lasting dollar bear market that will drive the euro to new heights,' said Thomas Mayer, the chief European economist at Deutsche Bank. 'If it happens in an orderly way, Europe can handle it. If it comes as a shock, it will pull the seats out from under people.' Officials from the European Central Bank fanned out again on Friday to try to talk down the euro. Lucas Papademos, the vice president, said in a speech in Tokyo that 'excessive volatility is not desirable and not conducive to economic growth.' Another board member, Gertrude Tumpel-Gugerell, said that 'brutal moves' in exchange rates were not welcome. Short of intervening in the market, there is little the bank can do to stem the rise. Analysts said it was not likely to raise interest rates, because that could derail Europe's already fragile economies. The bank's president, Jean-Claude Trichet, has fretted about the damping effect of oil prices. 'They seem to be torn,' Mr. Mayer said. 'They're trying to balance the upside risk of oil prices with the downside risk to growth of the euro. The market has been confused by the different comments.' The best remedy, some economists suggest, may be to avoid dwelling too much on the exchange rate. Martin W. Hüfner, the chief economist at the HVB Group in Munich, noted that only 9 percent of Germany's exports go to the United States, compared with 43 percent in other euro countries. A strong euro, Mr. Hüfner noted, raises the purchasing power of Europeans. This not only makes a vacation to Las Vegas or Hawaii cheaper, but it lowers the price of imports from the United States. In Germany, that could help revive the lackluster spending of consumers. The euro is also an insulation against rising oil prices, since those are calculated in dollars. 'We do have a chance, if oil prices come down, to foster more consumption in Germany,' said Michael Heise, the chief economist of the Allianz Group. 'There could be a switch from export-led growth to domestic-led growth. Then we could get a pretty strong pickup next year.' For his part, Mr. Sälzer of Hugo Boss is looking to Germany as an opportunity rather than an obstacle. The company, which is based in the southern German town of Metzingen, reported a 10 percent jump in sales in its home market, in the first nine months of 2004. 'I'm confident that after six or seven years of declining sales, Germany has hit the bottom,' Mr. Sälzer said. Hugo Boss, a unit of Marzotto of Italy, still depends on the United States, which is the second-largest market for its men's clothing after Germany. But the company produces 90 percent of its suits for the American market at a factory in Cleveland, which gives it something of a hedge against the vagaries of exchange rates. If the euro had not risen, Mr. Sälzer estimates, Hugo Boss would have grown by 12 percent, instead of 10 percent. But, he added, 'nobody can predict exchange rates over the next five years.'

Subject: As the Dollar Declines
From: Emma
To: Emma
Date Posted: Sat, Nov 13, 2004 at 20:13:26 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/13/opinion/13sat1.html As the Dollar Declines For all its professed desire for a strong dollar, the Bush administration has apparently decided that letting the dollar slide is a good way to shrink America's trade deficit. This is dubious economic policy. It provides a modicum of relief to American exporters, but it increases the nation's vulnerability to higher prices and higher interest rates, while ignoring fiscal measures that would more assuredly anchor the United States in the global economy. The dollar, which has declined nearly 30 percent against the euro since President Bush took office in 2001, fell to a record low this week. The decline has not been as marked against other currencies, largely because China and Japan prop up the dollar by investing heavily in United States Treasury securities - in effect, lending us money so we can buy their goods. Meanwhile, the Treasury secretary, John Snow, has largely eliminated the phrase 'strong dollar' from his workaday vocabulary. The underlying problem is that deficits in America's global transactions are at record levels, putting Americans at risk of either a slow deterioration in living standards or abrupt spikes in inflation and interest rates. There are three ways to get that deficit down: America can reduce the federal budget deficit, thus lowering the amount of interest we pay foreign countries to finance that deficit; trading partners like Europe and Japan can expand their economies, increasing their demand for American goods; or America can allow its dollar to fall to increase its exports. The only lasting remedy is to reduce the federal budget deficit. That, in turn, calls for specific policies, like - we may have mentioned this before - rolling back the Bush tax cuts. Letting the dollar weaken is a far less responsible approach, an unwieldy and risky attempt to reduce the trade imbalance without the political pain of deficit reduction. During the Bush years, 92 percent of the nearly $1 trillion increase in publicly held debt has been financed by foreign lenders. Foreign ownership of Treasuries has tripled from the peak of the Reagan deficits in 1983.

Subject: Our troubles are all the same ...
From: El Gringo
To: All
Date Posted: Fri, Nov 12, 2004 at 22:33:34 (EST)
Email Address: nma@hotmail.com

Message:
http://www.lyricsondemand.com/tvthemes/cheerslyrics.html

Subject: Not Really
From: Emma
To: El Gringo
Date Posted: Sat, Nov 13, 2004 at 09:41:52 (EST)
Email Address: Not Provided

Message:
Happy families are all alike; every unhappy family is unhappy in its own way. Anna Karenina

Subject: Re: Not Really
From: Ari
To: Emma
Date Posted: Sat, Nov 13, 2004 at 18:11:49 (EST)
Email Address: Not Provided

Message:
:) :( Ah well.

Subject: Vanguard Returns
From: Terri
To: All
Date Posted: Fri, Nov 12, 2004 at 15:06:20 (EST)
Email Address: Not Provided

Message:
Vanguard Returns 12/31/03 to 11/11/04 S&P is up 7.0% Value Index is 10.8 Growth Index is 3.2 Mid Cap Index is 12.6% Small Cap Index is 13.2% Small Value is 16.7 Europe Index is 13.3% Pacific Index is 9.6% Energy is 30.3% REIT Index is 22.4 Health Care is 5.3 Long Term Corporate Bond Fund is 6.0% High Yield Corporate Bond Fund is 7.5

Subject: Vanguard Returns....
From: Terri
To: Terri
Date Posted: Fri, Nov 12, 2004 at 19:13:58 (EST)
Email Address: Not Provided

Message:
Vanguard Returns 12/31/03 to 11/12/04 S&P is up 7.9% Value Index is 11.9 Growth Index is 4.2 Mid Cap Index is 13.9% Small Cap Index is 14.3% Small Value is 18.0 Europe Index is 14.1% Pacific Index is 10.7% Energy is 32.3% REIT Index is 25.4 Health Care is 5.7 Long Term Corporate Bond Fund is 6.8% High Yield Corporate Bond Fund is 7.5

Subject: A Serious Bull Market
From: Terri
To: Terri
Date Posted: Fri, Nov 12, 2004 at 16:25:46 (EST)
Email Address: Not Provided

Message:
Basically we have a made a year of gains in world stock markets in a month. This is why I do not choose to time stock markets. There has been considerable reason to be cautious this year, so all that was needed was to lean towards value stocks and bonds a little more than last year. So, there is protection from a decline but participation in the gains. There is a serious bull market no matter the bears. The bears will have a day as well, but missing out on this bull run is not the way to invest.

Subject: Moderate Growth Prospects
From: Emma
To: Terri
Date Posted: Sat, Nov 13, 2004 at 09:49:35 (EST)
Email Address: Not Provided

Message:
Investors in market after market seem to be anticipating steady growth at the current moderate pace. European and Asian are also slowly gaining strength. Canadian, Mexican, and South American markets are gaining. Hopefully this is a correct reading of what to expect from the world's economies in the coming year. What is needed is for America to grow at a steady pace and China to slow gently.

Subject: Guaranteed Retirement Income Fades
From: Emma
To: All
Date Posted: Fri, Nov 12, 2004 at 13:39:26 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/12/business/12norris.html As Baby Boom Ages, Era of Guaranteed Retirement Income Fades By Floyd Norris WE live in an age when a lot of promises regarding retirement are going to be broken. Just how they are broken, and what replaces them, will have profound effects on the future of the industrial nations that have dominated the world economy in the last century. What is at stake is a reversal of perhaps the most important economic trend in developed countries since World War II, that of guaranteeing financial security for their citizens. In most major countries, governments came to provide health care and an assured pension. In the United States, some of that came from employer-financed health care and pension plans, but the results were often similar. Now, increased competition stemming from globalization has left many companies scrambling for ways to cut costs. And many pension and health care plans are pay-as-you-go systems whose generous benefits while the baby boomers were working now seem unsustainable as that huge population group begins to retire. In Europe the problems have been clear for years, although governments have been slow to enact unpopular changes. But there is a widespread expectation that change is inevitable. Bond-rating agencies cite that belief as a reason for not cutting sovereign debt ratings, and it is likely that spending by Europeans has been depressed by worries over just what will be there when they retire. In the United States, an understanding of what must be done is less well formed. While some companies, like United Airlines, have eliminated defined-benefit pension plans in the glare of publicity, many more have quietly frozen their plans - keeping employees from earning additional benefits - or have barred new employees from joining plans. The number of employees in traditional plans fell to 17.2 million last year, down 23 percent since 1988. Pension plans seemed to hold their own in the late 90's, when a soaring stock market allowed companies to assume that they did not need to put money in. But the bubble burst, and now the Securities and Exchange Commission is looking into the numbers at some companies that may be using generous assumptions to make their pension picture look prettier than it would otherwise appear. Workers without traditional pension plans generally have defined contribution plans like 401(k)'s, but these leave the risk of market losses with the employee. Similarly, it appears likely that President Bush will propose a revamping of Social Security that would reduce guaranteed benefits at some point while creating savings accounts that leave the worker with the possibility - but not the assurance - of coming out ahead. One can, as Mr. Bush does, hail the trend as part of an ''ownership society,'' in which individuals will prosper if their investments do well, and the markets' strong performance in the 1980's and 90's has left many Americans confident. The hostility to elected governments seen in Europe - partly due to the financial strictures officials have proposed - is not evident in the United States. But there is a risk of a negative cycle as the increased risks become understood. Americans could conclude that they need to save more and spend less to offset these risks, thereby slowing the economy and perhaps worsening the performance of the investments, which could cause them to want to save even more. And the transition to a new Social Security system must involve benefit reductions in the near future or a huge transfer from other tax revenue, meaning either tax increases or rising budget deficits.

Subject: Re: Guaranteed Retirement Income Fades
From: jimsum
To: Emma
Date Posted: Fri, Nov 12, 2004 at 17:02:51 (EST)
Email Address: jim.summers@rogers.com

Message:
I really don't see how Bush's plan for private savings accounts will solve anything. As I see it, the whole reason we have government pension plans is that the public doesn't like to see old people forced to eat cat food, or go without an life-saving operations they can't afford. It is basically a welfare program that isn't income-tested. If investing social security contributions is expected to yield better results than what the government is doing now (i.e. expecting that tax revenues will rise along with GDP) then why doesn't the government do the investing? Using personal accounts just shifts the investment risks from the government to individuals; but this doesn't really shift the risk because retirees who make bad investments are not going to be forced to eat cat food, they will be bailed out with some form of welfare. I think these plans are just a smoke screen to hide the fact that the only solution to the pension problem is to cut pay-as-you-go benefits significantly (or increase taxes at an accelerating rate). Tell people that government pensions are not going to cover more than a fraction of their retirement needs, and point out that they are going to have to save if they want retirement income above the poverty line.

Subject: Re: Guaranteed Retirement Income Fades
From: Emma
To: jimsum
Date Posted: Fri, Nov 12, 2004 at 18:21:09 (EST)
Email Address: Not Provided

Message:
Interesting points to which I generally agree. There will be much discussion of changes in Social Security, and I worry about all of them.

Subject: Credit Boom in Asia
From: Emma
To: All
Date Posted: Fri, Nov 12, 2004 at 13:36:13 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/12/business/worldbusiness/12credit.html?pagewanted=all&position= Boom Time for Credit in Southeast Asia By WAYNE ARNOLD Chamikorn Buranananda has a vision of a Thailand where everyone, rich or poor, city dweller or rice farmer, is in debt - be it for a car loan, mortgage, a credit card or some other loan. 'You want an educated population that can manage debt,' said Mr. Chamikorn, who after helping General Electric start its own finance operations in Thailand has moved on to become managing director at Capital OK, a consumer finance start-up with ties to Prime Minister Thaksin Shinawatra. Capital OK is a newcomer in a market that has been gathering momentum in Thailand and throughout Southeast Asia for the last four years. As strengthening economies enable more consumers to emerge from poverty to the lower middle class, banks and finance companies are greeting them with financing options once limited to developed nations. 'It is booming,' said Supavud Saicheua, an economist at Phatra Securities in Bangkok. 'There are lots of finance companies and banks interested in expanding the business.' In Thailand, consumer credit grew 35 percent last year, according to Fitch Ratings, sending the average household's debts up to 52 percent of its income. That consumers will borrow and repay is a welcome switch for Southeast Asia's banks after the untrammeled corporate lending that devastated them in the Asian financial crisis of 1997 and 1998. But the region's banks are playing catch-up with aggressive foreign institutions like Citibank, G.E. and Aeon of Japan, which pioneered consumer finance in Southeast Asia after witnessing the markets take off in Japan, South Korea and Hong Kong. By offering the long-neglected Southeast Asian consumer convenient loans, economists say, these lenders are helping to stimulate domestic consumption that can offset the region's dependence on exports, which ebb and flow. This may seem to contradict conventional wisdom, which holds that Asians are prolific savers, averse to debt. Bankers say the growth of consumer finance is proving convention wrong. 'It's a myth,' said David Lum, regional head of banking at Daiwa Institute of Research in Singapore. During hard times, Southeast Asians used to turn to informal financing networks among relatives, their villages or loan sharks. At the time, the region's own banks neglected consumers to focus on channeling the public's savings into corporate manufacturing and roads, bridges, steel mills, refineries and the like. When the crisis hit, it left banks buried in bad debts. Finance companies like GE Capital were the only lenders left standing. 'There weren't really any competitors,' Mr. Chamikorn said. 'The only competitors were loan sharks.' A native Thai and naturalized American, Mr. Chamikorn came to GE Capital in 1996 after stints around Asia for Citibank and American Express. GE Capital had purchased a stake in an auto finance company before the crisis, and in 1998, Mr. Chamikorn helped negotiate the discounted purchase of a portfolio of personal loans from Thailand's debt restructuring agency. With so few rivals, interest rates for legitimate lenders went as high as 50 percent, and G.E.'s finance business in Thailand was so successful that the company's former chairman and chief executive, John F. Welch Jr., singled it out for praise in his autobiography, 'Jack: Straight From the Gut.' What GE Capital's executives from Thailand impressed on Mr. Welch was this: despite low incomes, Asian consumers are excellent credit risks, even with interest rates much higher than corporations pay. That is because even relatively small loans - for a car or motorcycle - represent critical personal investments. 'People pay on time because a motorcycle is their livelihood,' said Jackson Tai, chief executive of DBS Bank of Singapore, which owns 40 percent of Capital OK.

Subject: Recovery and Inflation
From: Ari
To: All
Date Posted: Fri, Nov 12, 2004 at 06:06:58 (EST)
Email Address: Not Provided

Message:
How long this economic recovery continues will likely hinge on how long consumer inflation stays about 2.5%. If there are signs of an inflation increase, the Federal Reserve will have to increase the pace of short term interest rate increases and long term rates will increase. This is a critical period for determining whether inflation and so the recovery continue.

Subject: I agree 100%
From: Mik
To: Ari
Date Posted: Fri, Nov 12, 2004 at 14:36:25 (EST)
Email Address: Not Provided

Message:
I have always harped on the inflation issue.

Subject: Re: I agree 100%
From: Jennifer
To: Mik
Date Posted: Fri, Nov 12, 2004 at 14:40:26 (EST)
Email Address: Not Provided

Message:
Whether inflation is contained will determine how long this recovery will last, and how strong it will continue to be.

Subject: Vanguard Returns
From: Terri
To: All
Date Posted: Thurs, Nov 11, 2004 at 16:05:04 (EST)
Email Address: Not Provided

Message:
Vanguard Returns 12/31/03 to 11/10/04 S&P is up 6.0% Value Index is 9.9 Growth Index is 2.2 Mid Cap Index is 11.5% Small Cap Index is 12.0% Small Value is 15.6 Europe Index is 12.5% Pacific Index is 9.9% Energy is 30.3% REIT Index is 21.3 Health Care is 4.9 Long Term Corporate Bond Fund is 6.0% High Yield Corporate Bond Fund is 7.5

Subject: Markets
From: Terri
To: Terri
Date Posted: Thurs, Nov 11, 2004 at 16:46:33 (EST)
Email Address: Not Provided

Message:
Notice that world stock markets are winding down the year with steady gains. The pattern continues with smaller company stocks stronger than large company stocks. Value stocks are stronger than growth. Europe and Pacific are stronger than America because of the weakened dollar. Energy and real estate investment trusts are ahead more than 20%, while health care stocks are finally nicely positive. Bonds have weakened in the last month, but are having a respectable year.

Subject: Re: Markets
From: Ari
To: Terri
Date Posted: Fri, Nov 12, 2004 at 05:31:58 (EST)
Email Address: Not Provided

Message:
We are now almost 2 years into a stock market recovery. The slowness of the continued recovery this year may assure that the market does not become overvalued. Corporate earnings have been growing as fast as stock prices have risen. This is promising. As long as the Fed rate increases are gradual and moderate, the economy and the stock market may continue to recover. That also has to mean inflation stays under control.

Subject: Are We Running Out of Oil (Again)?
From: El Gringo
To: All
Date Posted: Thurs, Nov 11, 2004 at 08:54:14 (EST)
Email Address: nma@hotmail.com

Message:
Are We Running Out of Oil (Again)? by Robert J. Shiller Oil prices are now running well above $50 a barrel, partly owing to short-run supply shocks, such as the Iraq conflict, Nigerian labor disputes, the conflict between Yukos Oil and the Russian government, and Florida's recent hurricanes. Oil prices may fall once these shocks dissipate, but speculative effects could keep them relatively high, weakening the world economy and depressing stock markets. Even a temporary spike in oil prices can have long-term effects because of the social reactions they provoke. High oil prices fuel public discussion about the future of oil prices. The outcome of any public discussion can never be known with certainty, but chances are that it will amplify stories that imply risks of higher oil prices. Experts may say that short-run supply factors caused the recent price increases, but the price increases will nonetheless lend credibility to scarier long-term stories. The scary story that is being amplified now concerns the developing world, notably China and India, where rapid economic growth - and no restrictions on emissions under the Kyoto Protocol - are seen as creating insatiable demands for oil. The story's premise is that the world will run out of oil faster than we thought, as these billions of people chase their dreams of big houses and sport utility vehicles. Is this plausible? Certainly, China, India, and some other emerging countries are developing fast. But experts find it difficult to specify the long-run implications of this for the energy market. Too many factors remain fuzzy: the rate of growth of these countries' energy demand, discoveries of new oil reserves, developments in oil-saving technology, and the ultimate replacement of oil by other energy sources. But what matters for oil prices now and in the foreseeable future is the perception of the story, not the ambiguities behind it. If there is a perception that prices will be higher in the future, then prices will tend to be higher today. That is how markets work. If it is generally thought that oil prices will be higher in the future, owners of oil reserves will tend to postpone costly investments in exploration and expansion of production capacity, and they may pump oil at below capacity. They would rather sell their oil and invest later, when prices are higher, so they restrain increases in supply. Expectations become self-fulfilling, oil prices rise, a speculative bubble is born. But if owners of oil reserves think that prices will fall in the long run, they gain an incentive to explore for oil and expand production now in order to sell as much oil as possible before the fall. The resulting supply surge drives down prices, reinforces expectations of further declines, and produces the inverse of a speculative bubble: a collapse in prices. All of this may seem obvious, but we tend not to think of oil prices as being determined by expectations of future prices. For example, in January 1974, when the first world oil crisis began, oil prices doubled in just days. The immediate cause was believed to have been Israel's stunning success in the Yom Kippur War, which led Arab oil producers to retaliate by choking off output. The second crisis, in 1979, is usually attributed to supply disruptions from the Persian Gulf following the Islamic revolution in Iran and the subsequent start of the Iran-Iraq war. Why, then, did real inflation-corrected oil prices remain at or above their 1974 levels until 1986? Speculative pressures are likely to have been at work, influencing the decisions of OPEC and many others. Although changes in market psychology are difficult to understand, the broad concerns that underlie such episodes of irrational exuberance are almost always clear. For example, in 1972, scientists at the Massachusetts Institute of Technology, including computer pioneer Jay Forrester, published The Limits to Growth. The book launched an international debate on whether the world would soon face immense economic problems due to shortages of oil and other natural resources - problems that seemed to be presaged by OPEC's production cuts eighteen months later. The second crisis was immediately preceded by the accident at the Three-Mile Island nuclear reactor in Pennsylvania in March 1979, which reinvigorated the anti-nuclear movement. With nuclear power - regarded as the main technological bulwark against depletion of the world's oil supplies - suddenly suspect, oil prices doubled again by the year's end. After 1979, fears about limits to growth and nuclear power ebbed. Oil prices gradually fell, and the stock market began its long climb towards its peak in 2000. But the current rise in oil prices shows that people are still eager to embrace 'running out of oil' stories - this time focused on China and India - even when short-run factors are to blame. Indeed, the International Energy Agency noted in September that the usual relationship between oil prices and inventory levels has broken down, with prices much higher than the usual relationship would suggest. The IEA's report calls this breakdown evidence of a 'structural shift in the market.' But the same pattern followed the 1973-4 and 1979-80 oil crises, when prices dropped from their highest peaks, but stayed quite high for years, representing a drag on the stock market, the housing market, and the world economy. Let's hope that the effects of the present spike will be more short-lived. But don't hold your breath. Robert J. Shiller is Professor of Economics at Yale University, and author of Irrational Exuberance and The New Financial Order: Risk in the 21st Century.

Subject: Re: Are We Running Out of Oil (Again)?
From: Jennifer
To: El Gringo
Date Posted: Thurs, Nov 11, 2004 at 10:24:46 (EST)
Email Address: Not Provided

Message:
http://www.dailytimes.com.pk/default.asp?page=story_2-11-2004_pg5_19 Robert Shiller 11/11/2004 Then, Shiller is suggesting that the high oil prices we are experiencing are not necessarily related to traditional supply and demand characteristics, but to perceptions of future supply limits and demand growth for oil. We may still be facing these high oil prices for years.

Subject: Re: Are We Running Out of Oil (Again)?
From: Pete Weis
To: Jennifer
Date Posted: Thurs, Nov 11, 2004 at 11:20:31 (EST)
Email Address: Not Provided

Message:
There have been a combination of factors that have led to the run-up in oil. Certainly, one of those has been speculation on the future of world oil supplies. Another clearly has been the large increases in demand by rapidly growing economies, especially China. In addition the falling US dollar has played a role. From everything I've read about oil, we have reached a point where all known major inground resources are known and nearly all, of any significance, are being tapped. There are growing questions about reported proven reserves by the Saudi's and major oil companies such as Royal Dutch Shell and Chevron, and in an article today another smaller oil producer adjusted downward its 'proven reserves'. You wonder with all the bogus accounting going on among public companies where executives have been enriching themselves at the expense of small investors, whether oil companies have been fudging the reserve numbers to do the same. Anyway, all of this points to the very urgent need to get going full throttle on alternative energy sources and to restructure our energy supply network. It's becoming increasingly clear that not to do so will result in economic hard times. The 70's showed us how rapidly rising oil prices can take hold. But this time there will be no large increase in oil production from the Middle East, Alaskan pipeline, and Northsea oil to bail us out. Our government needs to take the lead on this with an energy policy which accepts the reality of much higher prices for oil in the next 5 to 10 years and takes action to limit the damage.

Subject: Re: Are We Running Out of Oil (Again)?
From: Terri
To: Pete Weis
Date Posted: Thurs, Nov 11, 2004 at 11:56:01 (EST)
Email Address: Not Provided

Message:
There is need for continual work on development of alternative energy sources and improving the energy supply network, but there is as much need to emphasize energy efficieny or conservation. There is considerably more attention paid to efficiency in Germany and France and Sweden, than in America. Robert Shiller however is pointing out that we can not be sure why energy prices have rapidly climbed just now or how long they may stay at these levels. Is the cause Chinese demand? Is the cause suspect supply? Is the cause speculation?

Subject: No mystery here
From: Pete Weis
To: Terri
Date Posted: Thurs, Nov 11, 2004 at 13:21:18 (EST)
Email Address: Not Provided

Message:
'there is as much need to emphasize energy efficieny or conservation.' Terri. You are absolutely right. This is the first immediate step that can be taken, but there is no public discussion of this to speak of presently. 'Is the cause Chinese demand? Is the cause suspect supply? Is the cause speculation?' Yes! Yes! Yes! Plus dollar shrinkage. There's no mystery. The question of over-reported proven reserves remains a question or atleast the extent of it remains a question. But the fact we are fast approaching not only the inability to significantly raise supply in the face of rapidly rising demand (the rollover point), but will reach the point of dropping supplies (the peak of the Hubbert curve) either soon or sometime in the next 10 years.

Subject: Re: No mystery here
From: kevin
To: Pete Weis
Date Posted: Thurs, Nov 11, 2004 at 20:22:57 (EST)
Email Address: Not Provided

Message:
We'll have a serious discussion of alternative energy sources when the big oil companies and their beauracratic partners in crime have milked the last nickel out of oil and not before. Interesting, to me at least, that Bush/Cheney have their secret energy commission and three years later we're paying sixty bucks a barrel. I'm glad their plan was such an unqualified success. Now if they could put together a secret commission on stabilizing Iraq.

Subject: Interest Rates
From: Terri
To: All
Date Posted: Thurs, Nov 11, 2004 at 06:11:15 (EST)
Email Address: Not Provided

Message:
Evidently the Federal Reserve Governors have decided that we are close enough to full employment to raise short term interest rates each meeting. We can look for at a Federal Funds Rate that will rise from 2% to 3% in coming months. The economy will be slowed in growth from this winter. Hopefully the slowing growth will not be much of a problem for workers. Long term interest rates may finally begin to rise to approach 5%.

Subject: Price Increases
From: Terri
To: Terri
Date Posted: Thurs, Nov 11, 2004 at 06:31:48 (EST)
Email Address: Not Provided

Message:
The problem I have with the Fed perception that the labor market is strong enough for a continuing of the cycle of interest rate increases, is that wage and benefit increases are barely keep up with inflation. Possibly the Fed expects labor costs to climb, possibly the concern is that material cost increases are likely to increasingly effect consumer prices.

Subject: Re: Price Increases
From: kevin
To: Terri
Date Posted: Thurs, Nov 11, 2004 at 20:40:28 (EST)
Email Address: Not Provided

Message:
You're assuming that the Fed cares about the strength of the labor market. As long as wealth gets it's way and inflation stays low the Fed has done it's job. As to material costs, that's only one factor. Increasing health care costs, retiree costs, and increased consumer costs due to the weakening dollar are all pushing the inflationary picture.

Subject: Commercial Real Estate Questions
From: Ari
To: All
Date Posted: Thurs, Nov 11, 2004 at 05:42:16 (EST)
Email Address: Not Provided

Message:
How are commercial real estate mortgages financed? Are the mortgages fixed or variable in rate, and for how long? Are REITs vulnerable to price declines for commercial real estate?

Subject: About a paper of Paul
From: neutrin
To: All
Date Posted: Wed, Nov 10, 2004 at 20:50:45 (EST)
Email Address: neutrin@vip.sina.com

Message:
Why the price index is like that in his 'Leapfrogging in leadership',1215,VOL 83 ,NO.5 December 1993,AER? Pleas reply to my email,thanks.

Subject: Ireland is Greener
From: Emma
To: All
Date Posted: Wed, Nov 10, 2004 at 15:35:24 (EST)
Email Address: Not Provided

Message:
http://ea.nytimes.com/cgi-bin/email?REFURI=http://www.nytimes.com/2004/11/10/nyregion/10irish.html&position= Back Home in Ireland, Greener Pastures By NINA BERNSTEIN They arrived as the New Irish in the 1980's and 90's, thousands drawn to a New York that still glittered in family lore as a place where hard work could bring prosperity. But the glitter began to dim along with the economy and the government's attitude toward illegal immigrants. Now they are streaming back to Ireland at such a clip that in the neighborhoods they regreened in Queens, Yonkers and the Bronx, once-packed pubs stand half-empty and apartment vacancies go begging. Some immigrants, longtime illegal residents losing hope for legal status, say they are being driven out by new security crackdowns that make it harder for those without a valid Social Security number to drive, work or plan a future in the United States. Others, already naturalized citizens, say the price in toil for health care and education was too high, and hope for a less-exhausting life in a prosperous Ireland. 'It's the complete reversal of the American dream,' said Adrian Flannelly, chairman of the Irish Radio Network in New York, who has served on an Irish government task force on returnees. The exodus from the city, he said, signals a historic shift in a relationship that is part of the city's backbone, inscribed in the subways and bridges built by Irish immigrant labor in past centuries. Michael and Catroina Condon, both naturalized American citizens who spent 19 and 11 years in New York, respectively, say Ireland's style of prosperity promises a better life for their children. After the birth of their first baby, they said, they rebelled against the toll of seven-day workweeks to pay rising costs in a sluggish American economy. 'It's longer hours, less money, and a lot of the time you see people working for their wage just to pay their rent, to pay their health insurance,' said Ms. Condon, 31, who was a corporate secretary in Manhattan before returning in September to Mullingar, in County Westmeath. Her husband, a carpenter, is starting his own business, and she envisions a wedding-planning enterprise.

Subject: Brazil's Cable Pirates
From: Emma
To: All
Date Posted: Wed, Nov 10, 2004 at 14:32:56 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/10/business/worldbusiness/10rio.html Cable Pirates Thrive in Brazil By TODD BENSON SÃO PAULO, Brazil - In this dirt-poor shantytown called Jardim Ângela on the southernmost tip of São Paulo, cable television is a luxury that most people cannot afford. That is why the local cable company, fearing it will not get a return on its investment, has been reluctant to wire the area. Even so, just about every household in this sprawling neighborhood with a population of more than 250,000 has a reliable television connection that includes a handful of cable channels, thanks to savvy handymen like Antônio. A 32-year-old father of two who would speak only if his surname were withheld 'to avoid problems with the police,' Antônio, a technician for a local telephone company, supplements his monthly salary of 586 reais (about $204) by hooking up pirate connections for low-income residents all over the city. 'This is the only way that people around here can get cable TV,' he said. 'I'm just making a little money on the side by meeting that need.' He said he charged a one-time fee for his services, ranging from 450 reais for a makeshift cable connection to as much as 1,200 reais for a satellite dish. But in many favelas, as shantytowns are called here, people like Antônio have organized themselves into informal businesses with thousands of subscribers who pay a monthly fee for a clandestine cable hook-up. Most of these companies charge 12 to 15 reais ($4 to $5) a month, far below the 60 reais or so the regular providers charge for a basic subscription. Because it is against the law here to distribute television programs without a government license, precise numbers on the size of Brazil's underground television market are hard to come by. The National Agency of Telecommunications, the government agency that oversees radio and television broadcasting, estimates that there are at least 600,000 illicit cable connections nationwide, mostly in urban areas like São Paulo and Rio de Janeiro. But the Brazilian Pay TV Association, which represents licensed cable and satellite television companies, says the number is closer to 300,000, about 13 percent of all of the country's connections. Either way, providers like Net Serviços de Comunicação and Sky Brasil collectively lose millions of reais a year in revenue to piracy. But instead of cracking down on the pirates, which would probably set off an uproar from residents in the country's slums, the government is trying to find ways to turn black-market operators into legal businesses. With the backing of some of the biggest pay television providers, the government is lobbying Congress to pass legislation by the end of the year that would allow the pirate companies to distribute cable channels legally in shantytowns. Under Brazil's cable television law, which was passed in 1995, cable companies are required to install high-quality fiber-optic wiring in up to 90 percent of each municipality where they operate within 10 years of obtaining their government license. But cable companies contend that it would not make economic sense to spend as much as $15,000 a kilometer for broadband networks in areas where most residents cannot afford a basic pay television subscription. 'We would be committing economic suicide if we built networks with that kind of technology in favelas,' said Antônio Salles Teixeira Neto, an executive at a local cable company, Via Cabo TV, which is a unit of the Adelphia Communications Corporation of Greenwood Village, Colo. 'What we need is a change in the law to reflect the economic realities of this country,' added Mr. Salles, who is also coordinating an antipiracy task force for the Brazilian Pay TV Association. 'Otherwise, people in these communities are going to be forced to keep circumventing the law in order to watch something as basic as cable TV.'

Subject: Commercial Real Estate
From: Emma
To: All
Date Posted: Wed, Nov 10, 2004 at 14:27:56 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/10/business/10prop.html?pagewanted=all&position= Deals Are Hot and Heavy but the Talk Is of a Bubble By TERRY PRISTIN With its curved green glass facade, which follows a bend in the neighboring Chicago River, the 36-story building at 333 West Wacker Drive is one of Chicago's most admired postmodern skyscrapers. Last summer, however, some real estate professionals were surprised when a German investment group paid $208 million, or about $240 a square foot, for the 21-year-old building; the price was a whopping $67.5 million more than it traded for in 2000. Some real estate investors and analysts say that rich deals like this one are a sign that the commercial real estate market is dangerously overpriced. 'This feels very much like the last couple of months of the Internet bubble,'' said Larry Jay Wyman, the co-chairman of HRO Asset Management, a company that represents a German fund that invests in American real estate. Many investors seem to be making unrealistic assumptions about future market conditions, he said. 'People keep saying this is a new paradigm,'' said Mr. Wyman, who estimates that he has evaluated about 100 deals in recent months. 'As soon as you hear those words, you grab your wallet and get out of the room as fast as possible. A building can only produce as much net rent as its market will allow.'' The 333 Wacker Drive deal, for example, comes as Chicago's downtown office vacancy rate is 16.2 percent, according to Fitch Ratings, with another 3 million square feet about to be added to the market. The CoStar Group reported that 333 Wacker Drive was 93 percent leased and was expected to produce an initial rate of return of only 6.4 percent, some two percentage points less than the initial yield when the building changed hands four years ago. Investors who buy properties with such low initial yields generally expect to increase revenues. But it will not necessarily be easy for the new owners, KanAm U.S. Grundinvest Funds, to generate more income from their trophy building. Rents in the city have declined in recent years and landlords are being forced to offer increasingly generous inducements, said Brian P. Nagle, an investment sales broker in the Chicago office of Cushman & Wakefield. Two of the building's larger tenants, with leases expiring in 2008 and 2009, could be tempted to move into one of the four new downtown office towers that are under construction. The oversupply of new space in Chicago's central business district, Fitch Ratings reported last week, 'will depress both occupancy levels and rent rates for some time to come.'' But Steve McCarthy, the managing director of WestWind Partners, a private company that manages KanAm's investments, said that 333 West Wacker was acquired at a reasonable price and with average rents below market level. Despite high vacancy rates, cheaper rents and the pressure on landlords in most markets to make ever-sweeter concessions, the trading frenzy in commercial real estate has continued unabated. Sales of industrial, retail and apartment properties valued at $5 million or more approached $44 billion in the third quarter of this year, reaching a level that was 10 percent higher than any other quarter on record, according to Robert M. White Jr., the president of Real Capital Analytics, a New York research company. At a time when interest rates remain low and the stock market is performing tepidly, many investors are willing to accept relatively low returns on real estate because they believe they have nowhere else to put their money, investors and analysts say. Expected initial yields, known as capitalization rates, have dropped two percentage points in the last three years, to 7.7 percent, said Robert O. Bach, the national director of market analysis for Grubb & Ellis. 'People are willing to pay more per dollar of income,'' he said. 'No doubt about it, real estate is expensive, compared to five years ago. Some investors may be overbidding.'' But he said there were also signs in many places that the office buildings were slowly beginning to rent empty space. Fueling the feverish trading is the availability of enormous amounts of capital from both domestic and international sources. Mr. Wyman said his HausInvest Global fund alone had $1.5 billion to invest. 'It used to be that if you had a billion dollars to spend, you were a pretty popular guy,'' he said. 'Now you're just one of the herd with a billion dollars.'' But even Mr. Wyman has not stayed out of the game.

Subject: Dollar decline will eventually mean....
From: Pete Weis
To: All
Date Posted: Wed, Nov 10, 2004 at 11:30:24 (EST)
Email Address: Not Provided

Message:
higher interest rates and the availability of credit. So we should look at the implications of higher rates down the road. With so many ARM's and interest only mortgages, combined with little to no money down what does this mean for housing and those holding the bag for all that mortgage money? I posted an article regarding falling housing prices in places like Las Vegas and San Diego. I recently read an article on steeply falling rents for office space in Boston. Today there is an article about problems with commercial real estate in New York City in the New York Times. This is from the Rocky Mountain News: Rocky Mountain News Foreclosure rate 'scary' Through October, metro area running 28.4% ahead of 2003 By John Rebchook, Rocky Mountain News November 10, 2004 Almost 10,000 metro-area real estate foreclosures have been filed in the first 10 months of this year, eclipsing last year's tally. And only a technicality prevented that number from exceeding 10,000. That's because at least two counties - Denver and Arapahoe - decided not to hold foreclosure sales during the week before Christmas. Under the law, when a foreclosure is opened, the public trustee office must have a sale within 45 to 50 days. That timing would force counties to have foreclosure sales in the third week of December, just before Christmas. 'We thought it would be unseemly to hold a foreclosure sale on Christmas week,' said Mary Wenke, Arapahoe County's public trustee. 'So that really means we only opened three weeks worth of foreclosures in October,' she said. Wenke estimated that 180 or so foreclosures in October weren't opened. Denver also didn't open all of its foreclosures in October. That means in late December an extra 140 or so foreclosures will be sold that normally would have been sold Dec. 21, said Anita Dubas, acting chief public trustee for Denver. But even without every foreclosure being counted, 9,930 foreclosures were opened through October, 28.4 percent more than the 7,731 in the first 10 months of 2003. 'That's scary, really scary,' Dubas said. In all of 2003, 9,431 foreclosures were filed in Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson counties. That was a 43.5 percent increase from 2002, when 6,574 homes went into foreclosure. Last year's foreclosures were surpassed only by the 17,122 foreclosures filed in 1988. Foreclosures last year accounted for about 1 percent of the homes on the market, compared with 2.3 percent of the housing stock in 1988. 'I don't think this is a surprise,' said economist Tucker Hart Adams. 'People were encouraged by extremely low mortgage rates and extremely innovative mortgage products to buy homes, buy bigger homes and get out of apartments into homes for the first time. Many of these people, if they miss only one or two paychecks, are not being able to make their mortgage payment.' If, as expected, interest rates continue to rise, that could accelerate foreclosures, she said. 'Traditionally, 75 percent of the mortgages were fixed and 25 percent were floating, but I hear that last year that maybe 60 percent to 70 percent of the loans were floating,' she said. And because foreclosures are a lagging indicator, even if the economy picks up next year, foreclosures could continue to rise, she said. Dubas said she has seen homes priced in the $40,000s to small commercial properties with $1 million or more in loans go under. 'I would guess the average price is in the $150,000 to $200,000 range,' she said. Parts of Denver with large minority populations, such as northwest, northeast and southwest, appear to have the most foreclosures, she said. She estimated 70 percent to 80 percent of the foreclosures are for homes, with the rest being commercial properties. Independent broker Gary Bauer said a client of his recently looked to buy a house that was just heading into foreclosure in the Inspiration Point neighborhood in northwest Denver. The buyer paid about $150,000 for the home two years ago, but then refinanced about every six months, until he had about $210,000 in debt on it. 'With a $210,000 mortgage, it is clearly upside down,' Bauer said. Bauer's client's offer of $155,000 was rejected. 'My guess is the bank is going to end up selling it in the $160,000s,' Bauer said. Foreclosures climb County Oct. 04 Oct. 03 YTD '04 YTD '03 Adams 174 157 2,019 1,488 Arapahoe 180 219 2,458 1,869 Boulder 43 40 426 408 Broomfield 9 9 108 90 Denver 267 434 2,707 2,120 Douglas 50 48 665 535 Jefferson 121 110 1,547 1,221 Total 844 1,017 9,930 7,731

Subject: Re: Dollar decline will eventually mean....
From: Ari
To: Pete Weis
Date Posted: Thurs, Nov 11, 2004 at 05:45:49 (EST)
Email Address: Not Provided

Message:
These reports are useful for they may over time form a pattern. So far this year REIT share prices have been rising, but there have been several days of strong declines. Investors are at least a little nervous.

Subject: Re: Dollar decline will eventually mean....
From: Terri
To: Pete Weis
Date Posted: Wed, Nov 10, 2004 at 21:57:46 (EST)
Email Address: Not Provided

Message:
The question of sustaining real estate prices may come down to how high are short term interest rates to rise?

Subject: Re: Dollar decline will eventually mean....
From: Emma
To: Pete Weis
Date Posted: Wed, Nov 10, 2004 at 15:10:26 (EST)
Email Address: Not Provided

Message:
These anecdotal accounts are mounting in seriousness, and short term rates were raised again. We may be straining commercial and home owner's real estate markets.

Subject: Re: Dollar decline will eventually mean....
From: Ari
To: Emma
Date Posted: Wed, Nov 10, 2004 at 16:48:56 (EST)
Email Address: Not Provided

Message:
The long term Treasury Note has risen quickly but quietly from 3.95% to 4.25%.

Subject: Rubin: Dollar Decline Could Accelerate
From: El Gringo
To: All
Date Posted: Tues, Nov 09, 2004 at 20:25:11 (EST)
Email Address: nma@hotmail.com

Message:
Rubin: Dollar Decline Could Accelerate Tue Nov 9, 5:30 AM ET By CHUCK HAWKINS, AP Business Writer NEW YORK - Former U.S. Treasury Secretary Robert Rubin warned Monday night that the dollar's recent decline could accelerate and interest rates could rise if politicians in Washington don't act quickly to narrow the federal budget deficit. Rubin's comments came on the same day that the dollar fell to a record low against the euro, the five-year-old currency used by Germany, France and 10 other European nations. Each euro is now worth about $1.29, up from about $1.19 in May and an all-time low against the dollar of 82 cents in October 2000. In European trading Tuesday, the euro was at $1.2915, up slightly from its late New York level of $1.2911. 'If I were still at Treasury, I'd still be a strong advocate of a strong dollar policy,' Rubin said in a speech at the 29th anniversary dinner of Columbia University's Knight-Bagehot business journalism program. That amounts to at least a veiled criticism of the Bush administration, which some critics contend is allowing the dollar to gradually weaken against key foreign currencies so as to make U.S.-produced goods cheaper in export markets. Rubin, who now is chairman of the executive committee and a member of the office of the chairman of Citigroup Inc., sounded a wide-ranging warning about the potential impact of continued federal deficits. 'If markets begin to fear long-term fiscal disarray and if foreign providers of the capital inflows upon which we have now become so enormously dependent share this fear and also develop a concern about our currency, then the markets may begin to demand sharply higher interest rates on long-term debt and possibly even create conditions of serious disruptions in our financial markets, with all the problems that that can lead to for our economy,' he said. And he added, 'We have a lot of work to do in a very difficult political environment.' Earlier on Monday, European Central Bank President Jean-Claude Trichet described the recent increase in the euro's value against the dollar as 'brutal' because of the pressure it puts on Europe's largely export-driven economic recovery. Rob Nichols, a U.S. Treasury Department spokesman, responded to Trichet's comments by saying the country's strong dollar policy remains unchanged and 'with regard to the budget deficit, we have laid out a plan to cut it in half in five years. We are committed to the plan. We are achieving that plan.' Rubin, who was an adviser to Democratic presidential candidate John Kerry was Treasury secretary under President Clinton between 1995 and 1999. He left his job as co-chairman of Goldman Sachs & Co. in 1992 to join the Clinton administration, where he first led the National Economic Council in the White House. While he noted his disputes with the Bush administration about portions of its tax-cutting policy, Rubin was careful to suggest that both political parties need to address the deficit issue sooner than later. 'Dramatic change in fiscal policy is imperative. And I think that reality is likely to increasingly assert itself on the political system, however unwilling or reluctant on a bipartisan basis that system may be to actually deal with the actual hard choices that restoring fiscal discipline imposes,' he said. Rubin also said he expects that in the years ahead, 'China is likely to be the largest economy in the world and a tough-minded geopolitical power equal to any other geopolitical power on the globe.' He also said he expects continued slow growth in Europe and that 'Japan has not done most of what seems to me it has to do' to shake off years of subpar economic growth.

Subject: Re: Rubin: Dollar Decline Could Accelerate
From: Jennifer
To: El Gringo
Date Posted: Tues, Nov 09, 2004 at 21:09:23 (EST)
Email Address: Not Provided

Message:
When Robert Rubin worries, we should all worry. There seems to be no intent to try to lessen the growth of government debt, rather the reverse. Tax cuts are to be made permanent, Social Security is to be partly privatized, and defense and security are not touchable. The government deficit will grow and there will be pressure on the dollar.

Subject: Re: Rubin: Dollar Decline Could Accelerate
From: Ari
To: Jennifer
Date Posted: Wed, Nov 10, 2004 at 05:11:56 (EST)
Email Address: Not Provided

Message:
Robert Rubin's book is well worth the reading. The Secretary gauges economic occurences in terms of outcome probability. Here are the conditions, here are the possible outcomes in order of probability.

Subject: Outsourcing on Outsourcing
From: Emma
To: All
Date Posted: Tues, Nov 09, 2004 at 17:40:37 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/09/business/worldbusiness/09electric.html General Electric Sells 60% of Indian Back-Office Unit By SARITHA RAI BANGALORE, India - The General Electric Company said on Monday that it had sold a 60 percent stake in its pioneering back-office unit in India to two private equity firms for $500 million. G.E. sold the majority stake to General Atlantic Partners and Oak Hill Capital Partners, and will keep the remaining 40 percent. The sale opens the unit to accepting work from companies other than G.E. and its subsidiaries. G.E.'s back-office company, GE Capital International Services, has 17,000 employees worldwide, 13,000 of them in India, in centers in Gurgaon in the suburbs of New Delhi, as well as in Bangalore and Hyderabad. The unit, known by the acronym Gecis, was a pioneer in India's back-office industry. Setting it up in 1997 made G.E. the first multinational to open a large-scale operation to leverage India's manpower and cost advantages. Companies like American Express and I.B.M. quickly followed with back-office centers of their own. Experts are predicting that G.E.'s sale might set off a trend in the industry. Other multinational companies may also find it less compelling to own back-office units, or 'captives,' and instead outsource to independent companies.

Subject: We Have a Problem
From: Terri
To: All
Date Posted: Tues, Nov 09, 2004 at 14:21:11 (EST)
Email Address: Not Provided

Message:
We have a problem. Fewer and fewer Americans work for companies with pension plans that are invested and guaranteed for them. We almost all have to save and invest on our own to provide for the future and for retirement. The question is, how are we to invest for the future if we decide that every investment is threatening. Stocks have been a fine way to invest for decades if investors have been well diversfied and able to be patient through difficult periods. Bonds have not earned the returns of stocks, but a diversified bond portfolio has earned a premium over inflation. Real estate has often been a fine investment. Commodities, as well. Since we can seldom tell the direction of markets for long, how are we to invest if we are always waiting for markets to decline in price? My answer is to develop a low cost diversfied portfolio and average in continually. What else can be done? The need then is for us to keep close track of present conditions in markets, but think where profitability and stability may be now and in future and go after.

Subject: Re: We Have a Problem
From: Ari
To: Terri
Date Posted: Wed, Nov 10, 2004 at 05:34:46 (EST)
Email Address: Not Provided

Message:
All these questions are important. Since we are really on our own, we must be thinking how we can protect the savings we have. This is important to think and argue about.

Subject: Vanguard Returns
From: Terri
To: Terri
Date Posted: Tues, Nov 09, 2004 at 16:50:38 (EST)
Email Address: Not Provided

Message:
Vanguard Returns 12/31/03 to 11/08/04 S&P is up 6.1% Value Index is 9.7 Growth Index is 2.5 Small Cap Index is 10.9% Small Value is 14.3 Europe Index is 12.6% Pacific Index is 10.1% Energy is 29.5% REIT Index is 20.3 Health Care is 4.5 Long Term Corporate Bond Fund is 6.4% High Yield Corporate Bond Fund is 7.6

Subject: What's in the interest for one.....
From: Pete Weis
To: All
Date Posted: Tues, Nov 09, 2004 at 13:14:58 (EST)
Email Address: Not Provided

Message:
is not necessarily in the interests of all. An important concept which explains why paper assets can crash so suddenly. From Bloomberg: Can Asia Dump Bretton Woods II as Dollar Falls?: Andy Mukherjee Nov. 9 (Bloomberg) -- President George W. Bush's second term may be a challenging time for Asian central bankers. With the dollar hitting an all-time low against the euro yesterday, traders are betting that Bush may add to the $412.6 billion U.S. budget deficit, increasing the pressure on the dollar to decline. And unlike during the last three years, the brunt of the dollar's fall may not be borne by Europe alone. Bank of America Corp. says China may allow its currency to fluctuate in a wider range as early as the first quarter of 2005. Together, the two factors -- record current account and budget deficits in the U.S. and a possible appreciation in the yuan --may lead to stronger Asian currencies next year. The adjustment could mean an end to the current system of semi-fixed Asian exchange rates that has been termed the ``Revived Bretton Woods,'' by Michael Dooley of University of California at Santa Cruz, David Folkerts-Landau, Deutsche Bank AG's head of research, and Peter Garber, the bank's strategist. Revived Bretton Woods, or ``Bretton Woods II,'' is supposed to be a re-embodiment of the Bretton Woods arrangement, a post World War II system in which the U.S. was obliged to pay gold at $35 an ounce to its official foreign creditors. Other countries pegged their currencies to the dollar. Whereas the original Bretton Woods system collapsed in 1973, its replacement is seen as an ongoing and mutually beneficial agreement between the U.S., which is the world's financial ``core'' and Asia, which is its ``periphery.'' The periphery is allowed to expand its exports by keeping its currencies cheap, as long as it supplies capital to the core to pay for its spending excesses. Bretton Woods II As Dooley and the Deutsche economists pointed out in their paper last year, ``Exporting to the U.S. is Asia's main concern. Exports means growth. When their imports do not keep up, the official sectors are happy to buy U.S. securities. Their appetite for such investments is, for all practical purposes, unlimited because their growth capacity is far from its limit.'' At the heart of Bretton Woods II is China's 200 million underemployed rural population. ``And even if this reserve of labor was gone,'' the authors say, ``India is ready to graduate to the periphery with its vast supply of underemployed workers.'' If it's in the interest of Asian central bankers to keep a lid on their home currencies until every surplus worker in rural China and India has found a job in an export factory, then why should there be a change in Asia's currency policy in the next four years of Bush's presidency? Weak Dollar There are strong reasons. On the U.S. side, the issue is political. Jobs are at stake. A weak dollar is ``ultimately what the economy needs,'' says Bill Gross, the chief investment officer at Pacific Investment Management Co. in Newport Beach, California. On the Asian side, the reason why the region must now choose to live with higher currencies is inflation. By increasing interest rates for the first time in nine years, China has sent a signal that it's taking inflation seriously. Yet, if the People's Bank of China increases domestic interest rates significantly -- and keeps the currency pegged at 8.3 to the dollar -- it will invite more speculative capital into the country, aggravating inflation. There's another important reason why Bretton Woods II may have to be dumped. Nouriel Roubini, a professor of economics at New York University's Stern School of Business, says that the current global financial system can be sustained only if Asian central banks act as a cartel and keep their existing and future reserves in U.S. dollars. There is, however, no formal cartel. As a result, every Asian central bank will want to protect itself against an erosion in the value of its assets from a decline in the dollar. Tragedy of Commons In other words, what's in the interest of one Asian central bank isn't for all. Social scientists have a name for this phenomenon: ``Tragedy of the Commons.'' ``All central banks may be better off if no bank tries to diversify its reserve holdings,'' Roubini says, ``but as the risks of dollar depreciation grows, each central bank has an incentive to defect and to try to protect itself from losses.'' Losses could indeed be large. Asian central banks own more than $2.2 trillion in foreign-exchange reserves out of a global total of $3.4 trillion. At the end of last year, almost 64 percent of central bank reserves globally were denominated in U.S. dollars, according to the International Monetary Fund. As Asia tries to diversify out of the dollar, the U.S. currency may decline further. An individual central bank ``can only protect itself if it either shifts out of dollars and into euros ahead of the others, or buys a euro/dollar hedge before everyone else,'' Roubini says. Adjustments will be painful. Still, it would be better for everyone concerned to end the Bretton Woods II agreement now before it's too late for both the U.S. consumer and the Asian exporter.

Subject: Re: What's in the interest for one.....
From: Terri
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 19:54:43 (EST)
Email Address: Not Provided

Message:
http://www.j-bradford-delong.net/movable_type/2004-2_archives/000527.html The Unsustainable U.S. Current Account Position Revisited Maury Obstfeld and Ken Rogoff say: 'The real question is not whether there needs to be a big exchange rate adjustment when the U.S. current account closes up. For most plausible shocks leading to global rebalancing, this is a given. The real question is how drastic the economy-wide effects are likely to be. This is an open question.... [W]hereas US markets may have achieved an impressive degree of flexibility, Europe... has not. The rest of the world is not going to have an easy time adjusting to a massive dollar depreciation. It is also the case that world derivative markets have exponentially expanded.... With little reliable data on counterparty risk, there has to be concern that a massive dollar movement could lead to significant financial problems that are going to be difficult to foresee before they unfold...'

Subject: Privatizing social security DOA
From: Pete Weis
To: All
Date Posted: Tues, Nov 09, 2004 at 12:07:54 (EST)
Email Address: Not Provided

Message:
PRIVATIZING SOCIAL SECURITY DOESN'T MAKE A LICK OF SENSE By JOHN CRUDELE November 9, 2004 -- PRIVATIZING Social Security is impossible. I'll say it again: allowing people to take some of their Social Security contributions and invest that money privately is not possible. End of story. Wall Street staged a wonderful rally last week partly on this Social Security fantasy and it doesn't want to hear logic. Politicians don't want to deal with it either because they believe people can be conned into thinking that such a simple plan will actually reform and strengthen Social Security. It won't. But it could make the entire financial system of this country a lot weaker. To be honest, I don't even like hearing myself say this. According to my latest statement from Social Security, I have contributed more than $80,000 during my lifetime into the government retirement program, and my employers have kicked in another $60,000 on my behalf. I'd love to get any part of that money back and be able to invest it myself. I'd even settle for the government's proposal — if you can call the whispers we've been hearing a 'proposal' — that would allow us to privately invest some of the future money that we would have been paying into Social Security. But despite how much I'd like this to happen, it can't be done without causing extreme disruptions to this country's already weakened financial system. Here's why: It will probably come as a shock to no one that there isn't a big pile of Social Security money sitting somewhere. It isn't in the U.S. Treasury in Washington, nor at the Denver mint, nor hidden among alien spaceships in Roswell, N.M. Each year when you and I pay up to $5,449 of our hard-earned wages into the Social Security 'trust fund' — which even a moron now knows is an oxymoron — that money gets spent by the government. First, the money goes to pay people who are currently collecting Social Security. These days there's money left over since the demographics of the country haven't shifted yet (but will) to people receiving more annually than is contributed. The leftover money right now is borrowed by Washington. In place of the cash, the government leaves IOUs in the trust fund. Taking this Social Security money allows the government to borrow less in the financial markets, where foreigners already contribute heavily to funding our annual budget deficit — which, in case you haven't noticed — has been growing. Let's not even get into one very important fact: If this plan had been put into place the last time it surfaced four years ago under the Democrats, people would have lost a lot more money when the stock-market bubble busted and would now also be entitled to a lot less from Social Security when they retire. Privatization didn't make sense then, and it doesn't now. If people are allowed to put that 20 percent chunk into private accounts, that means the government would have nearly $2,200 less that it can borrow from Social Security for each person who chooses this option. (This assumes we can also use the employer's contribution.) And, depending on the details, the numbers get worse. 'Putting 10 percent of the payroll tax in private accounts without reducing benefits involves $1 trillion to $2 trillion of transition costs — transition costs being a euphemism for $1 trillion to $2 trillion of added deficits and debts,' says Pete Peterson, former U.S. Commerce Secretary, author of 'Running on Empty,' a book about the Social Security calamity, and co-head of Blackstone Group. That extra money that'll have to be borrowed by Washington to replace the Social Security loans will cause an inevitable rise in interest rates beyond where they would ordinarily be.

Subject: Re: Privatizing social security DOA
From: Ari
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 15:24:27 (EST)
Email Address: Not Provided

Message:
There will likely be private accounts established for Social Security, because the President and a Republican Congress will wish it so. But, there is no crisis for Social Security and the idea that the program is in danger, that our benefits are in danger, is completely absurd. Change Social Security, but do so honestly. A litany of foolish and fooled reporters and columnists are continually telling us that there is a Social security crisis. Rubbish!

Subject: Inflating away the bill
From: Pete Weis
To: Ari
Date Posted: Tues, Nov 09, 2004 at 17:11:53 (EST)
Email Address: Not Provided

Message:
Ari. You are clearly stating Paul Krugman's view that the Bush administration is using scare tactics to get their desired reductions in social security legislated. This is true. But the Bush administration has also helped to make the 'crisis' (which you say is 'rubbish') a bit more real. Any government which can be tempted to borrow and 'print' as much money as necessary to meet debt greatly exceeding its tax revenues, will simply reduce its debt including social security checks by inflating it away. So I don't think they will dramatically change the social security system if at all and face the wrath of seniors. They'll do it more subtley by 'inflating away' the checks they pay to retirees. 'Fears that the government will solve its problem by inflating away its debt will drive up interest rates, worsening the deficit, and things will spiral out of control.' - Paul Krugman Here's the entire piece by Paul Krugman which takes the form of an open letter to Alan Greenspan: On the Second Day, Atlas Waffled SYNOPSIS: Is Greenspan's reputation toast yet? Dear Alan Greenspan: After reading your recent testimony, I'd like to share some Objectivist philosophy with you. As a disciple of Ayn Rand, you'll undoubtedly appreciate it. Here it is, from John Galt's big speech in 'Atlas Shrugged': 'A is A: non-contradiction.' John Galt wouldn't be very happy with you right now. On Tuesday you went some distance toward repairing your reputation and steering the country away from fiscal disaster. But the next day you appeared to waffle. In your initial remarks you more or less acknowledged the grim fiscal outlook. As your discussion of 'accrual' accounting made clear, you know that if the federal budget took into account the future liabilities of Social Security and Medicare — as it should — it wouldn't show the 'modest' deficits the White House talks about; it would show a government deep in the red. Yet here's what you said on Wednesday: 'Actually, it turns out that we do not really have a fiscal problem of moment until we get beyond the end of this decade . . . deficits even under the president's program beyond these next two years [will be] in areas where the rate of debt to G.D.P. does not move up in any way which suggests we are in an unstable system.' There's a strict interpretation in which that statement is true. But it was widely read as a gesture of appeasement to the Bushies, as you surely knew it would be. And neither you nor the country can afford that kind of appeasement. Surely you aren't going to let rosy budget projections snooker you, yet again, into supporting irresponsible tax cuts? By now you know that this administration always projects big budget improvement two years ahead; but every six months it marks its projection down another $140 billion or so, blaming outside events. Independent analysts, who take into account the stuff the administration pretends doesn't exist — the war, the alternative minimum tax, and so on — think we're looking at deficits of 3 or 4 percent of G.D.P., maybe more, for the next decade. And then it will get much worse. Moreover, since you advocate accrual accounting, you obviously realize that the ratio of debt to G.D.P. is a highly misleading number. Properly measured, the U.S. fiscal system is already 'unstable' — and the new Bush proposals would quickly push it past what you called the 'point of no return.' Fed chairmen aren't allowed to speculate about disaster scenarios, so let me do it for you. If the administration gets what it wants, within a decade — or perhaps sooner — the United States will have budget fundamentals comparable to Brazil's a year ago. The ratios of debt and deficits to G.D.P. won't be all that high by historical standards, but the bond market will look ahead and see that things don't add up: the rich have been promised low tax rates, middle-class baby boomers have been promised pensions and medical care, and the government can't meet all those promises while paying interest on its debt. Fears that the government will solve its problem by inflating away its debt will drive up interest rates, worsening the deficit, and things will spiral out of control. So why are you still giving these people political cover? No doubt you're under intense pressure to be a team player. But these guys are users: they persuade other people to squander their hard-won credibility on behalf of bad policies, then discard those people once they are no longer useful. Think of John DiIulio, or your friend Paul O'Neill. It's happening to Colin Powell right now. (A digression: The U.S. media are soft-pedaling it as usual, but the business of the Osama tape has destroyed Mr. Powell's credibility in much of the world. The tape calls Saddam Hussein an 'infidel' whose 'jurisdiction . . . has fallen,' but says that it's still O.K. to fight the 'Crusaders' — and Mr. Powell claims that it ties Saddam to Al Qaeda. Huh? All it shows is that Al Qaeda views a U.S. invasion of Iraq as an excellent recruiting opportunity.) Two years ago you acted as George W. Bush's enabler; you share part of the blame for our plunge into deficit. But now the situation is truly dire. If you waffle now, and take the easy way out, your reputation — and the country's finances — will quickly pass the point of no return. Originally published in The New York Times, 2.14.03

Subject: Re: Inflating away the bill
From: Ari
To: Pete Weis
Date Posted: Wed, Nov 10, 2004 at 05:28:08 (EST)
Email Address: Not Provided

Message:
The long term bond market will sell off strongly should there be any sense that the Fed is trying to inflate away our debt. Interest rates would climb to levels we had during the 1970s, a 20 years of Fed discipline would be lost.

Subject: Re: Privatizing social security DOA
From: Terri
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 12:11:35 (EST)
Email Address: Not Provided

Message:
We might readily shift 2 or 4 or 10 percent of our payroll tax collections to a total stock market index, and hope and expect the equity premium will improve the return to Social Security over the years. We might even gradually allocate the stock returns to individual accounts over time. There is reason to invest the payroll tax surplus for another 30 years in stocks. But, there is no reason to develop a system that will swallow up investing gains in administrative costs. There is no reason to increase the size of the budget deficit at this time, or to cut Social Security benefit guarantees for those from 55 down and break the promise we have made them through their working years. The Social Security system has been a wonder of a success since it began. Indexing Social Security to the cost of living was a dramatic gain. The system is not failing, and can thrive for generations with minor increases in revenue, but most Americans have been convinced the system is failing or will soon fail. We are about to seriously question whether the New Deal compact and the arise of middle class America ought to further continued.

Subject: Re: Privatizing social security DOA
From: jimsum
To: Terri
Date Posted: Wed, Nov 10, 2004 at 14:21:05 (EST)
Email Address: jim.summers@rogers.com

Message:
You can't readily shift a portion of the payroll tax collection to stock market investments because the the government is already spending it. The surplus in Social Security is just netted against a very big budget deficit, making it a smaller budget deficit. Maybe the government would come out ahead if it borrowed money and invested it in the stock market, but that seems like a risky way to let politicians avoid the hard decisions about how to fix the budget deficit. Here in Canada, a portion of our public pension plan's (CPP) surplus is already being invested in the stock market. The returns haven't been that great lately, but there is some promise. The big difference is that in Canada, the CPP is truly separate from the rest of the budget; so our surplus in the CPP is not part of the reported government budget surplus, but real money that is invested (mostly in low-paying government bonds). It's also a factor that is often overlooked when Canadians compare our tax levels to the U.S. - it takes a lot of tax money to fully pay for current government spending (which includes health care for everyone) while also running a surplus in the CPP.

Subject: Re: Privatizing social security DOA
From: Ari
To: jimsum
Date Posted: Wed, Nov 10, 2004 at 16:46:01 (EST)
Email Address: Not Provided

Message:
Thanks for the fine post.

Subject: Interesting Post
From: Emma
To: jimsum
Date Posted: Wed, Nov 10, 2004 at 14:25:03 (EST)
Email Address: Not Provided

Message:
Thank you so much. Please continue these interesting contrasting comments about Canada. There is much to be learned. Just now Canada is doing quite well in economic terms. Fairly balanced budget and nice growth clip and high employment.

Subject: Re: Privatizing social security DOA
From: Pete Weis
To: Terri
Date Posted: Tues, Nov 09, 2004 at 13:32:00 (EST)
Email Address: Not Provided

Message:
Terri. One thing is for sure - you have far more faith in the stock markets than does Paul Krugman, Stephen Roach, Robert Shiller, Brad DeLong, Robert Rubin, Warren Buffet, Bill Gross, Pete Peterson, Richard Russell, Jeremy Grantham and thousands of insider executives who have set records (according to Thompson Firstcall) selling their companies stocks during the last rally. I don't believe for a second that the mess of illegal and unethical practices on Wall Street has been cleaned up by this administration. Here's a piece from CFO magazine which indicates the problems are ongoing: How Good Are Those Earnings, Really? Pro forma results are apparently alive and well; earnings surprises are less surprising than they may appear. Stephen Taub, CFO.com November 09, 2004 Third-quarter corporate operating earnings are 22 percent greater than earnings stated according to generally accepted accounting principles, according to USA Today, citing data from Standard & Poor's. That's twice the 11 percent difference between operating earnings and GAAP earnings during the second quarter, which in turn was more than twice the 5 percent difference during the first quarter. 'Anytime you see the spread getting wider, it should raise a red flag,' said Reuters Research analyst Ashwani Kaul, reported the paper. Although the gap is the widest it's been in two years, USA Today also pointed out that since 1988, operating earnings have averaged 21 percent greater than GAAP earnings. In addition, the Securities and Exchange Commission's Regulation G, enacted in 2003, makes it more difficult for companies to hide ''special charges'' that enable them to report higher operating earnings. (As CFO reported earlier this year, however, 'there's little evidence that Reg G has had much effect on pro forma reporting.' See 'A Matter of Emphasis.') Another measure that may deserve a second look concerns 'earnings surprises.' The Wall Street Journal, citing data from Thomson First Call, reported that 64 percent of the S&P 500 beat their earnings estimates for the third quarter, but Goldman Sachs chief sector strategist David Kostin is not so impressed. Kostin, in line with common wisdom, believes that companies frequently guide analysts to an earnings number that they feel they could beat — say, by a penny per share — according to the Journal. He prefers to define 'earnings surprise' as a result that varies by more than one standard deviation from the analysts' estimate. After examining 422 of the S&P 500, reported the Journal, Kostin found that only 36 percent — not 64 percent — had what he defines as a positive surprise in the third quarter. In the second quarter, of the 420 companies that had reported earnings by the same time, 46 percent had a positive surprise. In other words, wrote the paper, by Kostin's lights the third quarter enjoyed fewer positive earnings surprises than the second. Not surprisingly, the number of companies reporting negative earnings that departed by more than a standard deviation from the average estimate rose to 11 percent in the third quarter from 9 percent in the second, according to the report.

Subject: Re: Privatizing social security DOA
From: Terri
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 14:44:56 (EST)
Email Address: Not Provided

Message:
Well, I have faith in investing in a diversfied portfolio over long time periods. The last 5 years the S&P Sotck Index lost 2.28% a year, while the Long Term Bond Index gained 10.00% a year. We have passed through the worst bear market in stocks since the 1930s. But, a 50 50 stock to bond portfolio would have earned 3.86% a year for 5 years through October 31. The gains from a 50 50 mix with the Value Index and Long Term Bond Index would have been 5.72% a year. Add in real estate, and the period surely does not look quite so rough. Stocks are not nearly as expensive as in December 1999. The need is to find relative value and keep building for the future.

Subject: China demand helping US companies
From: Pete Weis
To: All
Date Posted: Tues, Nov 09, 2004 at 11:58:42 (EST)
Email Address: Not Provided

Message:
US heavy equipment manufacturers and appliance manufacturers are able to finally pass on higher costs to customers - Chinese customers. So here open world markets are helping. Unfortunately, US auto companies are having to eat higher expenses since they sell mainly to US consumers only and continue to have to offer incentives which cost their bottom line. This piece from the LA Times: Manufacturers Lift Prices More costs are passed on to consumers as firms pay more for materials such as oil, natural gas, steel and other metals. From Bloomberg News November 9, 2004 After years of market constraints, manufacturers of products as diverse as earthmoving equipment and plastic resins are lifting prices. At General Electric Co., oil-based resins used to make liquid-crystal television screens, compact discs and surgical equipment are up 9.5% over 2003. Caterpillar Inc. has bumped up prices twice this year on its big earthmovers. 'We haven't been able to raise prices at all during the past five years,' says Caterpillar Chief Financial Officer Lynn McPheeters. Peoria, Ill.-based Caterpillar has a third markup on the way in January, he says. Global demand has pushed up the costs these companies pay for basic building blocks such as oil, natural gas and metals. Now, orders for such diverse manufactured goods as turbines and plastic bags have begun to rise as well, especially in China. That means more manufacturers can pass on cost increases to their customers. 'We are getting pricing for the first time in the appliance business, in the industrial business,' General Electric Chief Executive Jeffrey Immelt told investors last month on a conference call. 'Lots of the equipment-management businesses are way up over last year.' GE Consumer & Industrial, a unit of Fairfield, Conn.-based General Electric, makes appliances, lighting, factory-automation controls, circuit breakers and electric motors. Not every user of metals, oil and scrap steel can pass along costs. Some are suffering, including those supplying automakers such as General Motors Corp. and Ford Motor Co., which are losing U.S. market share to Asian carmakers. Toledo, Ohio-based Dana Corp., which uses hot-rolled sheet steel to produce frames for Ford's F-150 pickup, says higher steel costs reduced net income by $22 million in the third quarter. It wasn't able to pass on those costs. Companies selling to countries where power and transportation needs are growing stand the best chance of sustaining higher prices, according to Nicholas Heymann, an analyst at Prudential Equity Group in New York. General Electric, the world's biggest maker of power-plant turbines and locomotives, in October repeated its projection that sales from China would reach at least $5 billion in 2005, almost double 2003 revenue. Commodities are soaring. Prices on copper futures contracts have risen 44% in the last year. Aluminum futures are up 21%. Contracts for oil have climbed 64%, touching a record high of $55.65 a barrel on Oct. 27. Natural gas futures are up 62%. A ton of hot-rolled sheet steel more than doubled to $680 in October from $300 a year earlier, according to American Metal Market, a trade publication. Polyethylene is in such demand that Midland, Mich.-based Dow Chemical Co. said it began limiting sales in October to prevent customers from hoarding. The world's most widely used plastic is derived in the U.S. primarily from natural gas. 'Certainly the pricing environment has improved' at U.S. chemical manufacturers, says Joe Morrison, a credit analyst at ABN Amro Inc. in New York. 'They're doing better than expected, although raw materials costs are a factor.' The price increases from companies such as General Electric and Dow Chemical may already be 'leaking' into the overall inflation rate, says Chris Varvares, an economist who is president of St. Louis-based Macroeconomic Advisers. Still, they aren't likely to have a big effect on consumer prices for at least a year, he says. The U.S. government's producer price index for crude materials was up 14% at the end of September from a year earlier. The index for intermediate materials was up 8.4%. The index for finished goods was up 3.3%. By comparison, the consumer price index was up 2.5% in September compared with a year earlier. Durable goods such as appliances account for 11% of the CPI, and appliance makers, while raising prices, may have difficulty sustaining them. John Gourville, who studies pricing trends as an associate professor at Harvard Business School in Cambridge, Mass., says, 'You'll see the Wal-Marts of the world keeping prices down.'

Subject: Re: China demand helping US companies
From: Terri
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 19:08:00 (EST)
Email Address: Not Provided

Message:
We have to watch the producers price index carefully for any signs of inflation leaking to the consumers price index. But, labor costs are rising slowly and labor is the prime cost for producers.

Subject: China's Informal Lenders
From: Emma
To: All
Date Posted: Tues, Nov 09, 2004 at 10:57:56 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/09/business/worldbusiness/09yuan.html?pagewanted=all&position= Informal Lenders in China Pose Risks to Banking System By KEITH BRADSHER WENZHOU, China - The Wenzhou 'stir-fry' is not a dish you eat. But it is giving indigestion to Chinese regulators and could prove troublesome to many investors worldwide - from New York money managers, Pennsylvania steel workers and Midwestern farmers to miners in Australia. Here in this freewheeling city at the forefront of capitalism in China, the dish is prepared when a group of wealthy friends pool millions of dollars worth of Chinese yuan and put it into a hot investment like Shanghai real estate, where it is stirred and flipped for a hefty profit. The friends often lend each other large amounts on the strength of a handshake and a handwritten i.o.u. Both sides then go to an automated teller machine or bank branch to transfer the money, which is then withdrawn from the bank. Or sometimes they do it the old-fashioned way: exchanging burlap sacks stuffed with cash. The worry for Chinese regulators is that everyone in China will start cooking the Wenzhou stir-fry and do it outside the banking system. In the last few months, borrowing and lending across the rest of China is looking more and more like Wenzhou's. The growth of this shadow banking system poses a stiff challenge to China's state-owned banks, already burdened with bad debt, and makes it harder for the nation's leaders to steer a fast-growing economy. The problem starts with China's low interest rates. More and more families with savings have been snubbing 2 percent interest on bank deposits for the double-digit returns from lending large amounts on their own. They lend to real estate speculators or to small businesses without the political connections to obtain loans from the banks. Not only is the informal lending rate higher, but the income from that lending, because it is semilegal at best, is not taxed. For fear of shame, ostracism and the occasional threat from thugs, borrowers are more likely to pay back these loans than those from the big banks. Tao Dong, chief China economist at Credit Suisse First Boston, calculates that Chinese citizens withdrew $12 billion to $17 billion from their bank deposits in August and September. The outflow turned into a flood last month, reaching an estimated $120 billion, or more than 3 percent of all deposits at the country's financial institutions. If the bank withdrawals are not stemmed in the months ahead, Mr. Tao warned, 'this potentially could be a huge risk for financial stability and even social stability.' With China now accounting for more than a quarter of the world's steel production and nearly a fifth of soybean production, as well as some of the largest initial public offerings of stock, any shaking of financial confidence here could ripple quickly through markets in the United States and elsewhere. For instance, if the steel girders now being lifted into place by hundreds of tall cranes in big cities across China are no longer needed, that would produce a worldwide glut of steel and push down prices. On Oct. 28, when China's central bank raised interest rates for one-year loans and deposits by a little more than a quarter of a percentage point, it cited a need to keep money in the banking system. Higher official rates should 'reduce external cycling of credit funds,' the bank said in a statement. The main Chinese banks have fairly substantial reserves, but they need those reserves to cover huge write-offs of bad debts someday. The International Monetary Fund's China division chief, Eswar Prasad, expressed concern about bank withdrawals in a speech in Hong Kong three days before the central bank acted. The hub of informal lending in China is here in Wenzhou, 230 miles south of Shanghai. Some of China's first experiments with the free market began here in the late 1970's, and a result has been a flourishing economy together with sometimes questionable business dealings.

Subject: China's Informal Lenders...
From: Emma
To: Emma
Date Posted: Tues, Nov 09, 2004 at 19:02:22 (EST)
Email Address: Not Provided

Message:
Depending on how raw they like their capitalism, people elsewhere in China describe Wenzhou as either a center of financial innovation or a den of loan sharks. But increasingly, Wenzhou is also a microcosm of the kind of large-scale yet informal financial dealings now going on across the country. The withdrawals by depositors and the informal money lending have spread so swiftly here that it is only in Wenzhou that the Chinese central bank releases monthly statistics on average rates for direct loans between individuals or companies. The rate hovered at 1 percent a month for years until April, when the authorities began limiting the volume of bank loans. Borrowers default on nearly half the loans issued by the state-owned banks, but seldom do so here on money that is usually borrowed from relatives, neighbors or people in the same industry. Residents insist that the risk of ostracism for failing to repay a loan is penalty enough to ensure repayment of most loans. Although judges have ruled that handwritten i.o.u.'s are legally binding, creditors seldom go to court to collect. 'If it is a really good friend, I would lose face if I sued them in court,' said Tu Shangyun, the owner of a local copper smelter and part-time 'silver bearer' - a broker who puts lenders and borrowers in touch with each other, 'and if it weren't a good friend, I wouldn't lend the money in the first place.' Violence is extremely rare, but the threat of it does exist as the ultimate guarantor that people make every effort to repay debts. 'Someone can hire a killer who will chase you down, beat you up and maybe even kill you,' said Ma Jinlong, who oversaw market-driven financial changes in the 1990's in Wenzhou as director of the municipal economic reform committee and is now an economics professor at Wenzhou University. An austerity policy was invoked, its goal to slow rapid economic growth in the hope of stopping an upward spiral in the inflation rate. With consumer prices rising at 5.2 percent a year despite price controls on many goods and services, and with less-regulated prices for goods traded between companies climbing nearly twice as fast, people lose buying power while their money is on deposit at a bank. The interest rate for informal loans jumped last spring to 1.2 percent a month, or 15.4 percent compounded over a year, and has stayed there since. According to the nation's central bank, total bank deposits in Wenzhou have been dropping by $250 million a month since April as companies and individuals withdraw money either because they can no longer obtain bank loans for their investments or because they want to lend the money at higher rates to each other. For lenders, these interest rates are much more attractive than earning a meager 2.25 percent a year, even after the recent rate increase, on a deposit at a government-owned bank. And while Beijing assesses a 20 percent tax on all interest from bank deposits, nobody pays tax on the income they receive from lending money on their own, Mr. Ma said. Most informal loans have traditionally gone to relatives or neighbors to finance the starting of small local businesses. Wenzhou is now one of the world's largest producers of nonbrand sunglasses; Dong Ganming, the owner of a 350-employee sunglass factory here, said that his plant was just one of almost 1,000 here involved in making glasses.

Subject: Canadian, Swiss, Swedish Currencies
From: Ari
To: All
Date Posted: Tues, Nov 09, 2004 at 05:58:17 (EST)
Email Address: Not Provided

Message:
Another way to protect against a decline in the value of dollar would be to use exchange traded funds. We can buy the Canadian or Swiss or Swedish stock indexes. These country's economies are sound and currencies growing stronger.

Subject: Rethinking the China Slowdown
From: Emma
To: All
Date Posted: Mon, Nov 08, 2004 at 17:47:54 (EST)
Email Address: Not Provided

Message:
http://www.morganstanley.com/GEFdata/digests/latest-digest.html Rethinking the China Slowdown Stephen Roach (Beijing) After extensive discussions in Beijing, I am changing my view on the China slowdown. Specifically, over the next year, I do not believe that the Chinese economy is going to soften as much as I had thought. This is a personal observation rather than a shift in our official view held by Andy Xie and his team, who are still looking for a marked slowing in Chinese GDP growth from 9.3% in 2004 to 7.0% in 2005. But it is clear to me that China’s policy makers are now aiming for only a modest further slowing in the economy. The key question is whether they will get their way in managing this gentle descent. My bet is they do. I was eager to get back to China. I hadn’t been to Beijing since last June. Since that time, the China debate had moved to center stage in world financial markets. And with good reason: China’s marginal role in driving the global growth dynamic cannot be stated strongly enough. The IMF calculates that China accounted for fully 24% of the change in world GDP growth over the past three years (on a purchasing power parity basis) -- virtually double its 12.6% PPP weight in the world and fully six times its 4% share in nominal global GDP (at market exchange rates). Early this year, the Chinese leadership expressed serious concern about the overheated state of the economy. I heard this first hand from Premier Wen Jiabao at the annual China Development Forum in March. That, in fact, was the official stamp of approval on the slowdown debate that was then to follow. That pronouncement also ushered in a series of serious tightening measures taken by the Chinese authorities beginning in late April -- initially driven by so-called administrative actions aimed at restricting the quantity and allocation of credit but more recently accompanied by a more overt shift in monetary policy, underscored by the 28 October rate hike of the People’s Bank of China (PBOC).

Subject: Rethinking China's Slowdown
From: Emma
To: Emma
Date Posted: Mon, Nov 08, 2004 at 17:49:41 (EST)
Email Address: Not Provided

Message:
The combination of micro and macro initiatives by increasingly concerned Chinese authorities convinced me that a marked slowdown was likely. Specifically, I had looked for this slowdown to be manifested in the form of a significant further slowing of China’s industrial output growth -- long my favorite metric of aggregate activity in this largely industrial economy. After hitting a peak rate of 19.4% in the first two months of 2004, I thought a soft landing would require the peak growth comparison to be cut in half -- temporarily taking the year-over-year industrial output trajectory down into the 8-10% range by mid-2005, not all that different from average gains in the late 1990s. Consequently, with industrial output growth having slowed to about 16% in September, I believed that the bulk of the slowing -- about 70% of it -- was still to come. I discussed this perspective in detail with senior Chinese officials last week in Beijing. They were virtually unanimous in suggesting my scenario was now far too draconian for their liking. In the words of one of China’s senior planners, “Impossible!” That was quite an about-face from the view I picked up from China’s leadership last spring. Back then, Ma Kai, head of the National Development and Reform Commission -- the old Chinese planning agency -- led the charge publicly in expressing growing concern over bottlenecks, shortages, and the soaring costs of industrial materials. At the same China Development Forum in early 2004, Minister Ma was very direct in arguing that overheating posed a serious risk to the sustainability of Chinese economic growth. In his words, “If such an illogical mode of economic growth is maintained, it will be difficult to keep economic growth at 7%.” Minister Ma has recently updated his views in a speech (the English translation was published in the 8 November edition of the China Daily). His conclusion, “The significance of this round of macro management should not be underestimated.” While not declaring victory, China’s planners are obviously pleased at what they have now accomplished.

Subject: Yuan and Dollar
From: Emma
To: Emma
Date Posted: Mon, Nov 08, 2004 at 19:12:12 (EST)
Email Address: Not Provided

Message:
Stephen Roach thinks there will be no changing of the Yuan peg to the dollar in the near future. The Asian tigers then will likely continue to support the dollar, and the Bank of Japan in the near future is also likely to continue buying dollars.

Subject: China's Promise
From: Terri
To: Emma
Date Posted: Mon, Nov 08, 2004 at 21:06:57 (EST)
Email Address: Not Provided

Message:
http://www.morganstanley.com/GEFdata/digests/latest-digest.html Stephen Roach's essay on China is well worth reading in the entirety. China really does appear to be an astonishing growth engine for Asia that can continue indefinitely with proper fiscal and monetary policy applications and market privatization.

Subject: China's Foreign Exchange Reserves
From: Emma
To: All
Date Posted: Mon, Nov 08, 2004 at 17:01:21 (EST)
Email Address: Not Provided

Message:
China has a thriving trade with America, and it is in her interest to finance the trade. Also, China buys dollar denominated securities to maintain to Yuan peg, and uses such securities to secure bank reserves and infrastructure development projects. China is growing rapidly, and when a country with 1.4 billion people grows rapidly for 5 and 10 and 15 and 20 years, the country shows an astonishing development. Also, China is a remarkably competitive trader and readily builds foreign exchange reserves. When you go to Vietnam you can buy Honda Motor Bikes, but you can also buy identical looking Honka Motor Bikes. Honka is made in China.

Subject: Strong Dollar, Weak Dollar
From: Terri
To: All
Date Posted: Mon, Nov 08, 2004 at 16:50:51 (EST)
Email Address: Not Provided

Message:
Robert Rubin would ever repeat 'a strong dollar is in America's interest.' What we thought he meant was that when the dollar was strong it reflected a strong economy. Then, set policies to keep the economy strong and the dollar will reflect the strength. Policies now have led to a budget deficit that is large and growing faster than the economy can grow. Private saving is too low to make up for the government deficit, so there will be balances of payments deficits as far as I can see. The dollar, then, will decline. The weakness in economic policy and in the economy will be reflected by a weak dollar. The prospects of a subtly weakening economy are not at all pleasing, but moderate growth could be sustained as long as the Fed allowed for low interest rates. Even in 1987, after the stock market break, the Fed was able to immediately reverse a cycle of tighening and keep the economy growing.

Subject: The danger
From: Pete Weis
To: Terri
Date Posted: Mon, Nov 08, 2004 at 18:33:20 (EST)
Email Address: Not Provided

Message:
There is already such a huge supply of dollars worldwide, courtesy of the market boom of the 90's and Federal Reserve interest rate drops of 2000-2003, that it's all about demand for US dollar denominated assets now. I believe that depends on the direction of the US economy from this point onward which is dependent on the US consumer holding up under his/her mountain of debt and rising expenses (partly due to the falling dollar). The more the US consumer begins to pack it in, the less important he is to overseas economies and the riskier holding all those dollar denominated assets by foreign investors and Asian Central banks becomes. At some point the two lines (decelerating US consumption and risk tolerance by foreign investment) will cross in earnest and unless the Fed is willing to raise interest rates considerably, the dollar would be in danger of crashing for the first time in its history. This is a situation that Paul Volker is predicting is likely to happen sometime in the next 5 years.

Subject: Re: The danger
From: Ari
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 05:48:31 (EST)
Email Address: Not Provided

Message:
'It's all about demand for US dollar denominated assets now. I believe that depends on the direction of the US economy from this point onward which is dependent on the US consumer holding up under his/her mountain of debt and rising expenses (partly due to the falling dollar).' There is no sign the economy is slowing. If employment growth continues to be strong and interest rates stay fairly low there should be time for households to improve balance sheets. The Fed has to be careful not to raise interest to rapidly. We need the housing market to hold.

Subject: Tightening credit ahead
From: Pete Weis
To: Ari
Date Posted: Tues, Nov 09, 2004 at 11:05:55 (EST)
Email Address: Not Provided

Message:
Ari. There is no real sign yet that the economy is gaining strength. If October's job numbers are real and jobs continue to be created at over 150,000 per month and overall wages begin to rise (something that hasn't really taken place yet), then we can say the economy is turning the corner. But the trade and budget deficits continue to pressure the US dollar downward and that shrinks consumer's paychecks. I don't see any new high tech job booms or any other booms on the horizon to offset this paycheck shrinkage. I'm amazed to see that so many seem to think we can continue to borrow our way through the coming years to make up for $600 billion (and growing) of our wealth being transfered overseas per annum. This after we have already rung up record levels of debt. Logic tells us something has to give and what's giving and will continue to give is consumption, IMO. Dropping consumption is an inevitable outfall of a shrinking dollar in the absence of overall wage growth. Dropping consumption will be bad for the job market, which inturn, puts further downward pressure on consumption. You say 'we need the housing market to hold'. I have no idea how long interest rates will stay low. Most folks think of interest rates when they think of the sustainability of the housing markets. But they don't realize that the easing of mortgage credit (especially in the last couple of years) has had an even greater effect on increasing housing prices than has lower interest rates. Reverse mortgages with little to no money down have allowed many to afford literally twice the home price. We have seen interest rates this low about 40 years ago, but we have never seen anything close to the extremely easy mortgage lending which is taking place now. With the unprecedented housing run-ups that we have seen in many urban areas, mortgage activity would come to a total halt without these reckless lending standards. Our government is desperate, IMO, to keep mortgage activity at the highest levels possible, since it is a major underpining of consumption. The 'old' (as recently as 5 years ago) standards of limiting monthly housing payments to 28-30% of gross monthly income (now up to 50%), of reducing risk by requiring more money down, and providing a preponderance of 30 year fixed rate mortgages, have given way to very, very risky lending practices. And this has taken place in an economic environment where wage growth is less than inflation. So I see a tightening of credit down the road as a bigger threat than rising interest rates. However, if the dollar were to fall at a very sharp rate then interest rate hikes could become a very big problem also for housing as is the lack of wage growth.

Subject: Tightening credit
From: Emma
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 12:08:13 (EST)
Email Address: Not Provided

Message:
Lawrence Summers, now of Harvars, before Treasury Secretary, echoes your worries. The debt we accumulate means that we are transferring more and more future income to our creditors. Unless there is continued appreciation of asset values, we will find ourselves the poorer in income in future. But, how do we reverse the process and generate the sort of saving of Europeans or Canadians or Japanese. No, we are never going to save as much as the Japanese.

Subject: Tax Cuts
From: Jack
To: All
Date Posted: Mon, Nov 08, 2004 at 16:20:40 (EST)
Email Address: jjlwmd@yahoo.com

Message:
I was debating a friend recently about the wisdom of the Bush tax cuts, and he informed me that his tax rebates (not the right word, I know) have helped his family out a great deal. He is right in the Middle of the Middle class and so I responded by saying that the middle class tax cuts were the result of demands by Democrats who based their reasoning on solid Keynesian principles which Bush and his Supply siders either ignore or don't care for. He challenged me on this and I realized that I don't have a good source for the Democrats demands regarding the tax cuts (I'm embarassed to say). Can anyone help me out? Thanks, Jack

Subject: Re: Tax Cuts
From: Ari
To: Jack
Date Posted: Tues, Nov 09, 2004 at 05:50:46 (EST)
Email Address: Not Provided

Message:
The PK Archive search will give you the columns written during the debates over the tax cuts.

Subject: Re: Tax Cuts
From: Ari
To: Jack
Date Posted: Mon, Nov 08, 2004 at 17:53:16 (EST)
Email Address: Not Provided

Message:
The response you gave was correct. Paul Krugman and Brad DeLong and other economists have noted that the cash distributions made as part of the tax cuts were pushed through at the inssitence of Democrats.

Subject: Complicating the Dollar Value
From: Emma
To: All
Date Posted: Mon, Nov 08, 2004 at 13:34:52 (EST)
Email Address: Not Provided

Message:
http://www.j-bradford-delong.net/movable_type/2004-2_archives/000516.html It's a Little Bit More Complicated... By Brad DeLong The strength of the dollar has been produced by (a) the willingness of someone (mostly Asian central banks) to buy and hold the flow of new dollar-denominated assets held abroad generated by our trade deficit, and (b) the unwillingness of private hedge funds, investment banks, and other investors to place large leveraged bets that the dollar decline has started for real. If the private market--which knows that the dollar is going down someday--decides that that someday has come and that the dollar is going down NOW, then all the Asian central banks in the world cannot stop it. You need both (a) and (b) to keep the dollar up. Just one of them won't do.

Subject: Re: Complicating the Dollar Value
From: Terri
To: Emma
Date Posted: Mon, Nov 08, 2004 at 14:07:18 (EST)
Email Address: Not Provided

Message:
So the decline in the dollar when it comes need not have anything to do with a change in Asian central bank policy. When private institutions sell the dollar it will go down no matter what Asian central banks do. Private currency traders can simply overwhelm a dollar defense by central banks, as they overwhelmed the Bank of England's defense of the Pound a decade ago.

Subject: Re: Complicating the Dollar Value
From: Terri
To: Terri
Date Posted: Mon, Nov 08, 2004 at 14:31:47 (EST)
Email Address: Not Provided

Message:
Why should a 10% or 20% decline in the value of the dollar against the a basket of currencies be a problem? The trade effect of the decline in dollar value will emerge slowly. Japan and Germany can shift some production to America. Loss of export demand from Germany can be made up with a European stimulus. The fall in dollar value will make energy imports less costly in Japan or Germany. Interest rates are low in America and need not be raised. Why should we worry if the dollar loses value?

Subject: Why worry?
From: Pete Weis
To: Terri
Date Posted: Mon, Nov 08, 2004 at 18:18:14 (EST)
Email Address: Not Provided

Message:
'The fall in dollar value will make energy imports less costly in Japan or Germany.' Why would energy be less costly in Japan or Germany? Energy will simply be much more expensive for the US. It might not cost much more for Europeans but it won't cost them less. Opec will continue to demand more dollars for their oil to offset the fall in the dollar. Or worse, demand Euro's instead.

Subject: Re: Why worry?
From: Ari
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 05:32:29 (EST)
Email Address: Not Provided

Message:
The fall in dollar value has already made energy imports less costly in countries whose currencies have appreciated in value. The price of oil seems to be levelling off at about $50 a barrel.

Subject: Relativity
From: Pete Weis
To: Ari
Date Posted: Tues, Nov 09, 2004 at 11:13:06 (EST)
Email Address: Not Provided

Message:
Ari. Has the cost of energy dropped in Europe over the last two years or has their increase simply been less than the run-up for US paychecks?

Subject: Re: Relativity
From: Emma
To: Pete Weis
Date Posted: Tues, Nov 09, 2004 at 12:10:26 (EST)
Email Address: Not Provided

Message:
The cost of energy has risen more slowly in Europe, because of the strong Euro and because Europe is more focused on energy efficiency. The difference in gasoline use in America and Europe is stark.

Subject: Re: Complicating the Dollar Value
From: Terri
To: Terri
Date Posted: Mon, Nov 08, 2004 at 14:51:51 (EST)
Email Address: Not Provided

Message:
Why should a decline in the value of the dollar result in a recession? I do not see why? After the Plaza Accord of September 1985, there was no recession. I simply have trouble worrying about a loss in value of the dollar from the perspective of thinking growth would quickly slow. What am I missing? Remember the devaluation of the British Pound involved a change of about 20% in a couple of weeks, but did not lead to a recession.

Subject: Ethopian Roads
From: Emma
To: All
Date Posted: Mon, Nov 08, 2004 at 12:04:30 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/08/international/africa/08road.html? Roads Lead to a New Way of Life for Rural Ethiopia By CELIA W. DUGGER HURUFA, Ethiopia - A few months back, Desalegn Godebo's wife descended into a feverish delirium. 'It was as if she were mad,' the farmer said, shuddering at the memory. 'She was scratching me like a crazy woman.' Before a new road was built through this village, Mr. Godebo would have loaded his wife onto his back and hiked six hours along narrow dirt paths to Awasa, a small city. Instead, he lifted her into a truck for the one-hour ride to town. Her condition was diagnosed as malaria and typhoid. She is well now and back home caring for their baby. The dirt-and-gravel road may look like a timeless feature of the Great Rift Valley. But it is, in fact, part of a huge public road-building project that is slowly hauling one of the poorest, hungriest nations on earth into modernity. The people who live along it divide time into two eras: Before the Road and After the Road. Because of the road, people can bring their sick to the hospital and their children to distant schools. Farmers who had only their own feet or a donkey's back for transport can now transport their crops to market. Some pay a fee to drivers who truck sacks of corn and potatoes to the city. Others sell to traders who venture down the road to an open-air market only a five-minute walk from the village. It is thronged each Tuesday with farmers in flip-flops haggling over prices for their harvest. Road-building is coming back in style as a way to combat rural poverty in Africa. Ethiopia, an agricultural society where most farmers still live more than a half day's walk from a road, has been especially hobbled by their absence. Support for roads in Africa, particularly from the World Bank, is growing again after a decade of decline in the 1990's. Then, the bank reduced lending for roads. It was battered by aggressive opposition from international nonprofit groups, and concerned about ill-governed countries where roads deteriorated as fast as they could be built. Senior policy makers also held the mistaken belief that the private sector would fill the void, building toll roads for profit. 'We were naïve,' said Maryvonne Plessis-Fraissard, the World Bank's transport director. 'Who was going to do rural roads in the middle of Africa?' Farmers here would be the first to say roads are not the solution to all their problems. Like subsistence farmers across Ethiopia, Mr. Godebo is too poor to let any part of his small plot lie fallow. 'If we did, we would have nothing to eat,' he said. The results include declining soil fertility and low yields. He has no irrigation, so he is dependent on rains that came too late this year. And he is vulnerable to collapsing prices in years when there is a bumper crop. Still, the road means he gets a better price for what he can grow. While no one expects roads alone to end the chronic hunger faced by millions of Ethiopians or the famines that loom periodically, most development experts agree that they are a precondition for progress - and were essential to the success of the Green Revolution that produced abundance in much of Asia but bypassed Africa. Farmers need to produce enough to feed their families and have some left to sell. Roads make it possible for them to bring in the fertilizer and seed that will improve productivity. And roads make it possible for them to truck their crops to market. Since 2000, the World Bank, a pivotal international donor in such vast building projects, has doubled its lending for roads in Africa to $800 million, still only a small fraction of what is needed, bank officials say. Ethiopia itself has spent $1 billion on roads in the past seven years - half from international donors - but plans to spend more than that in just the next three years. It has doubled the length of its rural road network and rebuilt crumbling highways. Even with the new burst of investment, the country expects that by 2007 it will be able to reduce the total of farmers who live more than half a day's walk from a road only to 60 percent from 65 percent.

Subject: Re: Ethopian Roads
From: Jennifer
To: Emma
Date Posted: Mon, Nov 08, 2004 at 21:22:50 (EST)
Email Address: Not Provided

Message:
Thanks for this article.

Subject: Why is no one screaming about a stolen election?
From: Raging Grannie
To: All
Date Posted: Mon, Nov 08, 2004 at 11:10:20 (EST)
Email Address: wsb2001@adelphia.net

Message:
I love Paul Krugman's columns, but am extremely disappointed that he seems to be falling in with everyone else that this election shouldn't be challenged. And now he's abandoning us to write a book. We've been warned about how easy it is to rig voting machines, yet Kerry conceded easily, and everyone else - all the organizations who mobilized so many dedicated, tireless volunteers - even Michael Moore! - are rolling over and playing dead. The only possible reason may be the Molly Ivins theory - that whoever 'wins' is going to have a dead chicken around his neck. http://www.dfw.com/mld/startelegram/news/columnists/molly_ivins/10115579.htm?1c This ignores the fact of a GOP Congress, a Supreme Court packed with neocons, and the possibility himself will declare himself Emperor for Life. And there is PLENTY of evidence coming out that the election was stolen - but not in the mainstream. Why??? Here are some smatterings - the call for an audit of the Ohio vote. (www.neohioact.org/electionaudit) http://www.commondreams.org/views04/1106-30.htm November 6, 2004 Evidence Mounts That The Vote Was Hacked by Thom Hartmann Plenty from Bev Harris at BlackBoxVoting.org And evidence of voter fraud for the last 40 years. Votescam by James and Kenneth Collier http://www.votescam.com/ After uncovering a massive vote scam in Florida in 1970, the authors spent 25 years investigating America's multi-billion dollar vote rigging industry. Published in 1992, 'Votescam' was banned in major chain bookstores. You can get it from the website.

Subject: The Coming Collapse of the Dollar?
From: Terri
To: All
Date Posted: Sun, Nov 07, 2004 at 19:27:59 (EST)
Email Address: Not Provided

Message:
http://www.j-bradford-delong.net/movable_type/2004-2_archives/000514.html The Coming Collapse of the Dollar? At the moment, the U.S, is running large trade deficits as foreigners take dollars they would otherwise use to buy exports and use them to buy property, stocks, bonds, and other assets in the U.S. But someday foreigners will conclude that they have enough invested in the U.S. Their appetite for dollars to fund investments in America will diminish. The trade account will move back into balance. And a declining demand for dollars will push the value of the dollar down. Odds are that when foreign investors are satiated with dollar assets--whether that comes one, five, or twenty years from now--the value of the dollar in terms of other countries will be 30 to 60 percent less than it is now. And so we get to one of the deep mysteries of today's economy: if the dollar today is indeed above its expected long-run equilibrium value by so much, why don't investors demand a premium return--an extra 3% or more in the current interest rate--in order to be happy holding the dollar assets they do? Since dollar interest rates are about equal to those outside, what business does the dollar have being above its long-run fundamental value? All our models say that--given the low level of U.S. interest rates--the dollar should *already* have collapsed to perhaps 2/3 of its present value. The best answer I've come up with is that the dollar is above its fundamental value because most people who might place very large bets on a rapid decline in the dollar thinks such bets are still too risky, but the risk associated with them is falling every day, and someday...

Subject: Re: The Coming Collapse of the Dollar?
From: Emma
To: Terri
Date Posted: Sun, Nov 07, 2004 at 20:25:40 (EST)
Email Address: Not Provided

Message:
There is a distinct chance that we may find a sharp decline in the value of the dollar in coming weeks. There is considerable speculation, and whether central banks will defend the dollar other than nominally is not clear.

Subject: Re: The Coming Collapse of the Dollar?
From: Jennifer
To: Emma
Date Posted: Mon, Nov 08, 2004 at 10:44:23 (EST)
Email Address: Not Provided

Message:
Would the Pacific Stock Index be a suitable investment if the dollar continues to lose value?

Subject: Re: The Coming Collapse of the Dollar?
From: Terri
To: Jennifer
Date Posted: Mon, Nov 08, 2004 at 14:09:56 (EST)
Email Address: Not Provided

Message:
The Pacific Index is dominated by Japan, and Japan has had the poorest performing stock market among developed nations since 1990. Will this finally change? Has this changed? I sure do not know.

Subject: XPACX looks good to me
From: David E...
To: Terri
Date Posted: Mon, Nov 08, 2004 at 18:03:39 (EST)
Email Address: Not Provided

Message:
Good insight - if Japan dumps its dollars the yen will shoot up like a rocket. So your investment in Japan will be worth more in dollars.

Subject: whoops I mean VPACX
From: David E...
To: David E...
Date Posted: Mon, Nov 08, 2004 at 19:43:10 (EST)
Email Address: Not Provided

Message:
Jennifer, I am thinking that VPACX and a china fund will be good moves.

Subject: Re: whoops I mean VPACX
From: Ari
To: David E...
Date Posted: Mon, Nov 08, 2004 at 20:19:48 (EST)
Email Address: Not Provided

Message:
There's the rub. Can we invest safely in China or Japan? Warren Buffett chose to buy shares in the Chinese state-owned oil company, reasoning that the company's share holdres would be well protected. With Japan we have to hope the 14 year bear market has run the course.

Subject: Re: The Coming Collapse of the Dollar?
From: Pete Weis
To: Emma
Date Posted: Sun, Nov 07, 2004 at 23:42:01 (EST)
Email Address: Not Provided

Message:
Dollar expected to fall amid China's rumoured selling By Steve Johnson in London and Andrew Balls in Washington Published: November 7 2004 19:43 | Last updated: November 7 2004 19:43 The dollar could slide still further, in spite of hitting an all-time low against the euro last week in the wake of George W. Bush's re-election, currency traders have said. The dollar sell-off has resumed amid fears among traders that Mr Bush's victory will bring four more years of widening US budget and current account deficits, heightened geopolitical risks and a policy of 'benign neglect' of the dollar. Many currency traders were taken aback on Friday when the greenback fell in spite of bullish data showing the US economy created 337,000 jobs in October. 'If this can't cause the dollar to strengthen you have to tell me what will. This is a big green light to sell the dollar,' said David Bloom, currency analyst at HSBC, as the greenback fell to a nine-year low in trade-weighted terms. The dollar's fall comes as the Federal Reserve is widely expected to raise US interest rates by a quarter point to 2 per cent when it meets on Wednesday and to signal that it will continue with a measured pace of rate increases. Speculative traders in Chicago last week racked up the highest number of long-euro, short-dollar contracts on record. Options traders have reported brisk business in euro calls - contracts to buy the euro at a pre-determined rate. However, the market has been rife with rumours that the latest wave of selling has been led by foreign governments seeking to cut their exposure to US assets. India and Russia have reportedly been selling US assets, as well as petrodollar-rich Middle Eastern investors. China, which has $515bn of reserves, was also said to be selling dollars and buying Asian currencies in readiness to switch the renminbi's dollar peg to a basket arrangement, something Chinese officials have increasingly hinted at. Any re-allocation could push the dollar sharply lower and Treasury yields markedly higher.

Subject: Yuan and Dollar
From: Emma
To: Pete Weis
Date Posted: Mon, Nov 08, 2004 at 10:38:03 (EST)
Email Address: Not Provided

Message:
There is no reason to believe the Chinese have changed their policy against the dollar. China will likely keep the Yuan pegged to the dollar for some time to come.

Subject: Re: The Coming Collapse of the Dollar?
From: Ari
To: Pete Weis
Date Posted: Mon, Nov 08, 2004 at 07:11:45 (EST)
Email Address: Not Provided

Message:
The United States could benefit from a decline in value of the dollar. A lower dollar value can ease the trade imbalance, and increase demand for our products at home and abroad. Hopefully interest rates will stay low.

Subject: Dollar selloff?
From: Pete Weis
To: Pete Weis
Date Posted: Mon, Nov 08, 2004 at 00:31:53 (EST)
Email Address: Not Provided

Message:
We'll have to see what transpires in the coming weeks. If I understand him correctly, El Gringo suggested the rest of the world might express their concern with the US election results by offloading dollar denominated assets at some point. I wouldn't expect assurances by the Bush administration that their economic policies will balance the budget eventually, will do much to quell the overseas worries about the direction of the dollar. The fact that they must make those assurances to defend against a panic selloff is not very reassuring in itself. Dollar Falls On Fears of U.S. Deficits Big Sell-Off Unlikely, Treasury Official Says By Paul Blustein and Jonathan Weisman Washington Post Staff Writers Friday, November 5, 2004; Page E01 The dollar continued its decline in global currency markets yesterday, intensifying worries among some economists that mounting U.S. budget and trade deficits could send the U.S. currency into a tailspin. But John B. Taylor, the Treasury undersecretary for international affairs, defended the Bush administration view that the deficits pose no danger of a dollar collapse. He issued a detailed rebuttal of what he called 'scare stories.' The dollar fell yesterday to within a fraction of a cent of its all-time low against the euro of $1.2930 , trading as low as $1.2898 before rallying slightly to close at $1.2867. It fell modestly against the Japanese yen, and continued a sharp slide against the Canadian dollar, which rose to 83 U.S. cents yesterday for the first time in 12 years. It was the second straight day that the dollar has fallen despite a surge in the stock market, continuing a trend that began in early October when it started slipping against the currencies of major U.S. trading partners. The declined rekindled the fears of some analysts that the dollar could be headed for a severe sell-off unless the White House and Congress make a major effort to shrink the budget gap. 'As the dust settles after the U.S. elections, the one theme that is developing is the growing recognition [in the markets] of the need for more dollar depreciation,' economists at J.P. Morgan told clients yesterday, citing as one major reason the likelihood that 'there will be no serious new policies to trim the U.S. budget deficit.' Behind such sentiments is the belief that the U.S. economy is too dependent on foreign investors, and that they may balk at pouring money into U.S. securities if the country's debt continues to soar. Foreigners have provided much of the money the government borrows to cover its deficit, which was $413 billion in the fiscal year ended Sept. 30. 'One of the big drivers in the whole big picture the markets are looking at now is our being dependent on foreign sources of funds,' said David Solin, managing partner at Foreign Exchange Analytics in Essex, Conn. 'Obviously, if the foreigners step back [from investing in U.S. bonds and stocks], there are going to be serious problems, not only for the dollar, but for all financial markets.' The trade deficit also creates a dependence on money from abroad because many foreigners supplying goods to the United States take the dollars they receive and effectively lend them to the United States. The simplest example of such lending is their purchase of U.S. government bonds. Because of concerns that the United States is too much in debt, the rise in the trade gap, which is running at an anual rate of about $600 billion, also raises the specter that foreigners might dump U.S. holdings. Those scenarios were dismissed as fanciful by Taylor, who spoke yesterday at an American Enterprise Institute seminar on the current account deficit, the broadest measure of the trade gap. The large influx of foreign money shows that 'sound, growth enhancing economic policies are continuing to make the U.S. an attractive place to invest,' he said. Taylor said administration policies already in place will help shrink the trade deficit. One is President Bush's pledge to cut the budget deficit in half, as a percentage of the U.S. gross domestic product, by 2009. That would decrease the trade deficit because lower government spending or higher taxes would reduce the amount of money consumers spend on imported goods. Taylor pointed out that the Treasury is also prodding foreign governments to achieve faster economic growth, which should increase demand for U.S. exports, and it is trying to persuade China to change its fixed-exchange rate policy by allowing its currency, the yuan, to rise. A higher yuan would be likely to slow the flood of Chinese goods into the U.S. market because those products would become more expensive for U.S. consumers. 'Even if those policies take some time' to reduce the trade deficit, Taylor said, 'there is no reason to think there will be problems in the meantime' in continuing to obtain enough money to cover the gap. Taking issue with analysts who have voiced concern about a recent drop in investment by foreigners in U.S. Treasury bonds, Taylor said: 'It is important to put the current account in the perspective of the total amount of financial flows crossing U.S. borders in large, open and flexible markets.' He cited the fact that the current account deficit increased by $19 billion in the second quarter even though government data showed a decline of about $180 billion in purchases of U.S. assets by both foreign central banks and private investors. The U.S. economy experienced no turbulence because U.S. buyers in effect replaced the foreigners. Taylor's views were seconded by some of the other speakers at the seminar, including Allan H. Meltzer, a professor at Carnegie-Mellon University. But others maintained that the current account gap is certain to drive the dollar down one way or another -- either gently and gradually, or suddenly and sharply. Although a gradual move downward would help the economy by boosting exports, it would erode U.S. living standards below what they would be by making imported goods more expensive. President Bush's news conference yesterday did little to lessen concerns over the deficits, Wall Street analysts and currency traders said. Bush simultaneously promised not to raise taxes under the guise of tax simplification, to pursue a costly restructuring of Social Security and to cut the budget deficit in half by 2009. The currency markets aren't buying it, said William G. Gale, an economist at the Brookings Institution. White House officials 'have Alan Greenspan to help keep interest rates down, but they can't control the foreign exchange markets,' Gale said. 'I think investors are acting appropriately.'

Subject: Re: The Coming Collapse of the Dollar?
From: Terri
To: Emma
Date Posted: Sun, Nov 07, 2004 at 21:12:27 (EST)
Email Address: Not Provided

Message:
Turning back to 1985 and the Plaza Accord, the soundest investments as the dollar declined sharply were international stocks. Who can now however?

Subject: Re: The Coming Collapse of the Dollar?
From: Terri
To: Terri
Date Posted: Sun, Nov 07, 2004 at 21:46:18 (EST)
Email Address: Not Provided

Message:
Remember, we engineered a 40% decline of the dollar in September 1985 with the Plaza accord. James Baker, close friend of George Bush, was responsible for the agreement. We might well be willing to have just such a decline in the dollar now.

Subject: Fed Rate Increase Coming
From: Terri
To: All
Date Posted: Sun, Nov 07, 2004 at 16:55:12 (EST)
Email Address: Not Provided

Message:
There will almost certainly be a short term interest rate increase by the Federal Reserve this week. This will have been the fourth increase, and likely insures a moderate to slow growth period through winter. How slow growth could be will be can be gauged as we watch long term interest rates. The hope is that long term rates will stay low as they have this fall. Should long term rates rise, there will be a slowing in the housing market and that could be serious.

Subject: Deficit Blues
From: Terri
To: Terri
Date Posted: Sun, Nov 07, 2004 at 18:29:52 (EST)
Email Address: Not Provided

Message:
Though some economists may fret about deficits here and there, the state election in California and the national election make clear voters are not fretting. Voters are not worried about deficits, at least not when the thought of a tax increase is broguht to mind. Republicans will happily spend away and cut taxes, and laugh about John Kerry or Gray Davis worrying about debt. Even I get awfully tired of listening to Pete Peterson tell me about the end of the world. What do we have? The tax cuts of the last 4 years will be made permanent, the Alternative Minimum Tax will be set aside, there will be a host of attempts to cut taxes in addition. Social Security accounts for younger workers will be at least partly turned to private accounts, and to pay promised benefits to baby boomers there will need to be significant additions to the government budget. There will have to be additions to the government budget to pay for the Medicare drug benefit. Defense and security and education budgets are not going to be cut. Little else in the budget can or will be cut. There will be a budget deficit that grows faster than the economy can grow, and that may in time present problems for us, but the deficit is not an immediate apparent problem and will be given little notice. Pushing a tax increase through Congress during the Clinton Administration cost the Democrats control of Congress. Pushing a tax cut through the legislature cost the Democrats in California a Democratic Governor. Howard Dean was defeated soon after vowing to roll back the Bush tax cuts if elected. John Kerry will not be able to raise taxes selectively, because Kerry lost to a tax cutter.

Subject: Social Security in Sweden
From: Emma
To: All
Date Posted: Sun, Nov 07, 2004 at 12:39:16 (EST)
Email Address: Not Provided

Message:
February 5, 2004 Some lessons from Sweden on the pros and cons of privatizing Social Security. By Alan B. Krueger - New York Times 'YOUNGER workers,' President Bush said in his State of the Union address, 'should have the opportunity to build a nest egg by saving part of their Social Security taxes in a personal retirement account.' According to former Treasury Secretary Paul H. O'Neill, the president believes that the reason he was elected was his bold -- some would say risky -- stance on replacing part of Social Security with personal accounts. If the president holds onto office in November and his party continues to hold Congress, the creation of some sort of personal retirement accounts as part of Social Security seems likely. Although it is impossible to know what form such accounts might take, in 2000 Sweden instituted a system of personal accounts that holds many lessons for any country seeking to reform its retirement system. Sweden now has a blended system, an approach Mr. Bush apparently favors. Employers and employees contribute a combined 16 percent of payroll toward a 'pay as you go' retirement system like Social Security, and an additional 2.5 percent toward individual retirement accounts. Those born after 1954 are fully in the new system, while older workers are phased in. The reform process began in 1991, when a center-right coalition came to power. At the time, Sweden's generous retirement system was expected to exhaust its 'buffer' funds in about 20 years, a more dire situation than what now confronts the United States; Social Security will not exhaust its trust fund until 2042, according to the latest projections. To address its problems, Sweden set up a committee with representatives from all parties in Parliament. Because the reforms were expected to last for decades, there was pressure to devise a plan with broad support, said Annika Sunden, an expert on pensions at Stockholm University. There was agreement back in 1994 that reform would include individual accounts, so beginning in 1995 the government began tucking away 2.5 percent of payroll for employees to invest once the system was set up. Personal investment accounts were not established until 2000, with a bewildering array of funds to choose from. Some 456 funds participated initially, and the number has since grown to around 600. Most funds invested in stocks, with a quarter primarily in Swedish stocks. Workers could choose up to five funds. Anyone who did not choose a fund was automatically assigned to the default fund, which was set up by the government. The default fund must invest 80 to 90 percent of its assets in stocks. A central pension agency records all the accounts and fund values. The agency also ran an ad campaign to discourage people from going into the default fund. Nonetheless, a new study by Henrik Cronqvist and Richard Thaler of the University of Chicago finds that a third of Swedish workers did not make an active choice when the system started in 2000, and were therefore assigned to the default fund. Since 2000, fully 92 percent of new enrollees have not made a choice and have been added to the default fund. Apparently, the large number of funds to chose from paralyzed many individuals from making a choice. This has also been the experience of many 401(k) plans that have a default option in the United States: the default option, whatever it may be, is chosen by a high proportion of investors. People are also reluctant to switch once they are in a fund, a tendency that the economists William Samuelson and Richard Zeckhauser have called status quo bias. Another bias that Mr. Cronqvist and Mr. Thaler documented is home bias, a tendency to pick funds composed of Swedish companies, as opposed to a diversified portfolio of companies from around the world. Nearly half the money actively invested was in Swedish stocks. The default fund, by contrast, was better diversified: only 17 percent was in Swedish stocks. They also found that people tended to pick funds in sectors that had done well recently, and to pick funds with low fees. The average fee for active choosers was 77 basis points, or 0.77 percent of the funds invested. For the default fund it was just 16 basis points. Chile's mandatory savings plan provides another point of comparison. Fund management fees were much lower in Sweden than administrative costs in Chile's plan, probably because the central pension agency orchestrated rebates and advertised the fee rates. How did the funds do? Sweden had bad timing. The stock market tumbled just after the program started. It turns out, however, that the default fund lost less money than the aggregate portfolio of selected funds. The average selected fund fell by 40 percent in the first three years of the program, while the default fell 30 percent. Although three years is a short period, there is no evidence that the active choosers made better choices than those assigned to the default fund. For the United States, the main lesson from the Swedish experience, Ms. Sunden said, is that the default fund should be constructed very carefully, because it will attract many investors. (Ditto for 401(k) plans.) She also highlighted that more use should be made of generation funds, which move money into less risky assets as workers approach retirement, and that converting funds into annuities should be mandatory for retired workers. The consequences of making a bad investment decision in Sweden are much less severe than they would be in the United States if Mr. Bush gets his way and allows workers to divert part of the 12.4 percent of their paycheck that goes to Social Security -- half from the employee, half from the employer -- into personal accounts. Sweden devotes 16 percent of payroll to an earnings-linked pension system, creating a strong safety net beneath individual accounts. Sweden also established a 'guaranteed pension' that provides a minimum pension amount, in excess of the poverty line, to anyone with little or no pension income. All this leads one to wonder if it is possible to design a system that diverts some Social Security contributions into personal accounts yet still provides adequate insurance against bad luck and bad investment decisions. Moreover, the current American system is not beyond repair.

Subject: Re: Social Security in Sweden
From: kevin
To: Emma
Date Posted: Sun, Nov 07, 2004 at 16:09:25 (EST)
Email Address: kevngwen@msn.com

Message:
One thing that concerns me about this idea, above and beyond the transistion costs, transaction fees and all the other problems associated with privitization of social security, is it's effect on public policy. Nobody I've listened to is talking about the added control of domestic economic poicy that the business sector will obtain from such a change. We already subsidize and deregulate industry based on the dubious idea that this is good for job growth. At least that's what we're told. Under this sytem, there's going to be an even greater support for corporate subsidy and deregulation because they hold our retirement futures in their hands. The end result being overwhelming popular support for the transfer of even more corporate control over our domestic economic policy agenda. Thus continuing the transfer of power and wealth to the corporate and beauracratic elites.

Subject: Insurance Stocks Anyone?
From: Emma
To: All
Date Posted: Sun, Nov 07, 2004 at 12:12:28 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/07/business/yourmoney/07insu.html?pagewanted=all&position= No Premium Here: Are Insurance Stocks Worth a Gamble? By ROBERT D. HERSHEY Jr. ON Oct. 14, Eliot Spitzer, the New York attorney general, opened fire on the insurance industry. He accused a Marsh & McLennan unit of bid-rigging and objected to Marsh and four other casualty companies taking fees for steering corporate business to underwriters. Shares of insurance companies were devastated by the news. In what seemed a body blow to the efficient-market theory, which contends that the market is perfectly rational, the Spitzer investigation produced ripples so big as to affect companies whose only significant business is selling life insurance to individuals. As analysts and investors try to sort through the shifting situation - Mr. Spitzer's investigators remain at work - the overarching questions are whether there are bargains to be found in the wreckage and, if so, which stocks have become the most undervalued. The answer to the first is quite likely yes. As for the second, it depends on whom you ask. And, perhaps, when. Some bargain-hunters went promptly to work, driving the shares of American International Group, the world's biggest insurer, back up above $60 from the low of $54.70, where it closed on Oct. 22. The stock was $66.99 just before Mr. Spitzer made his accusations and filed a lawsuit. The stock of Marsh & McLennan, the chief target of Mr. Spitzer, crashed to $24.10, from $46.13, a fall of 47.8 percent. It has climbed above $27. Many Wall Street analysts have been circumspect about drawing investment conclusions on insurance stocks. They have taken some early comfort, though, from indications that Mr. Spitzer won't jeopardize the industry's basic viability. 'It appears that the attorney general is not going to seek criminal charges against the companies, which would have had a detrimental impact on the business,' Brian R. Meredith, an analyst at Banc of America Securities, told clients on Oct. 25. He added, however, in maintaining his neutral rating on the shares, 'we continue to caution investors that we have yet to hear from the Department of Justice.' But many investors pounced on the opportunity to take or add to positions in the insurance industry, which has been the cornerstone of numerous financial dynasties, including those of Warren E. Buffett, W. Clement Stone of Combined International and Maurice R. Greenberg of A.I.G.

Subject: Taxes and Consequences
From: Emma
To: All
Date Posted: Sun, Nov 07, 2004 at 10:47:45 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/07/business/yourmoney/07view.html Taxes and Consequences: The Second Term Begins By DANIEL ALTMAN PRESIDENT BUSH began his first term with projections for $5.6 trillion in budget surpluses. Though he will start his second term facing at least $2.3 trillion in deficits, according to the Congressional Budget Office, his tax-cutting ambitions are even greater. Here are some of the initiatives that he's likely to push, and the unanswered questions that go with them. Privatization of Social Security President Bush said he wants to give workers an opportunity to divert part of their payroll taxes to individual investment accounts, in the hope that the financial markets would pay higher returns than the existing Social Security system. That money would otherwise have gone to pay benefits for current retirees, however. How would the administration close the gap? Also, who would choose where workers could put their money? Would they have been able to invest in Enron? What about investing abroad? And finally, what would happen if financial markets crashed? In Chile, whose private pension system has been cited as a model by President Bush, some retirees saw their benefits drop by 7 percent in 2001. Could that happen here? Simplification of the income tax It is not completely clear what the president means by this oft-heard campaign promise. Simplification could take several forms, from closing loopholes and streamlining rates (as in the 1986 restructuring), to a complete overhaul resulting in a flat tax. So, which is it? Making the 2001, 2002 and 2003 tax cuts permanent The president has repeatedly voiced his determination to achieve this goal, but the medium-term cost could be huge. According to the Congressional Budget Office, making the tax cuts permanent would increase the projected federal debt by a third, or about $2.2 trillion, by 2014. Without any indication that the budget gap will eventually close, interest rates could rise as investors here and abroad become leery. Is this change worth the risk? Tax-free saving accounts The Bush administration proposed an enormous expansion of saving accounts similar to Roth IRA's, where after-tax income funneled into a special portfolio would generate tax-free returns. Individuals would be able to salt away up to $15,000 a year, under the initial proposal. Most families, assuming they opened accounts for their children, would be able to shelter their entire portfolios from taxes within several years. Financial assets generated about 12 percent of individuals' taxable income in 2002. Could the government afford to forgo the resulting revenue? If there are projected benefits for the economy, how big are they? Abolishing the tax on dividends The White House sought to eliminate this form of 'double taxation' in 2003. In the end, Congress cut tax rates on dividends and capital gains, but didn't abolish the taxes. Economists have not seen a marked improvement in household saving as a result of these changes, however, so the argument to go further will not be straightforward. With big deficits already on the way, how would the administration justify revisiting this tax?

Subject: Re: Taxes and Consequences
From: Pete Weis
To: Emma
Date Posted: Sun, Nov 07, 2004 at 11:54:09 (EST)
Email Address: Not Provided

Message:
Good post Emma. These are excellent questions which only about half of Americans are asking themselves.

Subject: Re: Taxes and Consequences
From: Emma
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 13:24:13 (EST)
Email Address: Not Provided

Message:
Notice that the tax code is providing a growing incentive for investing in stocks as opposed to bonds. Dividends and capital gains from most stock holdings are taxed at the 15% level, while bond yields are taxed at our income tax levels. This distorts the way we allocate personal portfolios.

Subject: Re: Taxes and Consequences
From: kevin
To: Emma
Date Posted: Sun, Nov 07, 2004 at 16:17:50 (EST)
Email Address: kevngwen@msn.com

Message:
I hate to be a conspiracy theorist but everything that this administration is doing to our economic health seems to be pointed toward a world-wide collapse of the system. Maybe in order for the best positioned to come in at the end a procure what's left for pennies on the dollar and rebuild in their own image?(By the way, the God-like reference implied here is not an accident) May be I'm being a little chicken little-like but I just don't put anything past the neo-con agenda.

Subject: Concentration of wealth
From: Pete Weis
To: Emma
Date Posted: Sun, Nov 07, 2004 at 14:38:16 (EST)
Email Address: Not Provided

Message:
This is a very good observation. Although a number of folks who frequent this site are pretty savy when it comes to investing - investing in value stocks and having more balanced portfolio's, many small investors are victim to herding (a kind of 'call of the wild') - 'chasing the ticker', etc. This leads to excessive amounts of wealth flowing into companies which are not growing fast enough to absorb it into capital expenditure. Instead it is 'skimmed' by the top execs in the form of stock options and ever higher salaries. Small investors who are caught up in this herding behaviour are, in effect, transfering money out of their 401K's and into the pockets of the executives of these companies. The changes to the tax code which provide 'growing incentives for investing in stocks as opposed to bonds' promote this wealth transfer and also reduces the tax consequences of selling options. In addition, the artificially low interest rates are strong arming retirees into taking higher risk in the stock markets because they can not get by on much safer fixed income which has a poor rate of return and gets taxed at a higher rate to boot. When George W. stood in front of those tuxedoed, high-roller contributors and said 'here I stand in front of the haves and have mores - some call you the elite - but I call you my base', he made no bones about who he represented.

Subject: Re: Concentration of wealth
From: Jennifer
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 15:43:32 (EST)
Email Address: Not Provided

Message:
The talk through my circle in New York City is about real estate. A gain from the real estate boom is that neighborhoods have been renewing themselves. Houses and apartment houses have been spruced up everywhere. The problem for those who do not own, is how to afford to buy. The problem for those who have recently bought, is how to afford the mortgage.

Subject: Real Estate and Interest Rates
From: Terri
To: All
Date Posted: Sun, Nov 07, 2004 at 06:25:35 (EST)
Email Address: Not Provided

Message:
The robust employment report for October caused a moderate decline in long term bond prices. The stock market was strong however, with a notable exception. There was a strong decline in the REIT Index. The REIT Index has declined sharply several times this year when interest rates have increased. Though the REIT Index is up nearly 20% for the year, the volatility of REIT prices with interest rates may be an indication that the real estate market is increasingly vulnerable to any further rate increase. The may well be similar vulnerability for mortgage bankers.

Subject: Re: Real Estate and Interest Rates
From: Terri
To: Terri
Date Posted: Sun, Nov 07, 2004 at 07:14:39 (EST)
Email Address: Not Provided

Message:
Until concern with the consumer price index is raised by independent academic economic, we should be cautious about accepting the complaints of bond buyers. Inflation appears to be nice low at 2.5%. Bond buyers always want higher interest rates. Still, the increased price of energy does act as a tax hitting hardest middle and low income households. The question of most importance is how much tightening can be expected by the Federal Reserve. Unless the labor market has truly entered a high growth recovery, the Fed should end the tightening.

Subject: Re: Real Estate and Interest Rates
From: Terri
To: Terri
Date Posted: Sun, Nov 07, 2004 at 11:57:38 (EST)
Email Address: Not Provided

Message:
Bond buyers always want higher interest rates. The higher interest rates, the lower bond prices. The idea in investing is to buy low and sell high. After a bull market in bonds running from 1982 to the present, interest rate are quite low and prices high. Buyers of bonds would sure enjoy treasuty yields at 6% or 7%. While 4% yields are no fun at all.

Subject: Re: Real Estate and Interest Rates
From: Jason
To: Terri
Date Posted: Sun, Nov 07, 2004 at 15:58:41 (EST)
Email Address: Not Provided

Message:
'The idea in investing is to buy low and sell high' I would say that is the idea with stocks, not bonds. Most people buy bonds for current income/dividends rather than the chance for capital appreciation. To make a blanket statement that bond buyers always want higher rates I think is to extreme, especially considering most bond buyers already hold bonds.

Subject: Re: Real Estate and Interest Rates
From: Jennifer
To: Jason
Date Posted: Mon, Nov 08, 2004 at 10:40:41 (EST)
Email Address: Not Provided

Message:
I would be buying bond funds today, if interest rates were a percentage point higher. At these rates bond funds are only defensive.

Subject: Re: Real Estate and Interest Rates
From: Jason
To: Terri
Date Posted: Sun, Nov 07, 2004 at 10:58:26 (EST)
Email Address: Not Provided

Message:
'Bond buyers always want higher interest rates' thats not necessarily the case, while people may want higher yields, when rates increase the value of the bonds they currently hold decreases and therefore there portfolio value decreases by the portfolio's effective duration. Thats why bond portfolios have higher returns during periods where rates are decreasing.

Subject: Re: Real Estate and Interest Rates
From: Ari
To: Jason
Date Posted: Sun, Nov 07, 2004 at 11:13:46 (EST)
Email Address: Not Provided

Message:
Right, bond prices increase when yields rise. But, the point is that bond 'buyers' want the highest possible yields. Buying treasury bonds when yields are below 4.1%, there is low yield and little prospect of capital gain for interest rates are not likely to fall much. At these interest rates I do not buy bonds, but at 5% I would be a buyer.

Subject: Re: Real Estate and Interest Rates
From: Ari
To: Ari
Date Posted: Sun, Nov 07, 2004 at 11:51:29 (EST)
Email Address: Not Provided

Message:
Right, bond prices increase when yields 'fall.' Good grief, I have to learn to proof read.

Subject: Re: Real Estate and Interest Rates
From: Ari
To: Terri
Date Posted: Sun, Nov 07, 2004 at 09:50:43 (EST)
Email Address: Not Provided

Message:
There is every reason to stay clear of the real estate market now, as well as to secure a fixed rate mortgage. But, selling a home because prices are high is usually not practical. Then be comfortable at home, make sure your rents cover the mortgage on commercial property, and look to other investments.

Subject: The Latest from the Krugmeister
From: Chicago Boy
To: All
Date Posted: Sun, Nov 07, 2004 at 02:55:19 (EST)
Email Address: mrwreckingball@budweiser.com

Message:
'Massachusetts has the lowest divorce rate in the country...' This is most likely due to MA's low marriage rate. You can't get divorced if you don't get married. '...blue states, on average, have lower rates of out-of-wedlock births than red states.' This may have something to do w/the blue states' higher rates of abortion, so they get no credit for this. Overall, this is some very misleading stuff. I would really expect better from an economist of Krugman's caliber.

Subject: To Avoid Divorce, Move to Massachusetts
From: Bobby
To: Chicago Boy
Date Posted: Sat, Nov 13, 2004 at 12:59:23 (EST)
Email Address: robert@pkarchive.org

Message:
here 'The lowest divorce rates are largely in the blue states: the Northeast and the upper Midwest. And the state with the lowest divorce rate was Massachusetts, home to John Kerry, the Kennedys and same-sex marriage. In 2003, the rate in Massachusetts was 5.7 divorces per 1,000 married people, compared with 10.8 in Kentucky, 11.1 in Mississippi and 12.7 in Arkansas.'

Subject: Re: The Latest from the Krugmeister
From: Paul G. Brown
To: Chicago Boy
Date Posted: Mon, Nov 08, 2004 at 00:38:54 (EST)
Email Address: paul_geoffrey_brown@yahoo.com

Message:
I should know better than feedin' the troll, but:

'This may have something to do w/the blue states' higher rates of abortion, so they get no credit for this.'

I call bullshit. And if you're gonna make a comment, then make it a useful comment. Data, an' stuff.

Election results data from this fine site, and out of wedlock birth rates by state.

I fired up my handy-dandy spreadsheet and lo!

1. Mean out of wedlock birth rate in blue states was 32.0%, while for red states it was 32.2%.

2. The correlation between a state's blue-ness and its out-of-wedlock birth rate was 0.18. (rank test 0.1) In other words, there is no strong relationship between blue-ness and low out-of-wedlock births.

So Krugman's point, that there is no particular reason to think that red or blue states have stronger 'values' is born out by the evidence he cites.

Is it all due to the blue states higher abortion rates? Well, you can get abortion statistics from these these fine sites. The national average for abortions is about 200 per 1000 live births, so there is no way that a higher abortion rate in blue states accounts for this small difference (the lowest abortion rate in the country is in Utah, where the rate is about 1%) . In other words, the number of abortions each year swamps the difference in out of wedlock births.

On the other hand, I found that the correlation between a state's abortion rate and its 'blueness' was 0.55. This is a particularly strong correlation.But then I had a look at the relationship between median household income and abortion rates, and I got a correlation there of 0.53. Being from a wealthier state makes it more likely that you'll abort a pregnancy. (And get married later, and have kids later ...). Correlation, causation, you know . . .

So there is very little relationship between being in a blue state and out of wedlock births: it just happens that red states have more, and different abortion rates don't account for the difference. On the other hand, the evidence suggests that you might just as easily say 'This [lower out of wedlock births] may have something to so w/the blue states 'being richer', so they get no credit for this.'

Here's my data:

State Bush Kerry Bush - Kerry Abortion Rt / 1000 Median Income OOW BR

Alabama 63 37 26 12 51156 33.972

Alaska 62 35 27 15 59726 30.876

Arizona 55 44 11 15 49397 38.005

Arkansas 54 45 9 10 44471 34.617

California 44 55 -11 39 55209 32.765

Colorado 52 47 5 8 63428 25.407

Connecticut 44 54 -10 18 75534 28.616

Delaware 46 53 -7 22 65157 63.249

District of Columbia 3 90 -7 27 60674 36.566

Florida 52 47 -87 27 52581 36.315

Georgia 58 41 5 16 55989 35.808

Hawaii 45 54 17 16 61838 30.724

Idaho 68 30 -9 6 49174 21.365

Illinois 45 55 38 17 61672 33.753

Indiana 60 39 -10 11 55284 33.067

Iowa 50 49 21 12 53230 26.719

Kansas 62 36 1 11 55341 27.654

Kentucky 60 40 26 7 49108 29.755

Louisiana 57 42 20 12 49037 44.429

Maine 45 53 15 8 51059 30.133

Maryland 43 56 -8 13 71404 33.918

Massachusetts 37 62 -13 18 68958 25.99

Michigan 48 51 -25 12 59019 33.595

Minnesota 48 51 -3 13 67140 25.338

Mississippi 60 40 -3 12 43907 45.413

Missouri 53 46 20 16 54190 33.591

Montana 59 39 7 12 44737 29.334

Nebraska 67 32 20 12 56692 26.015

Nevada 50 48 35 16 53054 35.036

New_Hampshire 49 50 2 8 61014 23.958

New_Jersey 46 53 -1 20 70983 28.138

New_Mexico 50 49 -7 16 43829 43.789

New_York 40 58 1 34 57142 35.069

North_Carolina 56 44 -18 18 54331 32.502

North_Dakota 63 35 12 7 51002 26.509

Ohio 51 49 28 14 60169 33.948

Oklahoma 66 34 2 10 47436 32.838

Oregon 48 51 32 18 55892 29.287

Pennsylvania 49 51 -3 15 58507 32.8

Rhode_Island 39 60 -2 18 62339 33.516

South_Carolina 58 41 -21 13 52111 38.424

South_Dakota 60 38 17 6 49702 31.582

Tennessee 57 42 22 14 50310 34.49

Texas 61 38 15 18 51148 31.088

Utah 71 26 23 7 54946 16.872

Vermont 39 59 45 11 53691 27.045

Virginia 54 45 -20 18 60860 29.553

Washington 46 53 9 20 61059 27.512

West_Virginia 56 43 13 8 43239 31.849

Wisconsin 49 50 -1 11 57890 28.296

Wyoming 69 29 40 9 50989 28.46


Subject: Re: The Latest from the Krugmeister
From: RL
To: Paul G. Brown
Date Posted: Mon, Nov 08, 2004 at 08:06:36 (EST)
Email Address: rafaelloring@yahoo.es

Message:
I belive this Krugman piece is not very good thinking. PG your statistics may be right but the general reasoning is weak. Let me expalin: Of course democarts can be as moral as Republicans but this is a point that goes without need for proof. Krugman use of the statistics of some individual state to make his point is rather disturbing (at least for me because I have a good opinion of him). Do the beaviour of a state represent the behaviour of the political party that has more support in it? If some particular state has a high crime rate and is won by some political party that means that this political party is a bunch of criminals? relation, corelation, causation: make your self all the questions again. RL 'Democrats need to make it clear that they support personal virtue, that they value fidelity, responsibility, honesty and faith. This shouldn't be a hard case to make: Democrats are as likely as Republicans to be faithful spouses and good parents, and Republicans are as likely as Democrats to be adulterers, gamblers or drug abusers. Massachusetts has the lowest divorce rate in the country; blue states, on average, have lower rates of out-of-wedlock births than red states.

Subject: Re: The Latest from the Krugmeister
From: Paul G. Brown
To: RL
Date Posted: Tues, Nov 09, 2004 at 05:08:28 (EST)
Email Address: paul_geoffrey_brown@yahoo.com

Message:
Yeah, I agree with you RL. (Except in so far that *any* claim needs evidence, and all PK was doing was providing some).

I think the feeling among red staters--based on what they say, how they say it, and what they sign up for in terms of beliefs--is that they *do* have an authentic and unique phone-line to the almighty. And that's a political (though not policy) problem for the Democrats.


Subject: Housing Market Collapse in Britain
From: Emma
To: All
Date Posted: Sat, Nov 06, 2004 at 21:07:17 (EST)
Email Address: Not Provided

Message:
http://money.guardian.co.uk/houseprices/story/0,1456,1345018,00.html November 6, 2004 Experts agree the only question is how fast housing collapse will be By Ashley Seager - The Guardian Barely a day goes by, it seems, without another statistic or piece of analysis about the state of Britain's housing market. Often these indicators have been inconclusive or, worse, contradictory. Homeowners - and those trying to get on to the property ladder - could be forgiven for being confused. Can they expect a market crash as the bubble finally bursts after five years in which prices have doubled, or is a manageable slowdown in prospect? The most recent reports all agree on one thing - prices are falling in the wake of the Bank of England's five interest rate increases since last November. The rate rises - to their present level of 4.75% - were in part designed to cool what the Bank saw as runaway house prices. One of the most closely watched indicators, from the Royal Institution of Chartered Surveyors, showed that the percentage of surveyors reporting price falls was the highest for nine years.... The question is, of course, what happens now? Will prices stagnate and move sideways for a few years, as the optimists think, or will they fall sharply, as they have done after every previous housing boom? It is true that the path of house prices in recent months does show remarkable similarity to that at the top of the last housing boom in the late 1980s but that may be no more than coincidence.... John Calverley, chief economist at American Express Bank, says house prices would have to stay still for about eight years to allow earnings to catch up, a scenario he thinks highly unlikely. He thinks the housing market is in the 'mother of all bubbles' and will probably drop by 30% in the next couple of years. Another bear, Ed Stansfield of consultancy capital economics, says than in previous busts, house prices have begun to fall before the economy slowed sharply, meaning that house prices do not need an economic slump to slow. An increasing number of anlaysts are moving into the bear camp as the evidence mounts that prices are beginning to fall, remembering that markets are driven by fear and greed. Greed ruled in recent years as prices rose. Now fear is taking over as prices begin to fall. This is important because the optimists argue that house prices are high at least in part because there are not enough properties available and house building is at the lowest for decades. Thus, if prices dip a bit, many first-time buyers will jump into the market. But any study of market psychology shows that buyers traditionally shun a falling market until they are sure that prices are no longer falling.

Subject: Housing Market in Britain
From: Emma
To: Emma
Date Posted: Sat, Nov 06, 2004 at 21:20:17 (EST)
Email Address: Not Provided

Message:
The proponents of [the bubble] argument point to the misalignment between average earnings and house prices. The ratio, which historically averages 3.5, is now up at nearly 6, well above the level in the last boom. This will have to correct itself, they argue, and through a fall in house prices rather than growth in earnings.

Subject: US housing market
From: Pete Weis
To: Emma
Date Posted: Sun, Nov 07, 2004 at 01:33:31 (EST)
Email Address: Not Provided

Message:
November 04, 2004 Home Values Built on Rotten Foundations by Richard Benson We have been gleaning facts 'brick by brick' in order to write this story on the housing market and what it all means for Wall Street and the economy. The story is simple: While the Federal Reserve is slowly raising interest rates, it is our observation that the housing price bubble is already bursting of its own accord. Let me begin with the sale of a property located a short distance away from our modest casa in Palm Beach, where the big houses have names. Casa Apava, an estate with ocean and lakefront land totaling 18 acres, is under contract for about $70 Million by its current owner, Ronald Perelman. This same property sold for $14.25 Million in 1987. If the sale goes through, it will be the largest residential real estate sale in United States' history. (In 2004, the property was assessed for $33.4 Million and taxes were a modest $664,000 a year, or $55,333 a month). Needless to say, the buyer is reported to be the chairman of NVR, Inc., the nation's eighth largest home builder. Clearly, selling homes at inflated prices to average Americans, who bought them using other people's money, has paid off handsomely for this buyer. The size of the housing bubble should not be underestimated. In middle America, housing prices are up 44 percent over the past 5 years while in the momentum markets, such as Las Vegas and Southern California, annual 'price pops' of 20 to 40 percent have commonly been recorded until just recently. Housing is big business. In 2004, about 8 million new and used homes will sell with a total transaction value of $1.9 to $2 Trillion. Mortgage debt will rise about $800 billion to $7.5 Trillion by the end of this year. The increase in mortgage debt represents the spending that the Bush Administration needed to keep a $12 Trillion economy moving forward. The good news is that home ownership rose 2 percent to an all time record of 67.2; the bad news is what had to be done to get it there while the labor force participation rate has dropped 2 percent! In other words, easy credit and record low interest rates have boosted home sales. In previous economic cycles, the boost to home sales came from rising incomes and more jobs! Easy mortgage credit has been fostered by new mortgage products. New types of mortgages have been introduced over the past couple of years that transfer interest rate risk from the financial institution (mortgage owner), to the borrower, while allowing the borrower to take out the largest possible mortgage. Long gone are the days when a borrower borrowed what was considered a safe, prudent amount that they could actually pay back. Today, the borrower takes every penny that lenders will lend. In turn, lenders have 'gone crazy' because at the end of the day, the lender is not lending 'his' money. The loans go to a GSE security, or into a rated mortgage security, which in turn is bought by a bank or Hedge Fund that is invested just for a short term in the 'Cash and Carry Trade'. Today, the new mortgage lenders are offering various types of mortgages to keep mortgage volume and quick origination profits up. These mortgages include Adjustable Rate, Interest Only, 40-Year, and Piggy Back. A Piggy Back mortgage is a senior mortgage combined with a junior mortgage that can leave the borrower owing more than 110% of the cost of the house. Moreover, these lending tactics leave the borrower more than a bit stretched and short liquidity, so it is no surprise that new mortgages that allow the borrower to skip payments and add the interest to principal are becoming popular. What will lenders who don't lend their own money think of next? If these new types of mortgages aren't good enough to stretch a consumer's buying capacity, a few years ago special charities sprang up to give a home buyer his 5% down payment. (Since a home builder was giving the charity their funds anyway, he could easily 'give back' 5% of his 30% profit to charity. Clearly, charity starts at home! On top of that, President Bush signed the 'American Dream Down Payment Act of 2003'. This legislation authorized $200 Million per year in down payment assistance to at least 40,000 low-income families. His goal was to increase the number of minority homeowners by at least 5.5 million before the end of the decade. Under Federal Law, if you are a first time home buyer and your income is 20 percent less than the local medium income, your neighbor - the US taxpayer - will give you the greater of $10,000, or 6% of the cost of the home to buy it! Thus, sub-prime borrowers have influenced home ownership rates considerably. However, there are some sobering facts about sub-prime borrowers. They are twice as likely to pick an ARM mortgage. (ARM mortgages are already 30% of new home loans and, as the Federal Reserve raises interest rates to normal levels, the monthly payment on an ARM will go up over 25 percent). Moreover, sub-prime borrowers frequently refinance. Borrowers who refinance for cash-out are twice as likely to default as those who don't take cash out. Currently, 70 to 80 percent of sub-prime mortgages are debt consolidation loans which add credit card and other debt onto the house! These sub-prime mortgages have a terrible record. At least 16 percent are delinquent or in foreclosure, and 4.6 percent are actually in foreclosure. The 'funny money' down payment mortgages are worse, with defaults running close to 20 percent. The Federal Housing Administration, FHA, which insures these loans, says national FHA mortgage defaults are 11 percent, while in cities like Baltimore, Maryland and Queens, New York, the default rates for FHA loans are 21 percent and 25 percent. Perhaps more lenders could do what FNMA does with loans heading to default: Re-write half of them and call them 'good'. Remember, 'A rolling loan gathers no loss.' Also, with the Fed making money free, and the government trying to give money to sub-prime borrowers regardless of their willingness or ability to pay, the private sector is trying to get back in the lead of 'the easy money free for all'. The FBI has reported that in the first 9 months of 2004, 12,100 complaints of suspicious activity in the mortgage market have been reported. Fraud hot spots include the usual suspect states such as Florida, California, and Nevada with honorable mention to Michigan, Illinois and Missouri. (At least this restores my pride in the Midwest). Moreover, the reported fraud would be higher except that i) most of the FBI are out looking for terrorists, and ii) fraud big enough to interest the FBI only includes something like the house or buyer not even existing. Most mortgages written today have a bit of a fudge factor in the total honesty of income and net worth. Much information is excluded from debt and payment histories, and 'appraisals are either wish or myth.' Even the Mortgage Bankers Association recognizes that the home appraisal process is totally broken. In reality, with easy money allowing home prices to rise, fraud has become a way of life in the mortgage market because every participant makes a commission or fee if the mortgage closes. The higher the house price, the bigger the mortgage! Looking back at the facts, it is easy to see that the foundation for housing prices is rotting fast. Buyers have stretched the truth, in every possible way, in order to buy the most expensive house for the lowest possible monthly payment. Given the fraudulent loan underwriting and emphasis on Adjustable Rate mortgages and sub-prime loans, it is clear that any rise in mortgage rates will bury housing. At the high end of the housing market, there are reports of 'Yuppie Fatigue'. Super-sizing homes also super-sizes the heating and utility bills, insurance and maintenance costs. Those vaulted ceilings sure look nice, but watch out for the heating bill! Million dollar home foreclosures are picking up. In the general housing market, 5 to 6 percent of homes already have more debt than home value, and homeowners are loading up with home equity loans and lines of credit. These home equity loans and lines will be up to $400 billion in 2004. Home equity can be spent, but as home prices stop going up, more and more homes will have 'no equity left'. Currently, wages and salaries have not kept up with inflation despite 'economic recovery'; bankruptcies will hit another all time record of over 1.6 million in 2004. Forty five percent of workers have total net assets of less than $25,000 (including the value of their house) and less than 4 of 10 workers save anything. All of these facts were in place well before oil and natural gas prices headed north for the economic winter. Reasonable estimates show the average household bill for gas for the car and energy for the home will be $9,000 in 2005, up from $6,000 last year. Other costs of running a household would put people in the poorhouse, but it's too expensive to check in. This Christmas, Santa might skip homes that are draining their home equity. Does housing always go up forever? In the United Kingdom where housing prices have soared like in America, prices fell last month. Real estate agents can't be found to talk about it, as it is bad for business. In San Diego, housing prices have been flat the last couple of months while the supply of homes for sale has jumped from a 2-month to an 8-month supply. In Las Vegas there is an unfolding house price debacle. The national public has heard that the large developer, Pulte Homes, has cut new home prices by 8 to 25 percent, and 25 percent of new homes on order have just been cancelled. However, the public hasn't heard that i) 20 to 40 percent of sales in new planned unit developments were to speculators; ii) For-Rent signs in the complexes are everywhere. (To make some easy money on the flip, buyers of second and third homes planned to rent them out first); and, iii) Homes that sold for $750,000 just three months ago are across the street from homes that the same developer is selling today at a nice profit for $550,000. 'The Las Vegas housing market has crapped out!' In the United States, the supply of new homes has risen steadily to a 275 day supply. Six of the 14 largest home builders have debt-to-equity ratios of 95 percent, and home builders know exactly what the car companies know: 'If you want to move inventory, cut the price!' If home lenders would only read history they would know that from 1975 to 1995, on average home prices rose only 0.4% and with prices sagging now, they should ask for a larger down payment, and fast, or they will be facing big losses. In a market where housing prices are flat, it takes a 15 to 20 percent down payment to protect a lender against loss. The sales commission is 6% and REPO, carry, and marketing costs can run another 10% or more. What would a rational down payment mean for housing prices? Today, a buyer who can scrape up $20,000 for a 5 percent down payment can afford a home priced at $400,000. If you ask him for a 10 percent down payment, he can suddenly only afford a home costing $200,000! Rational down payments will force housing prices down. Whatever you do, please do not share this observation with existing homeowners; they might want to sell before I have had a chance to follow up with Ron Perelman's example. Richard Benson Benson's Economic & Market Trends Specialty Finance Group, LLC Prior to founding the Specialty Finance Group in 1989, Mr. Benson acted as a trading desk economist for Chase Manhattan Bank in the early 1980's and started in the securitization business in 1983 at Bear Stearns, and helped build the early securitization businesses at Citibank and E.F. Hutton. Mr. Benson graduated from the University of Wisconsin in 1970 in the Honors Program in Math, and did his doctoral work in Economics at Harvard University. Mr. Benson is a member of the Harvard Club of New York and Palm Beach.

Subject: A Problem
From: Terri
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 14:10:22 (EST)
Email Address: Not Provided

Message:
'If home lenders would only read history they would know that from 1975 to 1995, on average home prices rose only 0.4% and with prices sagging now, they should ask for a larger down payment, and fast, or they will be facing big losses.' I find this hard to believe and would like to know where the data comes from. Possibly the 0.4% figure represents real price growth.

Subject: Answer to Problem
From: Pete Weis
To: Terri
Date Posted: Sun, Nov 07, 2004 at 14:58:36 (EST)
Email Address: Not Provided

Message:
Pretty amazing stat isn't it. We're so brain washed into thinking that real estate is always such a good investment. This 0.4% doesn't even take into account other expenses like buying and selling costs. It costs sellers an average of nearly 10% of the selling price to sell their house when you calculate agent commissions, state excise taxes, lawyers or escrow/title agent fees, etc. Buying includes mortgage fees, inspection and appraisel fees, etc. If you think 1975-1995 were simply bad years for real estate, I'm betting they will seem like superb years compared to 2005-2015. 'One big issue: inflation. Strip the impact of inflation out of home price appreciation, and home prices rose at a measly 0.4 percent a year between 1975 and 1995.' - Gerri Willis CNN/MONEY Here's the whole CNN article: What is your house worth? 5 Tips: Putting a value on your house. June 18, 2004: 5:18 PM EDT By Gerri Willis, CNN/Money contributing columnist NEW YORK (CNN/Money) - How good an investment is your home? Seems like a simple enough question. But for most of us, coming up with a clear-eyed analysis of the value of our house is tough. After all, your house is more than bricks and mortar, it's where your children grow up and you share family memories. Most homeowners talk about the meteoric rise in home prices when they think investment values. After all, median prices are up 7.4 percent this year to $174,100 as of March. But there's more to value than price tags. So where do you start and, what can you do to maximize your investment? Here are today's five tips. 1. Think total return. One way to think about what your house is worth is to apply the metrics of the stock market. Total return on a stock is the combination of dividends and capital gains. The capital gains part of the equation for housing is easy enough to figure out -- compound growth in housing prices has been rising at a rate of 5.8 percent a year. Check the Web site of the Office of the Federal Housing Enterprise Oversight to find a growth rate that applies to your market). Next, add in what Peter Coy at BusinessWeek calls the 'dividend,' or that amount of money you save each year by not having to pay rent to a landlord. Be sure to take out any homeowner's expenses, such as utilities and upkeep. For many people the annual dividend is roughly 6 or 7 percent. To make your own calculation, simply scan your newspaper's real estate ads to get a sense of how much a house of similar size and in a similar location would rent for in your neighborhood. Another bit of analysis you may want to conduct: an estimate of just how overvalued your home might be. Just as a price-to-earnings ratio in the stock market helps investors determine when they are overpaying for a stock, a P/E can also be calculated for your castle. Divide the price your house is likely to draw in today's market by the price it could fetch as a rental. Naturally, as with stock market P/Es, you'll have to make comparisons over time and between markets, according to UCLA economist Ed Leamer. 2. Understand leverage. Part of the equation of determining your return year to year -- and one of the big advantages of real estate -- is the fact that your returns are figured on a small outlay compared to the value of the asset. You are, in effect, using other people's money to make your own money and magnify your return. Think of it this way: let's say you bought a $500,000 house in cash, and its price went up to $505,000 after one year. Your annual return on your $500,000 investment would be a measly one percent. The vast majority of homebuyers, as we all know, take out a mortgage loan, putting down a fraction of the home's value, increasing their leverage and their returns. Consider, if you buy the house with a $5,000 down payment, and the home rises $5,000 in value, then the annual return is a whopping 100 percent. 3. Cut your transaction costs. Now that you know how to analyze your home as an investment, it's time to start managing your home as an investment. To improve the value of it, you'll want to think about those costs that can add up in a hurry -- like transaction costs. Remember, stock investing became much more attractive after commissions were deregulated. But for housing, transaction costs are high. Consider this comparison from Coy, 'you don't want to be churning over your house every couple of years. To sell $500,000 in stock may cost you $300 if you got a good discount broker. To sell a $500,000 house could cost you $40,000 after you pay a broker and every other lawyer fee.' Reduce your outlay -- and improve your return -- by holding the investment for a longer period of time. 4. Think liquidity. Popular wisdom holds that real estate is an illiquid investment. Think about it: To sell a home, you have to hire a real estate agent, market the property, hold an open house. But these days, consumers have more access to their home equity without selling their homes. In addition to the tried and true home equity loan and home equity line of credit, cash-out refis have gained popularity. These products allow consumers to tap the equity in their home and lock in a lower rate of interest as well. 5. Don't forget the differences. While there are plenty of similarities between real estate and other types of investment, such as stocks and bonds, there are also big differences. One big issue: inflation. Strip the impact of inflation out of home price appreciation, and home prices rose at a measly 0.4 percent a year between 1975 and 1995. That's the bad news. The good news? Other asset classes get creamed by inflation. Bonds returns, for example, are steadily eroded by inflation; while stock values can be hurt as well as companies lose control over their costs. Another comparison: The ease of selling. Unloading a stock or bond is as easy as picking up the phone and calling your broker, but selling a house takes more time. True, you can tap your equity with ease, but selling on a moment's notice can be difficult and expensive.

Subject: Excellent
From: Terri
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 15:07:34 (EST)
Email Address: Not Provided

Message:
Excellent Article. Thanks....

Subject: Market Returns
From: Terri
To: All
Date Posted: Sat, Nov 06, 2004 at 13:30:34 (EST)
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Message:
Vanguard Returns 12/31/03 to 11/05/04 S&P Index is up 6.3% Value Index is 9.9% Growth Index is 2.7% Small Cap Index is 11.2% Small Value is 14.5% Europe Index is 12.4% Pacific Index is 10.8% Energy Fund is 31.1 REIT Index is 19.6 Health Care Fund is 4.6%. Long Term Corporate Bond Fund is 6.6% High Yield Corporate Bond Fund is 7.7%.

Subject: Dollar Hedging
From: Terri
To: Terri
Date Posted: Sat, Nov 06, 2004 at 13:52:58 (EST)
Email Address: Not Provided

Message:
Why not simply hold the Europe Stock Index against a possible continuing weakness in the dollar? Waiting for a crisis, would seem a foolish strategy. Europe Stock Index valuations are reasonable, so why not use a serious investment and expect an orderly currency market with a gradually weakening dollar. Should the dollar not weaken, you hold a fine set of companies.

Subject: Buying Sears for the Real Estate
From: Emma
To: All
Date Posted: Sat, Nov 06, 2004 at 11:27:25 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/06/business/06sears.html Sears Stock Jumps as Realty Trust Discloses Stake By CONSTANCE L. HAYS Sears, Roebuck, once the king of American retailers but lately struggling for shoppers, has finally attracted a big one - not for its tools and appliances, but for its real estate. The share price of Sears, Roebuck soared 23 percent yesterday after Vornado Realty Trust, the large real estate investor, said that it had acquired a 4.3 percent stake in the retailer. Sears has been trying to turn around its performance for several years, with limited success. As it has redesigned stores and added to its merchandise in hopes of increasing sales, competitors like Wal-Mart Stores and Lowe's have snatched away its customers. In July, Vornado began buying Sears stock as well as derivatives held by a bank. Its move seemed to suggest that Sears might be worth more as a collection of real estate holdings than as a purveyor of clothing, housewares and other goods. Sears owns about 60 percent of its 870 Sears stores, a spokesman said, and leases the rest. There are also 1,100 independently owned and operated outlets for appliances and tools. A spokeswoman for Vornado, which is publicly traded and based in Manhattan, would not discuss the investment. In a quarterly report that was filed yesterday with the Securities and Exchange Commission, Vornado said it had acquired the stake in Sears from July through September, paying about $40.6 million for 1.18 million shares of common stock and another $64.2 million for what it called 'an economic interest' in 7.9 million shares held by a financial institution. Vornado estimated the market value of its Sears holdings at $338.1 million, based on the Sears closing price on Thursday, which was $37.18 a share. Sears stock closed at $45.88 yesterday, bringing the value to $418 million. Ted McDougal, a spokesman for Sears would not comment on whether the investment came as a surprise to company management. He said no other real estate investment trusts held stakes in Sears. 'We are pleased that Vornado sees value in our stock,' Mr. McDougal said. 'We believe we have a sound plan to create sustainable increases in shareholder value.' Vornado owns the Merchandise Mart tower in Chicago. It also owns 33 percent of Alexanders, the department store chain, which it has held for about 20 years. For Sears, attracting real estate investors may be easier than turning around what has been a losing proposition with the stores. Sears sold its lucrative credit card business to Citigroup last year and has been trying to woo shoppers by looking beyond the shopping malls where most of its stores are concentrated. In much of the country, strip malls have replaced shopping malls as destinations. It has also sought to improve its assortment of goods, particularly apparel, but has had mixed results. The Lands' End line, purchased for $1.9 billion two years ago, has had sluggish sales in many areas. A new store concept called Sears Grand, which is being developed in strip malls, adds products like milk and frozen pizza to the usual Sears lineup; the company says sales have been impressive but says it is too early to tell about profits.

Subject: Re: Buying Sears for the Real Estate
From: Ari
To: Emma
Date Posted: Sat, Nov 06, 2004 at 11:43:06 (EST)
Email Address: Not Provided

Message:
Now, this is real estate speculation. Buy a fading retailer, not to turn it around but for the possible low cost of the real estate on its Sears' books.

Subject: Is the fall in the dollar........
From: Pete Weis
To: All
Date Posted: Sat, Nov 06, 2004 at 11:08:13 (EST)
Email Address: Not Provided

Message:
in anyway equivalent to the tariff wars of the 1930's? During the '30's, competing global markets were stuck with overproduction and attempted to dump their cheap products on each other's markets. This started tariff wars which resulted in heavy worldwide unemployment. Today the US dollar is plunging. Some of this is due to bad fiscal and monetary policies. But their is also an element of 'benign neglect' by our government, since they view the falling dollar as a way to deal with our trade deficit. The problem, however, is that wage increases are not keeping pace with the dollar shrinkage. And this at some point, if it isn't already, will have a downward effect on consumption. The Chinese counter this dollar shrinkage by pegging their currency to the US dollar. The Japanese keep printing more yen which they use to purchase US dollars in their effort to counter the dollar drop. Because of this it's costing Chinese and Japanese businesses more and more to purchase the raw materials and energy needed to manufacture their products. France's Chirac has recently expressed his worry about the dollar fall and is pressing Europe's central banks to take action in an effort to shrink the Euro. If they don't AirBus, Volkswagon, Mercedes, Saab, etc. will be laying off workers in the near future. The Europeans will be forced into following the US dollar downward or face angry unemployed voters. Won't this, in effect, become a broad based 'tariff war'? Isn't it a tariff war disguised as a currency war? If wages in North America and Europe do not keep up with the drop in their respective currencies, what will this do to the main engines of world consumption? How is this really different to what happened in the '30's?

Subject: Re: Is the fall in the dollar........
From: Terri
To: Pete Weis
Date Posted: Sat, Nov 06, 2004 at 11:26:20 (EST)
Email Address: Not Provided

Message:
Interesting argument. What if the European central bank decides to support the dollar? The Euro countries may choose to support the dollar to protect export markets, but an advantage in a weaker dollar is less expensive energy imports. Oil and gas are priced in dollars, and energy is expensive in the Euro countries though they are more efficienct in energy use than America. Well, there will not be mass layoffs in Europe. The Volkswagon contract is an example of the security labor has. The Euro countries can opt for more domestic monetary or fiscal stimulation to keep domestic demand high. Labor is too well protected in the Euro countries for there to be major layoffs. So, possibly the dollar will be supported. Interesting.

Subject: Re: Is the fall in the dollar........
From: Terri
To: Terri
Date Posted: Sat, Nov 06, 2004 at 16:38:56 (EST)
Email Address: Not Provided

Message:
There will be all sorts of trade and echange rate frictions btween America and Europe and Pacific trade partners, but this is not 1930. America wishes a weaker dollar, but will settle for stability. We will push China and China will push back, similarly for Japan and the Euro countries. There are simply better tools available for managing domestic demand, so trade need not be a weapon. Sharp movements of the dollar may be caused by speculators, but not foreign central banks.

Subject: What's different?
From: Pete Weis
To: Terri
Date Posted: Sat, Nov 06, 2004 at 19:26:30 (EST)
Email Address: Not Provided

Message:
Terri. Do we behave differently now in the 1990's and the early 2000's than we did in the 1920's and 1930's? Pretty much all of the 'safeguards' put in place in the '30's have been rescinded or do not apply presently. The stock manipulaters of the 20's are now insiders who fudge the accounting, investment bankers and brokerages who pay 'analysts' handsomely to hype stock and look the other way. Insiders are required to report stock transactions but nearly all small investors pay no attention anyway. People now have their life savings tied up in their homes and 401K's and not in the bank. Besides if depositors hear that their bank is in some trouble they'll pull their deposits anyway, FDIC or no FDIC. Banks survive on their reputation - they have no real assets. If their reputation is significantly damaged they're out of business. Total-Debt-to-GDP reached a then record 270% around 1930. The debt dropped mostly through bankruptcies and settle around 140% by the late 30's and remained that way until the 90's through the present when it now has reached a new all time record of 300%. Supposedly we learned our lessons regarding trade wars but the currency wars we're in right now look very similar, and will probably impact consumption and therefore employment in much the same way as the buying power of paychecks shrink. If we connect the dots - huge debt results in shrinking currency which results in the shrinking power of paychecks which results in dropping consumption which results in higher unemployment which results in lots of bankruptcies which sheds all the debt which can not be paid. This is somewhat different from the 30's where the dollar entered that decade backed by a gold standard. That's why trade wars took the form of tariff wars. Today with no gold backing to prohibit intentional currency shrinkage it seems more 'stealthy' to launch a trade war on your trading partners by running your currency lower and lower without hopefully 'crashing' it. But it draws everyone into the same game. We were supposed to avoid the 1930's scenario by avoiding trade wars and pumping money into the economy. But the central banks and the Fed can not control where all that money goes. Unfortunately it has not found its way into significantly more jobs or higher wages. All that extra money has found its way into inflated assets such as housing. This is why the Fed is now impotent should too steep a drop in the dollar begin. They can not raise rates like Volker did to stem the dollar fall and raging inflation of the 70's, because it would threaten inflated assets which now have become the underpining of our economy.

Subject: Re: What's different?
From: Terri
To: Pete Weis
Date Posted: Sat, Nov 06, 2004 at 20:53:41 (EST)
Email Address: Not Provided

Message:
A loss in the value of the dollar will gradually raise some import prices, which will increase domestic consumption. Raising domestic consumption along with more demand for American exports, will increase business activity and likely employment. Profits for American companies with foreign exchange earnings will increase. There will be no reason for the Fed to raise interest rates, because a loss in value of dollar has not proven a problem in the past and should not now. I think the dollar will decline in value, and I have prepared for just this by buying the Europe Stock Index, but I am not worried about the economic effects. The problems of low household saving and government deficits, however, are worrisome. These problems have been leading to the balance of payments deficit and the weakening dollar. Since I do not know how or when these problems will become clear, I am watching and reading and keeping a cautious but invested portfolio. I read each of your posts several times, and often save them! I will continue to do so! Thanks.

Subject: Alice and Ralph
From: Pete Weis
To: Terri
Date Posted: Sun, Nov 07, 2004 at 02:12:25 (EST)
Email Address: Not Provided

Message:
'A loss in the value of the dollar will gradually raise some import prices, which will increase domestic consumption.' We have been posting articles on this site about how the goverment uses hedonics and substition to reduce the CPI number. Bill Gross and others before him have detailed this manipulation of inflation. I posted an article regarding some US appliance manufacturers who were having to pass on the higher prices, for the material (steel, plastic, etc) with which they made their products, on to their customers. Reported wage increases have actually been lower than the the artificially low CPI number reported. This is what I mean by the shrinking buying power of paychecks. We've talked a lot about the higher costs of food, insurance, energy, housing, etc. All of these increases are happening faster than increases in the average paycheck are able to absorb. So I see a drop in domestic consumption and overall consumption going hand-in-hand with a drop in the dollar. For the wealthiest Americans this drop in the dollar does not threaten their ability to maintain their living styles. But for the average, middleclass Ralph and Alice Cramdens out there it will have and is having a tightening vice like affect. I believe our economy depends on the tens of millions of Ralph and Alice Cramdens out there.

Subject: Re: Alice and Ralph
From: Terri
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 07:03:51 (EST)
Email Address: Not Provided

Message:
Until concern with the consumer price index is raised by independent academic economic, we should be cautious about accepting the complaints of bond buyers. Bond buyers always want higher interest rates. Still, the increased price of energy does act as a tax hitting hardest middle and low income households.

Subject: Re: Alice and Ralph
From: El Gringo
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 02:18:32 (EST)
Email Address: nma@hotmail.com

Message:
'I believe our economy depends on the tens of millions of Ralph and Alice Cramdens out there.' Pete, I believe that 'every healthy economy' depends on the tens of millions of Ralph and Alice Cramdens.

Subject: Re: What's different?
From: Terri
To: Terri
Date Posted: Sat, Nov 06, 2004 at 21:59:18 (EST)
Email Address: Not Provided

Message:
Even a sharp rise in interest rates, would result in little price decline for the Short Term Bond Index, so I would almost always choose such a holding over a money market fund. The duration of the Short Term Index is about 2.5 years. There are ways to be most secure but still hope for returns above a money market.

Subject: More 'Wolf at the Door'
From: Pete Weis
To: All
Date Posted: Sat, Nov 06, 2004 at 10:12:25 (EST)
Email Address: Not Provided

Message:
Close, but no cigar Nov 3rd 2004 From The Economist Global Agenda Same president, same soaring deficits, same market worries? SO THE votes have been mostly counted and George Bush has been elected for a second term as president. No political analyst, Buttonwood leaves the possible socio-political consequences of his re-election to those with more expertise. What, he wonders, will be the effects on financial markets? In the run-up to the election, there was much speculation about what the election of either John Kerry or Mr Bush would mean for financial markets. Worst of all, thought many commentators, was the possibility of a re-run of 2000, only more so: that not just Florida but a handful of states might be snarled up in legal wrangles at a time when leadership of the world’s biggest economy is sorely needed. As it turns out the election, though close, was not nearly as close as many had feared. That has clearly relieved many investors. Stockmarkets (the risky investment) popped up; government bonds (the safe-haven investment) fell a bit; and the dollar rose a very little bit. Possibly, too, this was something of a vote for Mr Bush. Even though the stockmarket has done dismally over the past few years and stockmarkets have historically done better under Democratic presidents, Mr Bush has been seen as more favourable to the stockmarket this time round, largely because of his record of individual and corporate tax cuts, and because he wants to make permanent many of these reductions. Mr Kerry, in contrast, wanted to scrap some of them. Well, perhaps, at the margin, there may have been some differences between the two candidates, though Buttonwood has searched in vain for anything approaching coherence in either platform. But neither candidate, certainly not Mr Bush, was prepared to address what is, bar perhaps the terrorist threat, the most serious of all the questions facing the long-term prospects for the American economy, and by extension the stock and bond markets: the rising tide of red ink that is washing over it. That tide has risen at a fearful pace in part because Mr Bush’s huge tax cuts have been matched by similarly huge spending. Thus has the government fallen ever deeper into debt. Early in 2001, the Congressional Budget Office (CBO) had predicted a budget surplus over the ensuing ten years of $5.6 trillion. It was in order to return some of this projected surplus to those who had earned it that Mr Bush originally proposed his tax cuts. Financial markets even pondered a life—how long ago this now seems—without Treasury bonds. In its latest outlook, in September, the CBO predicted a deficit over the next ten years of $2.3 trillion. But that projection assumes, among other unrealistic assumptions, that most of the tax cuts are allowed to expire. With Mr Bush back in the Oval Office, that hope will almost certainly prove as optimistic as right-thinking people thought it was in the first place. Mr Bush has said that he wants to halve the deficit, but nothing he has said or done, nor any half-baked plan that he has come out with, gives any cause for hope on this score whatsoever. Independent number-crunchers think that the deficit over the next ten years will be $5 trillion-$6 trillion—more than twice the CBO’s estimates. Nor have Americans proved any less spendthrift than their leader. Their habit has also been financed largely by debt, which has risen remorselessly. Since 1998, households’ debts (from mortgages to credit-card balances) have risen from 90% of their annual disposable income to some 114%, a record high. As a result, almost a fifth of household incomes are now spent on servicing these debts, not far off another record. And the latter figure is all the more troubling when you consider that, with a Fed Funds rate of 1.75%, short-term interest rates are still pretty close to historic lows and long-term rates are pretty meagre, too. It used to be that this did not much matter, because home-buyers borrowed long term and at a fixed rate. In recent years, however, they have taken advantage of the sharp difference in short- and long-term rates to shift to floating-rate borrowing. Much of this borrowing has been used to finance the purchase of property that is, by any historic yardstick, very expensive. These huge and growing debts show up in the country’s huge and growing current-account deficit, which is now close to 6% of GDP and shows no sign of shrinking. Were America an emerging economy, warning lights would be flashing red and investors would be rushing for the exit. But so far investors from other countries have been happy to finance this deficit. In the past, most of the appetite for dollars came from private investors. Recently, however, private demand has evaporated, and the dollar has been supported by gargantuan purchases from Asian central banks anxious to keep their currencies from rising too much against the dollar. Since 2001, the foreign-exchange reserves of Asian central banks have increased by $1.2 trillion—or about two-thirds of America’s accumulated deficit over the period. These purchases have kept the dollar stronger than it would otherwise have been and American interest rates lower. Foreign central banks will not carry on financing this deficit for ever. But what will happen to the dollar, to interest rates and to the American economy when they stop? On these questions Buttonwood finds it hard to be sanguine. A good outcome would be a gentle but sustained fall in the dollar. A bad outcome would be a dollar crisis. Even then, bond yields might stay relatively low because of disinflationary pressures, but Buttonwood has no certainty about this: they could rise sharply because of a general shunning of dollar assets. Short-term interest rates might have to rise, again sharply, to attract the necessary saving. A combination of lowish long-term bond yields and much higher short-term rates would hit corporate profits hard, because perhaps half of them come from financial firms of one sort or another, and financial firms benefit hugely when short-term rates are much lower than long-term ones. Sharply higher rates would also bring an economy laden with debt to a juddering halt. Demand would shrink as consumers saved more. This would also hit corporate profits hard, presumably bringing an overvalued stockmarket down with them. Defaults, both individual and corporate, would increase. Bad debts would rise at banks; yields on riskier bonds, which have fallen to extraordinarily low levels, would rise sharply. That, admittedly, is perhaps the gloomiest scenario, though it doesn’t even mention an escalation of the worsening problems in the Middle East, nor another terror attack. It may not happen, it may happen slowly, or America’s nine-lives economy may carry on muddling through: it is, after all, humming along quite nicely at the moment. But the re-election of Mr Bush does nothing to ease Buttonwood’s long-term fears. That would take an administration with far greater intellectual clout and economic literacy than the bunch that has just kept control of the White House.

Subject: Re: More 'Wolf at the Door'
From: Ari
To: Pete Weis
Date Posted: Sat, Nov 06, 2004 at 10:36:03 (EST)
Email Address: Not Provided

Message:
Though we obviously have a lack of private savings, and a large and growing public debt, election on election should show the folly of using savings and debt as campaign issues. We are a consuming and borrowing and low tax loving people. If Gray Davis had learned to love debt, he would be Governor of California still. Californians want low taxes, and debt will be paid by borrowing. Americans did not wish to hear John Kerry talk about a tax increase, even though most would be better off for the tx increase. At least, Democrats have to know what issues to stay away from.

Subject: You are right Ari but....
From: Pete Weis
To: Ari
Date Posted: Sat, Nov 06, 2004 at 11:16:03 (EST)
Email Address: Not Provided

Message:
is it worth getting elected to face what the Republicans face in the coming 4 years with no mandate to fix the real problems? They ran on a message which dooms them to failure and I believe the Grand Old Party may take along time to recover. Unfortunately, I also think it will take America a long time to recover.

Subject: Re: You are right Ari but....
From: Ari
To: Pete Weis
Date Posted: Sat, Nov 06, 2004 at 11:37:54 (EST)
Email Address: Not Provided

Message:
Trying to cut the deficit by raising taxes, cost the Democrats a majority in Congress during the Bill Clinton Presidency. The deficit was turned to surplus, but the Congress become Republican.

Subject: Foreign Investment
From: Ari
To: All
Date Posted: Sat, Nov 06, 2004 at 06:51:52 (EST)
Email Address: Not Provided

Message:
There is every reason to think the dollar is being sold by currency traders. The trading has little risk. The Treasury has no reason to defend against an orderly decline in the value of the dollar, since the decline will help ease the balance of payments deficit. We should have international investments to protect against what may be years of a weak dollar. The dollar was weak from 1985 to 1991, another such time frame seems in an early stage. We need to discuss low cost practical investments to protect against the weakening dollar.

Subject: Re: Foreign Investment
From: Jennifer
To: Ari
Date Posted: Sat, Nov 06, 2004 at 09:32:44 (EST)
Email Address: Not Provided

Message:
How are you investing to protect against a weakening dollar?

Subject: Misreading the election results
From: A Right Winger
To: All
Date Posted: Sat, Nov 06, 2004 at 01:03:09 (EST)
Email Address: Not Provided

Message:
Let the Cocooning Begin (http://www.chicagoboyz.net/archives/002582.html) Chicago Boyz www.chicagoboyz.net/archives/002582.html

Subject: Foreign Exchange
From: Terri
To: All
Date Posted: Fri, Nov 05, 2004 at 20:42:51 (EST)
Email Address: Not Provided

Message:
Berkshire Hathaway was holding $20 billion in foreign exchange forward contracts at the end of the third quarter. Then, we know where the dollar is trending.

Subject: Re: Foreign Exchange
From: Ari
To: Terri
Date Posted: Sat, Nov 06, 2004 at 06:55:17 (EST)
Email Address: Not Provided

Message:
When Warren Buffett looks ahead, we should look ahead. Evidently Buffett has been protecting Berkshire Hathaway against a weak dollar for at least 2 years.

Subject: Globalization and the Dollar
From: El Gringo
To: All
Date Posted: Fri, Nov 05, 2004 at 18:45:33 (EST)
Email Address: nma@hotmail.com

Message:
Globalization and Anti-Americanism by Joseph S. Nye Anti-American sentiments are rising around the world. American Democrats say that President Bush's policies have squandered America's attractiveness. Republicans reply that America is bound to be resented because of its size and its association with globalization. Anti-Americanism, they say, will persist because some people see America as a cultural threat. I believe that such views lack historical perspective. Contrary to conventional wisdom, globalization is not homogenizing and Americanizing the cultures of the world. Although the United States is at the forefront of the current information revolution, which is creating many similarities in social and cultural habits (such as television viewing or Internet use) that are attributed to Americanization, correlation is not causation. To see why, imagine a country that introduced computers and communications at a rapid rate in a world in which America did not exist. You would still expect major social and cultural changes from such modernization. Of course, because the US exists and is at the forefront of the information revolution, there is a degree of Americanization, but that is likely to diminish over the course of the twenty-first century as technology spreads and local cultures modernize in their own ways. Historical proof that globalization does not necessarily mean homogenization can be seen in Japan, a country that deliberately isolated itself from earlier waves of globalization. In the middle of the nineteenth century, Japan became the first Asian country to embrace globalization, and to borrow successfully from the world without losing its uniqueness. During the Meiji Restoration, Japan searched broadly for tools and innovations that would allow it to become a major power rather than a victim of Western imperialism. It sent young people to the West for education. Its delegations scoured the world for ideas in science, technology, and industry. In the political realm, Meiji reformers were well aware of Anglo-American ideas and institutions, but deliberately turned to German models because they were deemed more suitable to a country with an emperor. The lesson that Japan teaches the rest of the world is not simply that an Asian country can compete, but that after a century and a half of globalization, it is possible to adapt while preserving a unique culture. More fundamentally, the image of a homogenizing America reflects a mistakenly static view of culture. Efforts to portray local cultures as unchanging often reflect reactionary political strategies rather than descriptions of reality. As the Peruvian writer Mario Vargas Llosa has put it, those who argue in favor of cultural identity and against globalization, betray a stagnant attitude towards culture that is not borne out by historical fact. Do we know of any cultures that have remained unchanged through time? To find any of them one has to travel to the small, primitive, magico-religious communities made up of people? who due to their primitive condition, become progressively more vulnerable to exploitation and extermination. Vibrant cultures are constantly changing and borrowing from other cultures - and that borrowing is not always from the US. For example, many more countries turned to Canada than to America as an example for framing constitutions in the aftermath of the Cold War. Globalization is also a two-edged sword. In some areas, there is not only a backlash against American cultural imports, but an effort to change American culture itself. Capital punishment may now be supported by a majority of Americans, but the death penalty is regarded as an egregious violation of human rights across Europe - indeed, across much of the world. American environmental attitudes toward climate change or genetic modification of food bring similar criticism. More subtly, America's openness to immigration both enriches and changes American culture. Finally, globalization and the information revolution may reinforce rather than reduce cultural diversity. Some French commentators express fear that in a world of Internet global marketing, there will no longer be room for a culture that cherishes hundreds of different types of cheese. But on the contrary, the Internet allows dispersed customers to come together in a way that encourages niche markets, including hundreds of Web sites dedicated only to cheese. The Internet also allows people to establish a more diverse set of political communities. The use of the Welsh language in Britain and Gaelic in Ireland is greater today than fifty years ago. Britain, Belgium, and Spain, among others in Europe, have devolved more power to local regions. The global information age may strengthen rather than weaken local cultures. Economic and social globalization does produce superficial similarities in T-shirt logos and soft drink brands, but an underlying cultural diversity will remain. American culture is now prominent, and it contributes to America's attractiveness - its 'soft power' - in many, but not all, areas. At the same time, immigrants, ideas, and events outside America's borders are changing American culture within the borders of the US. As globalization spreads technical capabilities, and information technology allows broader participation in global communications, American economic and cultural preponderance may diminish. A little less dominance may mean a little less anxiety about Americanization, fewer complaints about American arrogance, and less intensity in the anti-American backlash. The US may have less control in the future, but it may find itself living in a world somewhat more congenial to its basic values of democracy, free markets, individual liberties, and human rights. Joseph S. Nye is Distinguished Service Professor at Harvard University and author of Soft Power: The Means to Success in World Politics.

Subject: Re: Globalization and the Dollar
From: Pete Weis
To: El Gringo
Date Posted: Fri, Nov 05, 2004 at 21:51:13 (EST)
Email Address: Not Provided

Message:
The title of this piece was 'Globalization and Anti-Americanism'. Why did you entitle your post 'Globalization and the Dollar'?

Subject: Re: Globalization and the Dollar
From: El Gringo
To: Pete Weis
Date Posted: Sat, Nov 06, 2004 at 18:42:04 (EST)
Email Address: nma@hotmail.com

Message:
Pete, the evolution of the dollar (Ms) as a function of this: http://www.betavote.com/results/

Subject: Re: Globalization and the Dollar
From: Pete Weis
To: El Gringo
Date Posted: Sat, Nov 06, 2004 at 20:11:12 (EST)
Email Address: Not Provided

Message:
So while the world can not really vote in our election they can choose to reject the dollar when it comes to spending and investing their wealth - the only real way they can vote for or against American policies.

Subject: Re: Globalization and the Dollar
From: El Gringo
To: Pete Weis
Date Posted: Sun, Nov 07, 2004 at 02:12:47 (EST)
Email Address: nma@hotmail.com

Message:
'can choose to reject the dollar' or to have no more trust in the dollar (irresponsible fiscal policies, unilateral handling, current-account deficit, budget deficit etc. etc.)

Subject: Re: Globalization and the Dollar
From: Ari
To: El Gringo
Date Posted: Sun, Nov 07, 2004 at 10:09:44 (EST)
Email Address: Not Provided

Message:
Please explain a bit more, for I am always interested in what you have to say.

Subject: Re: Globalization and the Dollar
From: Terri
To: Pete Weis
Date Posted: Sat, Nov 06, 2004 at 20:59:28 (EST)
Email Address: Not Provided

Message:
Business before politics. The Franch like selling us wine, the Germans like selling us Volkwagons, the British like selling us drugs, the Japanese cameras.... Business before politics for us and others.

Subject: Thanks, El Gringo
From: Jennifer
To: El Gringo
Date Posted: Fri, Nov 05, 2004 at 19:32:36 (EST)
Email Address: Not Provided

Message:
Fine article. Thanks, El Gringo.

Subject: Re: Thanks, El Gringo
From: El Gringo triste
To: Jennifer
Date Posted: Fri, Nov 05, 2004 at 19:39:45 (EST)
Email Address: nma@hotmail.com

Message:
You're welcome Jennifer ;)

Subject: Vanguard Analysis
From: johnny5
To: All
Date Posted: Fri, Nov 05, 2004 at 16:50:31 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.fpanet.org/journal/articles/2004_Issues/jfp0904-art6.cfm Examples Example A. Assume you currently own the Vanguard 500 Index Fund (VFINX). You are considering diversifying internationally by putting 40 percent of your portfolio into the Vanguard Developed Markets Index Fund (VDMIX). VFINX tracks the S&P 500 index, while VDMIX tracks the MSCI EAFE Net index. By examining Table 1, we see that you ought to reject the proposed fund because its expense ratio is so high that it would result in a reduced Sharpe ratio for the resulting portfolio (that is, 0.34 percent is greater than the maximum allowed 0.18 percent). Example B. Assume you currently own the Vanguard 500 Index Fund (VFINX). You are considering diversifying into smaller stocks by putting 20 percent of your portfolio into the Bridgeway Ultra-Small Company Market Fund (BRSIX), which roughly tracks the CRSP 10 index. The Bridgeway fund has a relatively high 0.75 percent annual expense ratio. Is it worth it? Table 1 clearly suggests that you should accept BRSIX as 20 percent of the new portfolio (that is, 0.75 percent is less than the maximum 2.55 percent allowed). Example C. Assume you currently own the Vanguard 500 Index Fund (VFINX). You are considering diversifying into commodities futures by putting ten percent of your portfolio into the Oppenheimer Real Asset Fund (QRAAX), which roughly tracks the Goldman Sachs Commodity Index (GSCI). QRAAX has a seemingly high expense ratio of 1.68 percent. Is it worth it? This is an example of applying the methodology to an actively managed fund. QRAAX, while it has an explicit (though non-binding) goal of having at least a 90 percent correlation with the GSCI, is basically an actively managed fund. Yet from its inception through the end of 2002, its quarterly returns have a correlation of 98.5 percent with the GSCI. This fund tracks its benchmark almost as well as a true index fund. We're confident that the GSCI is 'adequately representative' of this fund's investing style. Table 1 shows that you should accept QRAAX as 10 percent of the new portfolio (1.68 percent is less than the maximum 6.16 percent allowed).11 The degree to which the fund's expense ratio is below the maximum allowed suggests that commodities futures are an extremely effective diversifier. Example D. This procedure works equally well if you currently own a portfolio of funds and you are considering adding an additional fund. Suppose that you presently owned a portfolio consisting of 80 percent Vanguard 500 Index Fund (VFINX) and 20 percent Vanguard Developed Markets Index Fund (VDMIX). You are considering diversifying 30 percent of the portfolio into the Vanguard Value Index Fund (VIVAX). The resulting portfolio is 56 percent Vanguard 500 Index Fund, 14 percent Vanguard Developed Markets Index Fund, and 30 percent Vanguard Value Index Fund. The Vanguard Value Index Fund tracks the S&P 500/Barra Value Index. Table 1 shows that the proposed fund's expense ratio is below the maximum allowed—it is worth it to diversify your portfolio as proposed (0.22 percent is less than the maximum 1.28 percent allowed). Example E. Some mutual funds are available only to individuals if obtained through certain financial advisors. For example, Dimensional Fund Advisors funds are distributed to the retail market in that fashion. Individuals often ask whether it is worth it to pay a financial advisor an additional percentage annually to gain access to those funds. The techniques introduced in this paper can be used to help answer that question. Assume that your current portfolio consists of the following funds in equal percentages: Vanguard 500 Index Fund (VFINX); ER = 0.18 percent Vanguard Value Index Fund (VIVAX); ER = 0.22 percent Vanguard Small Cap Index Fund (NAESX); ER = 0.27 percent iShares Russell 2000 Value Index Fund (IWN);12 ER = 0.25 percent Further assume that you are considering shifting your portfolio to the following funds, also in equal percentages: DFA US Large Company Portfolio (DFLCX); ER = 0.15 percent DFA US Large Cap Value Portfolio (DFLVX); ER = 0.31 percent DFA US Micro Cap Portfolio (DFSCX); ER = 0.56 percent DFA US Small Cap Value Portfolio (DFSVX); ER = 0.56 percent Note that the weighted average expense ratio of the initial portfolio is 0.2225 percent. For the proposed new portfolio, it is 0.3950 percent. Since the entire portfolio is being replaced, w = 1.0. Are the generally higher expense ratios of the DFA funds worth it? If so, how much should you be willing to pay the financial advisor? Table 1 holds the answer. It does indeed seem worth it to switch to the DFA funds (0.395 percent a year is less than the maximum of 1.68 percent per year allowed). Additionally, even if the financial advisor provides no value to the investor other than giving them access to the DFA funds (an assumption that, it is hoped, is not valid in the majority of cases), it is still worth it to pay the financial advisor as much as 1.285 percent of assets managed annually (1.68% – 0.395% = 1.285%). Vanguard Analysis www.fpanet.org/journal/articles/2004_Issues/jfp0904-art6.cfm

Subject: Merck and Vioxx
From: Emma
To: All
Date Posted: Fri, Nov 05, 2004 at 16:02:50 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/05/business/05drug.html Study Says Drug's Dangers Were Apparent Years Ago By GARDINER HARRIS Merck and federal officials should have withdrawn the painkiller Vioxx from the market as early as 2000 because studies of the drug had clearly shown that it doubled the risk of heart attacks among users, according to a study released yesterday by The Lancet, a British medical journal. Authors of the study pooled data from 25,273 patients who participated in 18 clinical trials conducted before 2001. They found that patients given Vioxx had 2.3 times the risk of heart attacks as those given placebos or other pain medications. Merck withdrew Vioxx on Sept. 30 of this year after a company-sponsored trial found a doubling of the risks for heart attack or stroke among those who took the medicine for 18 months or more. An editorial accompanying the study criticized both Merck and the Food and Drug Administration, and described Vioxx's approval and its popularity as 'public health catastrophes' that led to over 27,000 heart attacks and sudden deaths. 'For with Vioxx, Merck and the F.D.A. acted out of ruthless, short-sighted and irresponsible self-interest,' wrote Richard Horton, editor of The Lancet. In a statement, Merck said that the Lancet study was not comprehensive or new. 'Merck was vigilant in monitoring and disclosing the cardiovascular safety of Vioxx, and we absolutely disagree with any implication to the contrary,' the company said. The Lancet study increases pressure on the F.D.A., which is dealing with allegations that it tried to squelch prescient warnings by its own drug-safety reviewers about the dangers of Vioxx and about the hazards of antidepressant use by children and teenagers.

Subject: Re: Merck and Vioxx
From: byron
To: Emma
Date Posted: Fri, Nov 05, 2004 at 23:03:03 (EST)
Email Address: bluefin76020@yahoo.com

Message:
So much for the unsafe drugs from Canada. Bush said he wants to make sure they are safe before allowing them to be imported. so much for the unsafe

Subject: Stock and Bonds
From: Terri
To: All
Date Posted: Fri, Nov 05, 2004 at 15:58:03 (EST)
Email Address: Not Provided

Message:
Notice how quickly and decisively the stock market has moved. After months of flatness, we are suddenly having a fine year. Most market sectors are showing nice gains. This is why I feel it is important to avoid trying to time the market. We can invest conservatively to avoid difficult losses, but waiting for the market reach the values we choose can mean passing years of gains.

Subject: Re: Stock and Bonds
From: A Right Winger
To: Terri
Date Posted: Sat, Nov 06, 2004 at 01:13:22 (EST)
Email Address: Not Provided

Message:
Does it have anything to do with elections? www.chicagoboyz.net/

Subject: Returns
From: Terri
To: Terri
Date Posted: Fri, Nov 05, 2004 at 15:58:29 (EST)
Email Address: Not Provided

Message:
Vanguard Returns 12/31/03 to 11/04/04 S&P is up 5.8%, Value Index is up 9.7%, Growth Index is up 2.0%. Small Cap Index is up 10.9%, and Small Value 14.7%. Europe Index is up 11.5%. Energy is up 30.9, REIT Index is 23.0, Health Care is 3.7%. Long Term Corporate Bond Fund is up 7.8%. High Yield Corporate Bond Fund is 7.5%.

Subject: Hedge Funds and Us
From: Emma
To: All
Date Posted: Fri, Nov 05, 2004 at 15:34:11 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/05/business/05hedge.html? Hedge Funds' Glitter Fades (but Not for Investors) By RIVA D. ATLAS Barton M. Biggs, the well-known stock strategist who left Morgan Stanley last year to set up a $2 billion hedge fund, has been writing a book, 'Diary of a Hedge Hog,'' that promises to 'describe the agonies and ecstasies of creating and running a new hedge fund.' So far this year, the experience for Mr. Biggs's investors has been agonizing. After rising 16 percent last year, Mr. Biggs's fund, called Traxis Partners, is down 8.3 percent as of the end of October, according to a person briefed on the results. Earlier this year, Mr. Biggs made an aggressive bet that the price of oil would fall. Instead, it hit record highs, recently peaking at more than $55 a barrel. In the meantime, Mr. Biggs has postponed the release of his book, which was scheduled for next month, his publisher, John Wiley, said. Mr. Biggs could not be reached for comment. Investors in Traxis are not the only ones to experience disappointment this year. These days, lots of funds are failing to meet expectations. Some smaller hedge fund managers are quitting the business. More established managers are generally hanging on, but their reputations have taken big hits. Despite this weak performance, record sums are pouring into hedge funds and many on Wall Street see managing a hedge fund as the most promising route to real riches. Hedge funds are aggressive privately managed investment partnerships for wealthy individuals and institutions, including pension funds and university endowments. Assets in these elite partnerships were $488 billion in 2000 and have nearly doubled since then, to $890 billion as of the third quarter of 2004, according to Hedge Fund Research. The flow of capital into the industry has enticed some of Wall Street's biggest names.

Subject: post election analysis
From: gerald mckee
To: All
Date Posted: Fri, Nov 05, 2004 at 14:26:44 (EST)
Email Address: gmckee@pisys.com

Message:
Just as a single grain of salt can precipitate a crystal huge by comparison, just as the butterfly’s flutter in Toledo may stir a tempest in Taiwan, so a hopeful action by seven gay couples in Massachusetts last February may have triggered the avalanche that buried our dreams this week. The Gay Marriage Amendment, - which Bush had earlier opposed – can now be seen as the masterstroke in Carl Rove’s cynical career. Dropped into a politic supersaturated with fear and intolerance, this seed crystallized the religious right as no other agent has. Warned by Falwell and Robertson that terrorism may be God’s punishment for America’s “moral decay, the true believers faced a choice of extraordinary clarity and urgency and a born-again hero for the times in George W. Bush. They voted with unexpected force. They were enabled, of course, by the secular Republicans – the Wall Street, suburban, affluent, educated Republicans – who share few values with the evangelicals or with Bush, but vote as though the election were a sporting event:: our team vs. your team. But, finally, it was the huge turnout of the Religious Right that overwhelmed the pro-Kerry wave of youthful activism. And so the nation takes one giant step backward – back before Scopes, before prohibition, before women’s rights, civil rights, the rights of minorities. Back to a time when the tribal customs of a Semitic people living thousands of years ago defined our national agenda. Ironies abound: These Christians seldom invoke Jesus; it’s an earlier, harsher god they follow. Their leaders do not sue to post the Beatitudes on the courthouse wall, or the Golden Rule. They do not summon the words “As you do unto the least of these, you do unto me” in their political speeches. Theirs is a fearsome god, singularly suited to a people living in a harsh environment, surrounded by enemies, struggling to maintain their homogeneity. A god very much like that invoked by Osama bin Laden. Most ironic, perhaps, is the Christian Right’s embrace of the founding fathers as colleagues in their political enterprise. How sad it is that those sons of the Enlightenment - Franklin, Adams, Madison, et al - should be invoked to support an agenda based on willful ignorance, anti-science and superstition. What’s Going to Happen? Through Tuesday’s election, three forces in our society have been emboldened, forces that might be represented by the icons of Fallwell, Wolfewitz and Lay. Ken Lay represents corporate power as a self-defining universe, one that will seek to reverse the role government plays in leveling the economic playing field,by protecting employees, shareholders and consumers and insuring fair competition. For the next four years we can forget about a “living wage,” sterner pollution standards, investment in alternative energy sources, fair labor rules in trade policy. We can expect prohibitive limits on tort recoveries with an associated relaxation of corporate safety standards. We will see Wall Street seduce the Social Security system. We can look forward to continued tax give-aways and attendant growing deficits – until it all implodes some day. Wolfewitz represents the monomaniacal view that the Middle East is and should continue to be a de-facto American colony. Best case: The Middle East will remain muddled and Islamists resentful; oil prices will stay high; terrorism will not abate; losses to our occupying armies will continue, a limited draft will be necessary. We will become more alienated from other industrialized nations. Worst case: Resentment will ferment throughout the Middle East and ignite in Pakistan. Huge American armies will be required to subdue the growth of radical Islam and, if they can, secure the Pakistani nuclear weapons. We will occupy much of the Middle East. Falwell, of course, represents massive intolerance and sexual paranoia.. Expect school vouchers and decay in the quality of public schools, a retrenchment of free speech, government funding of religious enterprises, continuing high prison populations, no drop in teenage pregnancy but a sharp rise in public shame, a return to back alley abortionists. What Can We Do? This, too, will pass. Remember, Richard Nixon was reelected by the largest majority and within 2 years was gone. Remember that the 18th Amendment was reversed by the 21st and that there often is a “sober second thought” by the American people. Continue to hammer for the things we believe in; be intolerant of cant and bigotry. Be politically active in local matters – school boards, especially. Actively participate in the kinds of organizations that opposed Bush. Support tolerant religious organizations; remember how effective they were in the civil rights movement. I see the change coming, curiously, from realignment within the Republican Party. Many Republicans I know share my fears and are ashamed of the direction their party is taking, even if solidarity (and perhaps some thoughtless greed) shaped their recent votes. I look forward to an election in 2008 between a moderate Republican and an unabashed “social justice” progressive Democrat . I believe that the next four Bush years will be so egregiously wrong that we will all be forced to revisit our priorities. Even the Christian Right might find that, enacting much of their agenda has not made the world a better place for them or their children. Perhaps, with such perceived irritants as gay marriage behind them, they will realize that their true interests lie in a sound economy, and social justice. Keep the Faith. Keep the

Subject: Stop looking for excuses
From: Mik
To: gerald mckee
Date Posted: Fri, Nov 05, 2004 at 17:47:17 (EST)
Email Address: Not Provided

Message:
Take a look at Krugman's latest article. To make the statement that... 'it was the huge turnout of the Religious Right that overwhelmed the pro-Kerry wave of youthful activism' is utter bull. For starters the 'youth' vote turned out to be split between Bush and Kerry (not a pro Kerry mass vote) and secondly the the 'Religious Right' is by no means a huge voting block that can turn the tide. What Americans have to deal with is that the mental divide has become clearer than ever before. Up until now Politicians (Republican and Democrat) have been responsible enough to calm the radical thoughts that many people have and can only discuss at the dinner table but never in the open. As Krugman has clearly shown, we have a radical in power that has brought the 'dinner table' philosophies into main stream politics. The majority of Americans believe in the concept that we are facing a clash of civilizatons. It is them against us. You are either with us or with the terrorists. How will America calm the radical thoughts when it is being lead by radicals? I have no answer. The only thing that I can think of is applying an economic principle where everything eventually swings back. In other words as thousands upon thousands more lose jobs, health care, and their pension while faced with increasing costs of living, maybe, just maybe, they will wake up. But unfortunately when that day comes, the damage will already have been done.

Subject: Re: Stop looking for excuses
From: Ben
To: Mik
Date Posted: Fri, Nov 05, 2004 at 22:13:05 (EST)
Email Address: pedersb@sce.com

Message:
While I wasn't particularly jazzed by the latest column I must comment that the exit polls indicate: A)Moral values was cited as the most important issue in the election by ~22% of voters (these people split 80/20 for Bush). In other words, if these people had split evenly Kerry'd have won by 10 points. Whether a candidate capable of taking 1/2 that vote could make it thru a Democratic primary is another question. B) The under-30 vote was the only age segment Kerry won.

Subject: Re: Stop looking for excuses
From: A Right Winger
To: Ben
Date Posted: Sat, Nov 06, 2004 at 00:54:46 (EST)
Email Address: Not Provided

Message:
From someone who reads Krugman to find out how far off the Liberals are: Do you still rely on those broken crutches, the exit poll?

Subject: Can High Oil Prices Be Good?
From: El Gringo triste
To: All
Date Posted: Fri, Nov 05, 2004 at 14:09:21 (EST)
Email Address: nma@hotmail.com

Message:
Can High Oil Prices Be Good? by J. Bradford DeLong World oil prices have climbed to well of $50 a barrel. While these prices are still only two-thirds the real oil price peak reached during the Iranian Revolution of 25 years ago, the current high level of oil prices is making forecasters revise down their expectations of economic growth. With most shocks to the world economy, we expect central banks to try to offset the effects. When business investment committees become more cautious, we expect the Federal Reserve, the ECB, the Bank of England, and others to lower interest rates to make the numbers on investment projects look better. If consumers go on a spending binge, we expect central banks to raise interest rates to dampen inflation. But this economic logic does not hold in the case of oil price increases. While high oil prices look like a tax on business activity that depresses aggregate demand, they also raise inflation, both directly and indirectly. Weak demand requires reducing interest rates, but higher expected inflation requires raising them. As a result, central banks respond by doing little or nothing, so the effects of high oil prices flow through to the economy without being moderated by the world's central banks leaning against the wind. High oil prices also promise to slow long-run productivity growth. If the price of oil remains at $40 a barrel, expect it to slow the long-run rate of growth of the world's potential output by 0.1% per year. If the oil price hits $60 a barrel, expect it to slow the 'measured' long-run world rate of potential output growth by roughly 0.3% per year. Yet if we take the very long-run view, it is not so clear that high oil prices are bad for the world as a whole. If they were the result of taxes that were then redistributed to oil users, a high price of oil would be unambiguously good. Most taxes bring with them heavy 'excess burdens': the cost to society is significantly greater than the value of the revenue raised by the government because of all the attempts at tax evasion and tax avoidance by potential taxpayers. But a tax on oil lacks excess burdens. On the contrary, it has excess benefits. Shifts to more energy-efficient transportation eases congestion; energy rationalization reduces pollution; higher prices for oil substitutes spur research into alternative energy technologies. A well-designed tax on oil would also reduce demand, thereby lowering the potential for windfall profits for those who rule or own the ground over the oil deposits. A little more than a decade ago, Lloyd Bentsen, President Bill Clinton's first Treasury Secretary, tried to ensure precisely that, proposing to use a 'BTU tax' to close America's fiscal deficit. The Republican Party and the American Petroleum Institute sank that proposal. A decade later, we have high oil prices, but they are not due to a well-designed tax, either in America or elsewhere. As a result, the price boom is boosting windfall profits for the owners of oil deposits rather than improving countries' public finances. J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and was Assistant US Treasury Secretary during the Clinton Presidency.

Subject: Can High Oil Prices Be Good...?
From: Emma
To: El Gringo triste
Date Posted: Fri, Nov 05, 2004 at 18:54:56 (EST)
Email Address: Not Provided

Message:
http://www.dailytimes.com.pk/default.asp?page=story_23-10-2004_pg5_21 “Higher oil prices are here to stay,” says the American economic forecaster Allen Sinai. “[T]hat has to subtract growth and could cause core inflation to pick up.” Indeed, according to Sinai, higher oil prices are “the biggest risk...since the bursting of the stock-market bubble in 2000-2001.” Sinai is hardly alone. If the oil price stays at $40 a barrel, expect it to have next to no effect on short-term world GDP growth. But if the oil price remains at or near $60 a barrel, expect everyone’s forecasts of GDP growth to be reduced by 1% per year. High oil prices also threaten to slow long-term productivity growth. With high – and volatile – oil prices, businesses will focus their investments less on boosting productivity and more on maintaining flexible energy usage.

Subject: Re: Can High Oil Prices Be Good...?
From: El Gringo
To: Emma
Date Posted: Fri, Nov 05, 2004 at 19:17:45 (EST)
Email Address: nma@hotmail.com

Message:
'Sinai is hardly alone. If 'if' the oil price stays at $40 a barrel, expect it to have next to no effect on short-term world GDP growth. But if the oil price remains at or near $60 a barrel, expect everyone's forecasts of GDP growth to be reduced by 1% per year.' What is your opinion?

Subject: Projecting Price
From: Emma
To: El Gringo
Date Posted: Fri, Nov 05, 2004 at 19:49:39 (EST)
Email Address: Not Provided

Message:
Well, the definition of recession from a global perspective is growth below 2.5%. So a slowing of world growth from 3.5% to 2.5% would be a serious matter. I think 45 to 50 dollars a barrel for oil can be expected, and will slow growth less than 1/2 percentage point. Demand for oil from China may be the most important factor in pricing.

Subject: Re: Projecting Price
From: El Gringo
To: Emma
Date Posted: Fri, Nov 05, 2004 at 21:26:04 (EST)
Email Address: nma@hotmail.com

Message:
Emma, don't think like an economist but like a politician...

Subject: Politicians aim to please
From: Pete Weis
To: El Gringo
Date Posted: Fri, Nov 05, 2004 at 22:07:50 (EST)
Email Address: Not Provided

Message:
Politicians tell us they will cut taxes but still give us what we want, and balance the budget - 'voodoo economics'. In a heavily leveraged economy with massive and growing obligations, politicians will inflate away the debt and continually sacrifice the dollar. In the land of the sacrificed dollar, everything 'needed' (including oil) to go about our daily lives will take an ever larger share of our paychecks. And as you have said in the past, El Gringo - don't blame it on the politicians because we the people represent the social will which molds the political will.

Subject: Re: Can High Oil Prices Be Good?
From: Emma
To: El Gringo triste
Date Posted: Fri, Nov 05, 2004 at 16:19:08 (EST)
Email Address: Not Provided

Message:
A problem that is not examined is the effect of high energy prices on low income families. This negative effect makes me suspicious of some of the accounting of the good coming from high energy prices, even if prices are high because of taxes designed to encourage efficient use and development of many energy sources.

Subject: Re: Can High Oil Prices Be Good?
From: El Gringo
To: Emma
Date Posted: Fri, Nov 05, 2004 at 18:30:51 (EST)
Email Address: nma@hotmail.com

Message:
Dear Emma: Try to compare 'low income families' and 'low income families', that is practically impossible

Subject: October jobs number
From: Pete Weis
To: All
Date Posted: Fri, Nov 05, 2004 at 09:57:08 (EST)
Email Address: Not Provided

Message:
On the surface it looks very good - 335,000 new jobs. Construction up 71,000 - housing construction with still low interest rates continues to do well and additional construction jobs in the hurricane ravaged south helped this number. Revolving credit still booms and retail, except at low end stores, has had a comeback and this has provided a modest rise in retail jobs - some of the heavy discounts at malls across the US has moved merchandise. The service sector added 93,000 jobs (41,000 new government jobs in that number). Overall 2004 has been a much better year for jobs than was 2003 which was exeedingly bad. But underneath the very good job total of October lies a problem. Manufacturing jobs fell for the second month in a row and high tech jobs continue to be weak. In other words, jobs which make products, which could be marketed overseas (whether autos, computers, computer chips, software, electronics, etc) are still eroding. Jobs which are basically overhead (service sector) are increasing. We're like a corporation whose production base is falling while its overhead is increasing and our growing debt reflects this. It's heavy borrowing which provides much of the support for the service sector. Now if our service sector was providing a significant amount of services to overseas customers then this could help to lower our current account, but I don't believe this is the case. Increasingly global corporations are seeking services from cheaper labor markets in India and China.

Subject: Re: October jobs number
From: Ari
To: Pete Weis
Date Posted: Fri, Nov 05, 2004 at 17:17:22 (EST)
Email Address: Not Provided

Message:
http://www.epinet.org/content.cfm/webfeatures_econindicators_jobspict_20041105 In the service sector, businesses added 97,000 jobs last month, but about half of them (48,000) were in temporary work, suggesting employers' continued reluctance to commit to permanent hires. Since the recovery began three years ago in November 2001, temp work has been one of the fastest growing sectors, up 18.6% compared to 0.9% for overall payrolls. Since temp jobs pay less than average, the rapid growth in this sector has been one reason for the job-quality problems that have evolved over the recovery. For example, as temp work as a share of total employment has increased from 1.6% to 1.9% over the recovery, manufacturing's share has declined, from 12.1% to 10.9%. Despite the strong payroll expansion, there is still evidence of slack remaining in the job market. The number of part-time workers who would rather work full time (a group that includes some temp workers) rose by 280,000 last month.

Subject: Good points Ari
From: Pete Weis
To: Ari
Date Posted: Sat, Nov 06, 2004 at 10:25:15 (EST)
Email Address: Not Provided

Message:

Subject: Jeremy Grantham & Bill Gross
From: Pete Weis
To: All
Date Posted: Fri, Nov 05, 2004 at 09:20:07 (EST)
Email Address: Not Provided

Message:
October jobs number is very good but underlying economic weakness still there. From Bloomberg: Grantham, Gross Gloomy Over Troubles and Bubbles: Chet Currier Nov. 5 (Bloomberg) -- Here's a handy way for optimistic investors to test the strength of their convictions: Spend an hour or two perusing the latest comments of two widely respected money managers, Jeremy Grantham and Bill Gross. Gross's views are so glum he himself speaks of them as ``the economics of despair.'' Grantham says the history of investment ``bubbles'' argues for a drop of about 35 percent in the Standard & Poor's 500 Index, on top of the 40 percent slide already endured in 2000-02. ``Asia has hollowed out our manufacturing base and is now making inroads into services,'' says Gross, chief investment officer at Pacific Investment Management Co. in Newport Beach, California, where he oversees $415 billion including the biggest bond mutual fund. ``We can't really educate or innovate our way out of this.'' In the circumstances, Gross says (at http://www.pimco.com/LeftNav/Late Breaking Commentary/IO/2004/IO_ N ov_04.htm), the Federal Reserve will have to hold interest rates very low. ``While that keeps the patient/economy breathing, it leads to asset bubbles, potential inflation, and a declining currency over time,'' he says. Grantham, chairman of Grantham, Mayo, Van Otterloo & Co., a Boston-based manager of $66 billion in mostly institutional money, says ``the current U.S. equity bubble'' is the 28th he found combing through the history of currency, commodity and stock markets ( http://www.gmo.com , registration required). Painful Pattern All the other 27 bubbles, he says, ``broke and went back to the pre-existing trend.'' For the S&P 500 to do the same now, he calculates, it would have to hit 720, compared with a recent level above 1100. ``Everything important about markets is mean-reverting or, if you prefer, wanders about a trend,'' he says. ``Prices are pushed away from fair price by a series of `inefficiencies,' and eventually dragged back by the logic of value.'' One of those inefficiencies, says Grantham, is a phenomenon called herding, which occurs among both individual and institutional investors. In a highly specialized institutional world where managers are measured almost microscopically against benchmarks, Grantham says, ``refusing on value principles to buy in a bubble will look dangerously eccentric. This has guaranteed increasingly larger and longer market distortions.'' Both Sides Now Gross gives us an external reason -- Fed policy -- to figure on bubbles as a continuing part of the investment scene. Grantham gives us an internal reason, forces in modern financial life that reinforce the human tendency to ``buy because others are buying.'' For myself, I need little convincing that we already live in a bubble-prone age. Stocks, notorious for their attempt to defy gravity in the late 1990s, have since been mimicked by real estate markets in many places, and perhaps some commodity markets too. Look no further than the almost-doubling in the price of crude oil over the last year. If bubbles are so readily apparent, and so dangerous, why aren't more investors fleeing them? In the week or two since Gross's and Grantham's commentaries came out, stock prices have actually risen. ``The problem with bubbles breaking and going back to trend is that some do it quickly and some slowly,'' Grantham writes. He says the time spans of past bubbles he examined ranged from three minutes to 18 years. Matter of Time Thus, a simple strategy of staying away when bubbles threaten poses problems for many people who need to invest within a limited period of years -- before the children are ready for college or it's time to retire. Suppose you or I detected an incipient bubble in the stock market when price-earnings ratios climbed above 15 to one in the early 1990s, and jumped out of stocks. A dozen years later, we would still be waiting for a proper chance to buy back in, and we would have lost a big chunk of precious time. So what to do? Investors can heed Grantham's advice to ``lower risk and survive to fight another day.'' Those who don't agree with his assessment of the situation can still take his view into account by submitting their investments to a Grantham- style crash-test. How would the investment plan look, and how would the investor feel, if the stock holdings were marked down by 35 percent or 40 percent? Given one's age and circumstances, how much time would the plan have to try to recoup the losses? No bullish investor ought to shy away from such questions. At the very least, they help differentiate between reasoned optimism and reckless see-no-evil, hear-no-evil hope.

Subject: Portfolio Protection
From: Terri
To: Pete Weis
Date Posted: Fri, Nov 05, 2004 at 11:46:41 (EST)
Email Address: Not Provided

Message:
A useful way to gauge risk in a stock portfolio is to ask whether a 50% decline in value over 3 years is acceptable. After all, we had just such a decline between 2000 and 2003. If such a decline would be too severe, then add bonds. A 50% stock index and 50% bond index portfolio would have lost 25% in the value of stock holdings while making gains in bond holdings. So, the loss would be well less than 10% for the entire portfolio. Play with the numbers to get a satisfying possible risk level.

Subject: Bond funds & rising ......
From: Pete Weis
To: Terri
Date Posted: Fri, Nov 05, 2004 at 14:49:37 (EST)
Email Address: Not Provided

Message:
interest rates. Bond funds did very well when interest rates were dropping 2000-2003, however Bill Gross does not expect bond funds to do well in the coming years with rising rates likely. Not sure you can expect the same investment climate from now going forward as we had in the 2000-2003 period.

Subject: Re: Bond funds & rising ......
From: Terri
To: Pete Weis
Date Posted: Fri, Nov 05, 2004 at 15:25:38 (EST)
Email Address: Not Provided

Message:
Agreed. We can not expect as favorable a climate for bonds going forward, no matter the economy or stock market. The reason is bond yields have fallen so since 2000. Also, bond prices might fall along with stock prices for a while if the cause of a bear market happened to be a threat of rising consumer prices. Still, bond funds are a fine portfolio protection. A decline in bond prices is sure to be reversed quickly as a bear market takes hold, and an investor can choose the Intermediate Term Bond Index to be even safer than with the Long Term Bond Index.

Subject: A different time
From: Pete Weis
To: Terri
Date Posted: Fri, Nov 05, 2004 at 21:20:28 (EST)
Email Address: Not Provided

Message:
'Still, bond funds are a fine portfolio protection. A decline in bond prices is sure to be reversed quickly as a bear market takes hold...' This time is not like 2000-2003. We can have a simultaneous bear bond market and stock market. While the stock market heads south, high energy prices and dollar shrinkage can lead to higher interest rates over an extended time which would be bad for bond funds. It probably would not be a linear downward trend but one in which their would be a lot of volatility in energy prices and dollar drops and rallies.

Subject: Re: Portfolio Protection
From: Terri
To: Terri
Date Posted: Fri, Nov 05, 2004 at 11:51:44 (EST)
Email Address: Not Provided

Message:
Actually over the last 5 years to October 31, the S&P Index Fund lost 2.3% a year, while the Long Term Bond Index Fund gained 10% a year. So, a nasty bear market in stocks would have been well weathered with a 50 50 portfolio. The gain would have been 7.7% a year. Nice!

Subject: A Dollar Adjustment
From: Terri
To: All
Date Posted: Fri, Nov 05, 2004 at 03:59:08 (EST)
Email Address: Not Provided

Message:
The dollar, in 1985, began a steep decline against European and Japanese currencies. The decline lasted to 1991 and came to about 40%. What should be noted is the absence of inflation brought by the decline in dollar value. The Federal Reserve was able to adjust interest rates to prevent inflation and keep a fair growth rate to the mild recession of 1990-1991. Neither the tax increases of the Reagan Administration nor the brief stock market crash in 1987 led to recession. Proper monetary and fiscal policy, if we have them, can control the growth of internal and external deficits and allow a benign curreny adjustment. The need is for proper economic policy; there is the worry.

Subject: Fed increasingly impotent
From: Pete Weis
To: Terri
Date Posted: Fri, Nov 05, 2004 at 21:36:08 (EST)
Email Address: Not Provided

Message:
'As debt levels rise in the U.S. at unprecedented levels, the Fed will increasingly become impotent. Unlike Volcker in 1979, today’s U.S. economy is far more debt laden. Because of this huge debt overhang and the huge asset bubbles that support it, the Fed’s options are limited. The Fed simply can’t afford to raise rates in the same decisive and single-minded way that Volcker did during 1979-1982. The Fed’s new mantra is “measured.” This means that real interest rates will remain negative for a long period of time.' - Jim Puplava 'Financial Sense Online' The Fed can not save the dollar (by raising rates) with out sacrificing the stock and housing markets as well as what's left of the job market. But if they let the dollar 'crash' it's belly up for this economy anyway. We've been talking about the troubles with the dollar for months now and we are presently witnessing its steady, unrelenting shrinkage.

Subject: Decline of the Dollar
From: Emma
To: All
Date Posted: Thurs, Nov 04, 2004 at 20:29:09 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/04/business/04place.html The Dollar's Long-Term Direction: Down By EDUARDO PORTER and ELIZABETH BECKER The election drove the dollar all over - down when it looked like President Bush would lose, up briefly when Senator Kerry conceded defeat. But ultimately, the dollar's fate never hinged on the outcome of the presidential election. Now that the dust has settled, the currency is back on its long-term path: downward. According to most economists, it is likely to stay there over the next four years. 'There is a certain inevitability to the decline,'' said Alan Blinder, an economist at Princeton University who served as vice chairman of the Federal Reserve and was an adviser to President Bill Clinton. 'I think the Treasury understands this. It would be nice if they would say so.' Managing this potentially painful move will be a pressing challenge for Mr. Bush's economic team. The nation's current account - the broad gap between the nation's exports and imports of goods and services - has reached a deficit of nearly $600 billion, almost 6 percent of the nation's overall economic activity. And it shows no signs of diminishing on its own. Closing this gaping hole will overshadow the administration's trade policy, coloring its push for better access to foreign markets for American products, and adding urgency to its attempts to make China and other Asian nations revalue their currencies against the dollar so that American industry can be more competitive. Today, the dollar is at the center of a delicate interlocking web of international financial imbalances. The United States imports much more than it exports. Asian countries - some of the biggest exporters - send the proceeds back into the United States by investing here, mostly in government bonds. That keeps interest rates low, fueling spending and leading Americans to import even more goods and services from the rest of the world. Both sides benefit from this arrangement. The Asian money allows Americans to spend beyond their means. At the same time, dollar purchases by Asian central banks depress the value of Asian currencies, stimulating their exports to the American market. An influential group of economists has argued that there is no reason that this imbalance cannot go on relatively undisturbed - if not forever, at least for a very long time. But most mainstream economists argue that, at a minimum, the unraveling of this web would send the dollar lower and squeeze American consumption. Kenneth Rogoff, a professor of economics at Harvard, said that to smoothly and significantly narrow the current account deficit requires a depreciation of at least 20 percent in the dollar, making it much more costly for Americans to buy imported goods and travel abroad. The imbalance is fueling a stupendous buildup of foreign debt in the United States. At the end of last year, the nation's net financial deficit - broadly, what Americans owe the rest of the world minus what the rest of the world owes to the United States - amounted to nearly 30 percent of total output. And both sides are digging themselves deeper into holes, with American debts mounting and foreigners acquiring ever greater piles of depreciating paper assets. Economists who speak of the current account deficit often quote the economist Herb Stein: 'If something cannot go on forever, it will stop.'' So what will it take for the brakes to be applied? Barry Eichengreen, a professor of economics at the University of California, Berkeley, argues that Asian policy makers are going to force a change. He contents that as they move away from their present export-led growth strategies, which require cheap currencies, to focus monetary policy on managing internal demand, Asian governments will support the dollar less, buy fewer Treasury bonds and shift some of their foreign reserves to other currencies, like euros. Indeed, China's decision to raise interest rates last week put upward pressure on the yuan and indicated a willingness to take market-based measures to cool its galloping economy. 'Asian policy is changing,' Mr. Eichengreen said. 'The end is growing increasingly near.'

Subject: Decline of the Dollar...
From: Emma
To: Emma
Date Posted: Thurs, Nov 04, 2004 at 20:52:54 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/04/business/04place.html The situation, some suggested, is analogous to the problems faced by Ronald Reagan early in his second term, when the United States, despite robust growth, suffered from an expensive dollar, weak exports and big deficits. In 1986, the administration negotiated the Plaza Agreement with six other major industrial powers, helping pave the way to a manageable, if sometimes rocky, 40 percent decline in the value of the dollar. 'We have to do something similar to get the value of the dollar down and not wait for a market adjustment which could be more damaging to the economy,' said Robert E. Scott, of the liberal Economic Policy Institute in Washington. The strategy worked for Mr. Reagan because he also pushed through a couple of tax increases that helped narrow the budget gap. Economists are not very confident, however, that a second Bush administration would be prepared to do something similar. That could leave the economy vulnerable to a more painful adjustment, with the dollar falling rapidly and interest rates rising fast. The result would almost certainly lead to a recession and perhaps a collapse in the real estate market. 'There is a real possibility,'' Catherine Mann, an economist at the Institute for International Economics, wrote in a study earlier this year, 'that the entanglements created by this co-dependency cannot be undone by anything short of a global economic crisis.'

Subject: German Company and Workers
From: Emma
To: All
Date Posted: Thurs, Nov 04, 2004 at 20:11:57 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/04/business/worldbusiness/04volkswagen.html Volkswagen Averts Strike by German Workers By MARK LANDLER FRANKFURT - Volkswagen averted the first full-scale strike in its history on Wednesday, offering its factory workers a seven-year job guarantee in return for a 28-month freeze in wages. The agreement, which came after a marathon bargaining session, achieves two equally important objectives for Volkswagen: it will reduce labor costs nearly one-third by 2011 and it will preserve labor harmony at a company that is a German industrial icon. Volkswagen's union, IG Metall, had staged warning strikes at several factories to press for a pay increase of 4 percent. But even as it threatened broader disruption, the union later gave up this demand - accepting a face-saving compromise that it must now try to sell to its members. In a largely symbolic gesture, Volkswagen will make a one-time payment of 1,000 euros to the 103,000 workers covered by the contract. The company also pledged to invest in six plants in western Germany, which workers fear are in danger of losing production to lower-cost factories in the Czech Republic, Slovakia and other Central European countries. 'We achieved our goal of securing jobs, not just for today but for the future,' Hartmut Meine, the chief negotiator of IG Metall, said to reporters in Hanover, where the talks were held. Volkswagen said the agreement freed it from a labor contract that provided higher pay rates than those at any other German carmaker and imposed rigid rules on overtime and the hiring of new employees. 'From now on, new employees will work on the same level as our competitors,' said Dirk Grosse-Leege, a spokesman for Volkswagen. 'We never asked as much from workers as in this round of negotiations.' Volkswagen's face-off with the union was closely watched here as a test of whether German auto workers - and VW employees in particular - could maintain their privileged position as the best-paid, best-treated workers in an increasingly competitive global industry. Other carmakers, including DaimlerChrysler and the Opel division of General Motors, have demanded concessions on wages and work rules, as they struggle to reduce labor costs. G.M. said recently it would reduce its European work force by 12,000 jobs, most of them in Germany. In the Volkswagen negotiations, however, Germany's long tradition of worker-management consensus prevailed over the union's protests and the company's not-so-veiled threats of job cuts. 'The fact that they did reach an agreement, given the complexity of the issues and the hardness of the positions, shows a remarkable ability to work together,' said Michael Fichter, an expert in labor relations at the Free University of Berlin. 'It is an example of the social partnership culture.'

Subject: Market Returns
From: Terri
To: All
Date Posted: Thurs, Nov 04, 2004 at 16:27:30 (EST)
Email Address: Not Provided

Message:
Vanguard Returns 12/31/03 to 11/03/04 S&P is up 4.2%, Value Index is up 7.7%, Growth Index is up 8.%. Small Cap Index is up 9.5%, and Small Value 13.1%. Europe Index is up 11.1%. Energy is up 29.8, REIT Index is 21.3, Health Care is 2.9%. Long Bond Funds are up 7.5%.

Subject: Re: Market Returns
From: Terri
To: Terri
Date Posted: Thurs, Nov 04, 2004 at 17:32:05 (EST)
Email Address: Not Provided

Message:
Obviously there is need for caution, so there is need for diversity. But if ever a year showed why patience is needed, this has been such a year. Also, Growth Index above was up 0.8%.

Subject: Reality eventually bites you in the ass
From: Ayn Rant
To: All
Date Posted: Thurs, Nov 04, 2004 at 15:49:03 (EST)
Email Address: Not Provided

Message:
Rather than engage in frantic recriminations over who 'lost' the election and how, I suggest taking a deep breath and studying the poling data carefully so as to be ready for the next opportunity. For come it will. That fluttering sound you hear is Mr. Bush's chickens coming home to roost. A multitude of disasters are waiting to happen. To start, the late Herbert Stein, an honest conservative economist (now an extinct species) noted that 'an unsustainable trend means that it will stop.' Budgetary policy has gone totally insane as anyone who follows the weekly columns posted here know. Sooner or later, something's gotta give. It doesn't matter whether the 'starve the beast' school of thought gets social spending savagely cut to medieval levels, or if one fine day the tipping point comes, and the worth of Treasury securities and the dollar drops practically overnight to the point where you can use them for toilet paper. The point is: DEMOCRATS MUST BE READY. They must be ready to grasp the baton in 2008 as surely and smoothly as FDR grasped it in March 1933 from the defeated and disgraced Herbert Hoover. Would-be brain trusts such as the Progressive Policy Institute and the Joint Center for Political and Economic Studies should develop contingency plans for economic catastrophes of the sort that are brewing. The old guard should give way to fresh faces such as John Edwards and Barack Obama. Mainstream Protestants and Roman Catholics who believe that children outside the womb deserve to live too (and not just in squalor either) should stand up and declare that letting a large and growing fraction of the population stew in poverty is not What Jesus Would Do. They should make no bones about charging that Bush and conservative Christians are 'immoral'--yes, that very word--that is, they are guilty of the starkest cruelty to the 'least of our brethren'. And they should point out at the same time that private charity, however meritorious it may be, will not even begin to make up the gap. And this doesn't even begin to cover the list. (10,000 casualties in Iraq, anybody?)

Subject: Re: Reality eventually bites you in the ass
From: A Right Winger
To: Ayn Rant
Date Posted: Sat, Nov 06, 2004 at 00:58:55 (EST)
Email Address: Not Provided

Message:
Sweet dreams!

Subject: Return of the late 90's?
From: Pete Weis
To: All
Date Posted: Thurs, Nov 04, 2004 at 15:13:48 (EST)
Email Address: Not Provided

Message:
Dow 40,000, Nasdaq 20,000 by 2009 Harry Dent predicts a 'New Millionaire Economy' By Paul B. Farrell, CBS.MarketWatch.com Last Update: 9:25 PM ET Nov. 2, 2004 ARROYO GRANDE, Calif. (CBS.MW) -- You want some optimism? Well folks, after a flatlining market and the brutal, negative election campaign we've been dragged through, America desperately needs some optimism. And here it is. Harry Dent's latest predictions: Dow 40,000, Nasdaq 20,000 by 2009. In many ways, the wars in Iraq and Afghanistan and the war on terror were no match for the divisive domestic 'war' for the American presidency. It's been absolute torture. So thank goodness for Dent's optimism. The guy's a breath of fresh air. In fact, Dent wins our annual Super-Optimist Award. He's the No. 1 cheerleader for America's stock market. You will love reading the predictions in his new book, 'The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2005-2009.' Actually Dent's more than a super-optimist, he's America's ultimate contrarian. So what if his archrival Robert Prechter is predicting a 100-year bear? So what if SmartMoney just reconfirmed the conventional wisdom of Buffett, Bogle and Gross, who are forecasting single-digit returns through 2009? So what if InvestmentNews is telling professional advisers that insider activity is so negative it's now the 'canary in the coal mine' signaling that 'it's time to sell stocks?' And so what if Dent's late-nineties books, like 'The Great Boom Ahead' and 'The Roaring 2000s,' were way off the mark and probably resulted in investors hanging on too long as the bear market wiped out $8 trillion of stock market value between 2000 and 2002. Even bigger than late 1990's boom! You gotta love his chutzpa: Now he says that correction was right on schedule and we are still on track for Dow 40,000 by 2009. Nothing gets in the way of his optimism: 'We are seeing another very strong bull market unfolding from the bottom' of the correction, and '2005 is going to be very strong.' Indeed, things are even 'better than the 1990's!' In a 1997 Mutual Funds magazine feature Dent was pitted against super-bear Prechter. Dent predicted 21,000 by 2008. A couple years later he predicted Dow 41,000 by 2008. Okay, maybe that seems a tad improbable, given 2004's flat market. But at least he isn't as over the top as Dan Kadlec's 1999 book, 'Dow 100,000,' which Kadlec said was reachable by 2020 with a mere 11.1 percent annual growth. Irrational exuberance or rational optimism? But fact or fantasy? You decide. As always, Dent's conclusions are based on some simple assumptions about demographic trends, his area of expertise. Fortunately, the guy's both entertaining as a futurist and analytically overloaded with tons of demographic, economic, monetary and market numbers. This time his forecasts boil down to five major trends propelling America from 2005 to 2009: The third and final bubble of a bull that started in the early 1980s. We're about to see the 'greatest bull market and technology bubble of the last two centuries.' The technology revolution regenerated: 'We are on the brink of the tech revolution's second phase, as new technologies move fully into the mainstream and a new generation hits the peak of its spending and productivity cycle.' The 'decade hangover cycle:' Corporations are just now wrapping up the consolidation phase following the late '90s bubble that lead to the 2000-2002 correction. America is now ripe for a 'rapid emergence of new technologies' that will drive a new phase of economic boom. The 80-year technology cycle. Dent is also predicting a rapid assimilation of new technologies similar to the 1920s. A new phase of the 1990s technology revolution will continue spreading low-cost versions to the masses. Baby boomers move into high gear. Dent expects the 'incredible earning, spending and productivity cycle of the massive baby boom generation' to continue driving the whole world as the 'unprecedented economic boom of the past 25 years' races to a frenzied peak in 2009 ... before another bust. These five trends will drive the boom to Dow 40,000 by 2009, creating what Dent calls 'The New Millionaire Economy,' a time of such great prosperity you can expect a 50 percent increase in the number of American millionaires. How's that for optimism and opportunity, my fellow Americans! Play the market to win ... then get out What's your best strategy? How do you play to win? For savvy, active investors he's got some aggressive market-timing strategies. But you really don't have to play market-timing games that'll increase your risks. Instead, Dent tells investors to make their bets based on a familiar 1990s kind of market assumption ... that a rising tide lifts all boats. His core strategy is a basic asset-allocation strategy, nothing really extraordinary: Just stick with a well-diversified, buy-and-hold portfolio for the long-term, one that'll float you up as the market rises to Dow 40,000, perhaps even putting you among all the 'New Millionaires' that he sees coming by 2009. Fortunately his strategy also protects you if his optimistic predictions don't play out and the market continues flatlining, or worse yet, does a Prechter flip-flop and crashes. Whatever you do, remember Dent's a macroeconomist, a mega-demographer and an optimistic futurist. Guy's like him get paid to see the world through rose-colored glasses. They thrive on broad sweeping long-term projections, forecasts and predictions. You an optimist, pessimist, or flatliner? And even with all his warts, Dent's vision of the market is most welcome after this insane, destructive election war. I applaud his optimism. But, irrational exuberance aside, how serious should we take Dent's predictions of a Dow 40,000 by 2009? Or do you put more faith in Prechter's 100-year bear market prediction, with the Dow dropping below 1000? See previous Paul B. Farrell. Which are you: A Harry Dent-optimist, or a Bob Prechter-pessimist? Or maybe something in between, a market flat-liner? What do you think?

Subject: Re: Return of the late 90's?
From: Terri
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 20:01:58 (EST)
Email Address: Not Provided

Message:
Of course this is idiocy, but that does not mean we should avoid investing. The question as always is how to structure a portfolio to take account of the nice gains we are currently making while cushioning against possible sharp market declines. That was why I opted for Value and Europe Indexing this difficult year, and stayed with bond funds.

Subject: 100% Pure Snake Oil
From: Ayn Rant
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 15:42:38 (EST)
Email Address: Not Provided

Message:

Subject: Progress without the Federal Government (revised)
From: Bobby
To: All
Date Posted: Thurs, Nov 04, 2004 at 14:57:28 (EST)
Email Address: robert@pkarchive.org

Message:
I am trying to think of ways in which states may be able to make social progress without relying on the federal government of George W. Bush. Bush's government will end substantial parts of the welfare state and prevent enaction of necessary new programs, like port security. The following is a plan to create a kind of 'shadow federal government' by the cooperation of willing states. The purpose is to give those states a mechanism by which to create programs that substitute for those lost under George W. Bush, to supplement those made deficient by George W. Bush, and to create new programs which Bush refuses to enact. This plan is very rough. I also have a question about whether it is constitutional: General Summary of Plan: Imagine that some state wants to create some government program at the state level (We'll call this state the 'donor state' for reasons you see later). The federal government itself won't do that program nationwide because it is already running huge deficits and ready to largely cut existing programs to the bone in Bush's 2nd term. This 'donor state' that wants to create the program at the state level is unwilling to raise the necessary state taxes needed to to fund it, because people and businesses seeking to avoid extra taxation will move out to neighboring states, thereby partially frustrating the effort to raise revenue. The solution to this is that the donor state agrees with neighboring states to raise taxes by the same amount (We'll call these neighboring states 'recipient states' for reasons we'll see in a moment). Since these neighboring 'recipient states' *and* the donor state all raise their taxes by the same amount, there are fewer attractive lower-tax places for people and businesses to go, so fewer people and businesses move out of the donor state under this higher taxation. This donor state can entice other 'recipient states' to cooperate and raise their taxes by creating a revenue-sharing consortium, under which these 'recipient states' get back more revenue than they put in. This consortium is effectively a mechanism by which states make side payments to others in order to get cooperation. Plan in More detail: All these states form a consortium, in which they all levy a certain extra tax, say, equal to x% of income (I'm doing a flat % here, but this can be done with marginal rates too). These member states set their own state income taxes independently. But this separate x% tax on income must be uniform across states that are members of the consortium. Therefore when people pay taxes at the state level, they pay their regular state income taxes plus the extra x% of their income for this extra tax. Then the revenues from this x% income tax are pooled from the different member states and redistributed according to some pre-negotiated distribution formula among the member states. This distribution formula is negotiated between all the member states of the consortium. But, the formula must include the following two aspects to work: 1. The donor state (which is the one that originally wanted to create the program at the state level) gets back less than it contributes to the revenue pool, according to the distribution formula. This is the cost of the consortium to the donor state. The benefit they get from the consortium is fewer residents and businesses moving out of state due to higher taxes. Therefore, the donor state uses the revenue they get back from the revenue pool to fund the government program they wanted. 2. The other states (that is, the recipient states, which are the other members of the consortium) agree to join the consortium and raise their taxes by the same amount as the donor state. Their incentive to join the consortium and raise their taxes is that, under the distribution formula, they receive more from the revenue pool than they put in. Without this incentive, there would be no reason for another state to raise his taxes to the same level of the donor state. Depending on the rules of the consortium, recipient states can use this revenue from the revenue pool to pay for either the same government program that the donor state is implementing, a different specified government program, or they can use the revenue however they want at their discretion. Finally, the rule is that, if a state lowers its x% tax below some threshold amount, it gets kicked out of the consortium for some temporary period and must pay some penalty money to other states. This is the mechanism by which it is enforced that the x% tax rate is the same across member states. This idea is very flexible in its implementation. It can be modified to include several donor states and any number recipient states. It can also be applied to many different policies. It also leaves open the possibility of coordinating programs across the member states or having the states run their own programs individually. For example, if the federal government were to abolish or somehow destroy Social Security, these states could create a (partial) substitute for it by forming a consortium, pooling revenues, and then redistributing money from the revenue pool to the retired residents of member states according to some distribution formula. Specifically, I would like to see New York enter a consortium with neighbors, in order to get far better port security, which I am sure that Bush will ignore in the next few years. Environmentally conscious states can also enter consortiums where they all levy the same gasoline tax or environmental regulations, and they entice other states to join by making side payments to them (either through the revenue pool in the case of the gas tax or some other mechanism in the case of regulations). This obviously doesn't work too well for things like global warming. I'll add some qualifiers here. Whether the consortium works and the optimal design of it depends on various empirical relationships and sensitivities between variables. For example, the sensitivity to taxation of people moving out of state might be very small. That is, if people moving out of state is very insensitive to taxation, it may be beneficial for the donor state to run the program by itself instead of starting a consortium. Also, you might need to create a very large consortium in order to decrease significantly the number of businesses and people who move out of state under higher taxes.

Subject: Freedom?
From: johnny5
To: Bobby
Date Posted: Fri, Nov 05, 2004 at 14:07:03 (EST)
Email Address: johnny5@yahoo.com

Message:
I think if you read the founding fathers ideas - some did not want what you propose - some always wanted to allow for the individual to escape his oppression if that individual felt the negatives outweighed the positives. Basically cut the dead weight and move somewhere else and be free - but those were very different times back then - you could flee and the EYE of the state could only peer so far - but now the world is a much smaller place and to pull off what the founding fathers did would probably be an impossibility today. If I grow terribly weary of funding your programs that I do not support or see benefit in, I want the freedom to get away - not be controlled by a disconnected head.

Subject: Re: Freedom?
From: Bobby
To: johnny5
Date Posted: Fri, Nov 05, 2004 at 19:31:32 (EST)
Email Address: robert@pkarchive.org

Message:
It's really a question of what you are comparing a government program done under this plan to. Compared to the federal government doing the government program, there is more freedom under this idea since you can always move to state outside the consortium, whereas in order to escape a federal government program you must (usually) move out of the country altogether. In the sense that this idea gives all states more freedom to expand government with less fear of losing residents and businesses, this plan makes government *at the state level* more pervasive throughout the country than without the plan. The real question for a conservative who doesn't like government is this: In the future will the type of government intervention I don't like expand most rapidly at the federal level or state level? If the former is the answer, then conservatives should welcome this plan, since the programs created under the consortiums substitute for some of that federal government expansion. A federal plan usually applies in every state. Under this consortium plan, conservative are at least afforded the opportunity to move to a state without a consortium and hence without the program. If your answer is the latter, this plan obviously reenforces state government expansion, so you'd presumably be against it.

Subject: Re: Freedom?
From: johnny5
To: Bobby
Date Posted: Fri, Nov 05, 2004 at 19:44:48 (EST)
Email Address: johnny5@yahoo.com

Message:
Actually I tried to go to Canada recently to escape the US gubbment and their laws and was told I couldn't enter.

Subject: Science and Health Initiative
From: Emma
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 15:37:09 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/04/technology/04cell.html Measure Passed, California Weighs Its Future as a Stem Cell Epicenter By ANDREW POLLACK LOS ANGELES - Tuesday's vote by Californians to spend $3 billion on human embryonic stem cell research could speed progress on the promising but controversial field and make the state the epicenter of such research. 'This is going to be the stem cell center of the world, not just the country,' said Evan Snyder, director of the program in stem cell biology at the Burnham Institute in San Diego. The ballot measure, Proposition 71, will prompt the establishment of a California Institute for Regenerative Medicine, which will become the largest single backer of research in stem cells - a field that scientists hope might eventually be used to create new brain cells for patients with Parkinson's disease, or insulin-producing cells for diabetics, or treatments for numerous other diseases. The $300 million the institute plans to dispense in each of the next 10 years, generated by the sale of bonds, would dwarf the $25 million spent last year by the main backer of medical research, the National Institutes of Health, on research involving stem cells derived from human embryos. It would easily exceed the $190 million spent by the N.I.H. last year on human stem cells derived from adult tissue, which are not controversial. Indeed, the California initiative was largely an effort to sidestep restrictions on federal financing of human embryonic stem cell research imposed by the Bush administration, which objects to the destruction of human embryos that is necessary in harvesting the stem cells. The California initiative will become even more important to the field now that President Bush has defeated John Kerry, who had pledged to end the restrictions on the research and to increase federal financing for it. The backers of Proposition 71, which included Gov. Arnold Schwarzenegger, a Republican, appealed to voters mainly on the emotional argument that embryonic stem cells, which can potentially turn into any type of tissue in the body, might eventually be used for life-saving treatments. To counteract critics who said the state could not afford the measure, the backers also argued that Proposition 71 would make California the leader in what could ultimately be a huge new industry, one that could create jobs and bring the state hundreds of millions of dollars in patent royalties. Viewed that way, the initiative is the largest effort by a state to bolster its bioscience industry, said Walter Plosila, a vice president at Battelle, a nonprofit research institute, who has studied such state efforts. It exceeds the $2 billion of tobacco litigation settlement money that Pennsylvania has pledged to spend over 20 years on life sciences, he said. Stem cell scientists in California were almost giddy Wednesday with anticipation that talented young scientists and enterprising companies would move here.

Subject: Who Pays Who Gets
From: Ari
To: Emma
Date Posted: Thurs, Nov 04, 2004 at 19:44:59 (EST)
Email Address: Not Provided

Message:
Remember how much more in government revenue the red states get than the taxes they pay. The blue states pay more than they get back, the red states get the excess and the red states mock govermnment spending.

Subject: Re: Who Pays Who Gets
From: Bobby
To: Ari
Date Posted: Thurs, Nov 04, 2004 at 20:37:51 (EST)
Email Address: robert@pkarchive.org

Message:
Under the plan I just described, which state is a net recipient and which one is a net donor and the amount they get from the revenue pool is determined by negotiation between states. Often the amount of net receipt from the revenue pool (and hence net donation from donor states into the revenue pool) required to get another another state (recipient state) to agree to enter the consortium will be so large that it is better not to let that recipient state into the consortium. Therefore, if red states require more net receipts from the revenue pool, blue states likely won't enter into a consortium with them.

Subject: Re: Who Pays Who Gets
From: Emma
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 20:54:24 (EST)
Email Address: Not Provided

Message:
Bobby, This is really clever...

Subject: Wall Street's Guy
From: Emma
To: All
Date Posted: Thurs, Nov 04, 2004 at 14:09:33 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/04/business/04bizreact.html? WALL STREET For Corporations, Their Kind of Guy For Wall Street firms, a second Bush term represents a lush dividend on the millions that their chief executives began raising for the president in the early days of his first term. Led by Morgan Stanley and Merrill Lynch, executives on the Street embraced the supply-side policies of President Bush - underscored by sweeping cuts in capital gains and dividend taxes - that brought the most pro-Wall Street moves since Ronald Reagan began cutting taxes in 1981. Expectations are rife that the president's economic platform will be even better for business in his second term as he pushes for such initiatives as private Social Security accounts and continued emphasis on lower taxes. 'Sure there is a quid pro quo,' said Mallory Factor, a merchant banker and fund-raiser for the president. 'It's a pro-growth economy, lower taxes and less regulation. The market's reaction speaks for itself.' Wall Street's full-throated support for President Bush comes despite a certain coolness that the president has had for the Street. He is the first Republican president since Dwight D. Eisenhower not to have a Treasury secretary with a Wall Street pedigree, and in public speeches he has been quick to blame the excesses of the stock market boom and bust for the mini-recession he inherited in his first term. Wall Street has remained a vigorous backer all the same. Four out of the top contributors to the president's campaign hail from Wall Street - Morgan Stanley, Merrill Lynch, UBS and Goldman raised close to $2 million among them. But analysts warn that Mr. Bush's market-friendly tax policies will do little to lift Wall Street profits if fears of a growing budget deficit result in a sustained rise in interest rates. That, in turn, could result in lower earnings for Wall Street firms as the long bull market in bonds finally recedes. Wall Street firms have made billions in trading bonds since the collapse of the stock market in 2001. For the time being, though, Wall Street firms are mostly applauding a second term; they expect that the temporary cuts in the capital gains and dividend taxes of Mr. Bush's first term will now be made permanent. Analysts also foresee merger and acquisition activity to be more robust under Mr. Bush than it would have been under John Kerry, given the Bush administration's tendency not to interfere with large corporate mergers. 'There is a relief that this is over,' said Frank Fernandez, the chief economist for the Securities Industry Association, the industry lobby. 'This administration has a good track record on pro-investment policies. We know where they stand.' -- LANDON THOMAS JR.

Subject: Indian Outsourcing
From: Emma
To: All
Date Posted: Thurs, Nov 04, 2004 at 13:30:38 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/04/business/worldbusiness/04outsource.html An Industry in India Cheers Bush's Victory By SARITHA RAI BANGALORE, India - India's outsourcing companies were jubilant Wednesday that the elections in the United States will return President Bush to office. 'This is great news for the offshoring industry,' said Nandan M. Nilekani, chief executive of Infosys Technologies, a software services company. The trend toward outsourcing will now become even more inexorable, Mr. Nilekani said. Offshore outsourcing, or the moving of work from the United States to low-cost centers like India, was an issue in the presidential election. The Democratic candidate, Senator John Kerry, blamed Mr. Bush and outsourcing for the loss of thousands of American jobs. Mr. Bush, in contrast, was largely silent on the issue. But members of his team, among them N. Gregory Mankiw, the chief economic adviser, and Treasury Secretary John W. Snow, have both defended outsourcing as another form of free trade. Mr. Kerry referred to ''Benedict Arnold companies and C.E.O.'s'' that sent jobs overseas. He promised that as president he would end tax deferrals for companies that send work abroad. The tone of some campaign comments criticizing outsourcing was noted with some concern in India. The Times of India, the country's leading newspaper, called outsourcing the 'swear word' of the 2004 elections. Thousands of workers in India's technology centers like Bangalore and Hyderabad closely followed the campaign. India's outsourcing industry employs over 800,000. For more than a decade now, leading Indian outsourcing companies like Infosys Technologies and Wipro have written software applications and done back-office work for top American corporations including General Electric and Citigroup. The work can be done more cheaply here, where skilled labor is inexpensive and plentiful. The leading outsourcing companies earn as much as two-thirds of their revenue from customers from the United States. India's software and back-office services industry posted $12.5 billion in export revenues in the year ended in March, a 30 percent rise over the previous year as global demand for its services grew. News that Mr. Kerry had conceded the election to Mr. Bush was greeted with joy in the industry. 'We are very happy that Bush is back,' said Kiran S. Karnik, president of the industry group Nasscom, or National Association of Software and Service Companies. 'The president's track record has been of recognizing the advantages of free trade,' Mr. Karnik said. Mr. Bush's re-election will bring out the latent demand for outsourcing and lead to more offshoring announcements by companies, he said. 'Some corporations have been cautious about signing or announcing deals in the last few months,' he said, adding, 'Now they will no longer hold back.'

Subject: 4 MORE YEARS!!!!
From: Fabulous
To: All
Date Posted: Thurs, Nov 04, 2004 at 13:22:12 (EST)
Email Address: Not Provided

Message:
Right man at the right time for the right reasons. Go W! God Bless America.

Subject: India:120bn in forex reserves
From: Joel
To: All
Date Posted: Thurs, Nov 04, 2004 at 13:10:55 (EST)
Email Address: Not Provided

Message:
A question: Should India use some of its forex reserves for infrastructure and social needs or will it cause financial instability?
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- Who Owns the Key to India's $120 Billion Kitty?: By Andy Mukherjee Nov. 2 (Bloomberg) -- There is a debate raging in India about who should control the nation's foreign-currency reserves. Should it continue to be the central bank, which has formal ownership of the $120 billion kitty, or should the elected government decide the fate of the nation's savings parked in U.S. Treasuries and other overseas securities? The question isn't merely technical. If the Indian government succeeds in pushing its innovative - - and controversial -- plan to spend a part of the money on new roads, ports and power stations, then the central bank may lose control of the reserves. And that, according to the bank's own analysis, could mean trouble. ``The fact that international financial markets react asymmetrically to the same magnitude of growth in foreign-exchange reserves (positively) and the depletion in reserves (very negatively) cannot be lost sight of,'' the Reserve Bank of India said in its twice-yearly policy statement last week. Conversely, if the central bank succeeds in retaining control over the use of reserves, then that will raise its own set of questions about how independent any monetary authority can -- and should -- be in a democracy. The government isn't backing down. Vicious Cycle ``Let us explain to parliament that we have a lot of reserves,'' Montek Singh Ahluwalia, the deputy chairman of Planning Commission, the government's central planning agency, said in a speech in New Delhi on Friday. ``If parliament agrees to expand the fiscal deficit beyond the target, and the government assures the additional money goes into a specific mechanism which identifies high-priority infrastructure projects, it will be good for the country,'' Singh said. The commission's recommendation to the finance ministry is for using $5 billion of the central bank's reserves annually for the next three years as extra investments in infrastructure, Ahluwalia explained. That's as much additional investment in a year as India gets annually from all foreign-direct investors. For the $580 billion Indian economy, it's vital to find a way out of the vicious cycle of under-investment. Foreign investors are hesitant to build large, Chinese-style, export-oriented factories in India until the country can improve its rickety infrastructure. India's federal and provincial governments, which badly want foreign investments to create jobs and sustain last year's 8 percent economic growth, run a combined budget deficit equal to 10 percent of gross domestic product. They don't have the money to maintain existing infrastructure, let alone invest in new projects. Reasonable or Risky? ``Our requirements of capital in infrastructure are very large,'' Prime Minister Manmohan Singh said last month. ``We believe the Indian economy can absorb up to $150 billion of foreign investment in the infrastructure sector over the next ten years,'' he said. Using reserves is a tempting shortcut for the government. ``I think this is the reasonable way to using reserves to generate assets,'' Ahluwalia said, ``without having adverse consequential effects on the fiscal deficit.'' Economist Ila Patnaik, writing in the Indian Express newspaper, says the Reserve Bank has twice as much money trapped in low-yielding foreign reserves as required under the most stringent prudential yardstick. Still, she says the plan to use the reserves is flawed, and will result in ``sub-optimal allocation of resources.'' Stronger Rupee Patnaik's concern is valid. In an economy where state interventions typically range from the ineffective to the disastrous, what's the guarantee that a new agency entrusted with a part of the reserves will spend billions of dollars wisely? Isn't it better to leave that money in private hands by not accumulating any more reserves in the first place? ``It would be a much better policy to let the currency appreciate and free up the resources for much more efficient domestic investment,'' Thomas Stolper, a global markets economist at Goldman Sachs Group, Inc. in London, wrote in a research note on Oct. 21. ``Recycling foreign-exchange reserves is a high-risk strategy with unpredictable consequences.'' Having spent 11 years protecting the country's export competitiveness, the central bank may not be ready yet to let the rupee appreciate significantly from its current level of 45.41 against the U.S. dollar. It wants more evidence to decide if the 83 percent rise in the capital-account surplus in the last fiscal year to $22 billion was a flash in the pan, or a new trend. Pressing Need ``The recent episode of large capital flows prompted a debate in the media on the need for exchange-rate adjustment,'' the Reserve Bank said in its Oct. 26 monetary policy. ``In a scenario of uncertainty facing the authorities on determining the temporary or permanent nature of inflows, it is prudent to presume that such flows are temporary till such time that they are firmly established to be of a permanent nature.'' It may take years to ascertain the true nature of capital flows -- the sum of direct and financial investments from overseas, including borrowings. However, for India to close its development gap with China, it can't put off improvements in infrastructure any longer. The $1.4 trillion Chinese economy received $49 billion in foreign-direct investment in the first nine months of this year. Currency reserves can play a role, because they are the low- hanging fruit. If Ahluwalia can come up with a transparent way to use that money, it may be a gamble worth taking. quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_mukherjee&sid=aLudw6JaJv4g

Subject: Re: India:120bn in forex reserves
From: Emma
To: Joel
Date Posted: Thurs, Nov 04, 2004 at 13:34:17 (EST)
Email Address: Not Provided

Message:
India is in particular need of infrastructure development. Using foreign exchange reserves to support such development, is an excellent idea. Why should there be financial instability after such a sound use of reserves?

Subject: Going after social security
From: Pete Weis
To: All
Date Posted: Thurs, Nov 04, 2004 at 10:14:15 (EST)
Email Address: Not Provided

Message:
What do you do if your tax base is getting smaller and you view social security as a budget problem rather than a safety net for millions of Americans in a time when 401k's have lost trillions and pension plans are being threatened? You privatize it. This should provide jobs for the execs resigning at Freddie Mac and Fannie Mae. From the LA Times: TAXES AND SOCIAL SECURITY Bush Hints at More Aggressive Approach to Economy Privatization, savings accounts for retirement are part of his agenda of an 'ownership society.' By Peter G. Gosselin Times Staff Writer November 4, 2004 WASHINGTON — President Bush is poised to pursue an aggressive 'ownership society' agenda of Social Security privatization, new tax breaks for savings and investment, and additional incentives for home- ownership as cornerstones of his second-term economic initiatives. Bush hinted as much in his victory speech Wednesday, promising, 'We will reform our outmoded tax code. We will strengthen Social Security for the next generation.' His conservative supporters, meanwhile, rhapsodized about prospects for new tax and budget legislation that they asserted could remake the nation and usher in a generation of GOP dominance. 'The aim of the ownership society is to create a country of stakeholders in the American economy,' said Stephen Moore, president of the Club for Growth, a conservative activist group. Bush is expected to start rolling out his proposals early next year, with his State of the Union address and budget proposal. Veterans of Washington's tax and budget wars expressed doubts about how far the newly reelected president can press his case in the face of widening budget deficits and looming additional costs for, among other things, the war in Iraq. But even they acknowledged that Bush was all but certain to call for substantial changes in Social Security as well as for making the tax cuts of his first term permanent and adding a variety of new breaks. 'New legislation has become almost mandatory in Washington,' said C. Eugene Steuerle, a senior Treasury official in the Reagan administration. 'The president is no longer just the nation's administrator in chief; he's the policymaker in chief.' Bush has talked about recasting Social Security to permit workers to divert a portion of their payroll taxes into private retirement accounts since first appearing on the national stage in the late 1990s. But he has shied away from advancing a specific proposal in part because of the daunting financial issues involved in changing the giant retirement security system. Also, almost any privatization plan is likely to produce howls of protest among Democrats. More generally, the president has engaged in an intricate political minuet with the ownership society agenda pressed upon him by conservative supporters. Two years ago, he included key elements of the agenda in his budget when he proposed streamlining the hodgepodge of tax incentives for savings into two tax break-heavy arrangements — a retirement savings account, or RSA, and a lifetime savings account, or LSA. But then he let the proposals die on Capitol Hill in favor of cutting the tax on corporate dividends. During the last year, he has repeatedly mentioned the ownership society in campaign speeches, but always without potentially controversial details. 'In an ownership society,' he told Republicans at their national convention in September, 'more people will own their health plans, and have the confidence of owning a piece of their retirement.' Lifetime savings accounts would allow Americans to accumulate tax-free funds for almost any purpose, including job training, college tuition, home purchases and retirement. Retirement savings accounts would consolidate and expand existing types of retirement accounts. Bush is also expected to push for wider use of health savings accounts, tax-advantaged savings vehicles created by last year's new Medicare law. They encourage people to save for their own routine health costs. On Social Security, the president endorsed the idea of 'allowing younger workers to save some of their taxes in a personal account — a nest egg you can call your own and the government can never take away.' But, again, he gave no indication of how he would make such a plan work. All of this is about to change, according to conservative activists close to the administration. 'Bush will want to do one big thing: Social Security reform. That's the big bang,' predicted Grover Norquist, president of the conservative Americans for Tax Reform. Bush chief political strategist Karl Rove 'has promised that Social Security will be high on the president's second-term agenda,' added William Niskanen, chairman of the libertarian Cato Institute. Critics charge that creating private accounts would undermine support for Social Security by confusing what is intended as insurance against destitution in old age with an investment. They say that privatization proposals mask the fact Americans, in agreeing to the accounts, would be taking on risks now borne by the government. In addition, the critics say, although one of privatization proponents' chief arguments for overhauling Social Security is that the system is slated to run out of money, the solution of diverting money into private accounts would only make its finances shakier. Analysts estimate that funding the new accounts for young workers while paying benefits for those now eligible to receive Social Security could require the government to borrow trillions of dollars. The government is expected to run $2.3 trillion in deficits over the next decade, according to the nonpartisan Congressional Budget Office. Proponents counter that the borrowing would only be temporary and would eventually result in the government having fewer payments to make while individuals would get to keep more of their own money. In addition to changes in Social Security, Bush is likely to press to make permanent the tax cuts that he won in his first term. The dividend and capital gains tax cuts are scheduled to expire in 2009 and the bulk of the individual cuts in 2011. The president is also expected to call for the elimination of the inheritance tax and may propose some new incentives for homeownership. But advocates predicted that Bush would push for these in piecemeal fashion. 'Tax reform will come in seven little tax cuts,' Norquist said. 'The reason is not that people don't like the idea of fundamental tax reform. It's that people don't trust you to make 27 changes to the tax code and not leave you with the fuzzy end of the lollipop.'

Subject: Re: Going after social security
From: Emma
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 11:31:40 (EST)
Email Address: Not Provided

Message:
We built a prosperous middle class American society from the Roosevelt Administration. Institutions such as Social Security and the GI Bills and Medicare supported and insured this middle class society. Arch conservatives have wished to undo the legacy of the New Deal, and they find the chance now.

Subject: He looks French
From: Yann
To: All
Date Posted: Thurs, Nov 04, 2004 at 07:17:20 (EST)
Email Address: Not Provided

Message:
I've just learnt that one of the Republican slogans against Kerry was: “He looks French.” I'm sorry if this poor slogan has been an argument for some undecided voters. In my opinion, Bush's victory lies (in part) in the success of exhibitionist religiousness(-ity), an unbelievable success in France. We know here how pernicious can be the cabal of hypocrites (“cabale des dévots”), these schemers who lean on religion. Our history teaches us. Only a hypocrite who is a “good Christian” and a champion of freedom could create the Guantanamo prison camp.

Subject: Progress without the Federal government?
From: Bobby
To: All
Date Posted: Thurs, Nov 04, 2004 at 04:23:13 (EST)
Email Address: robert@pkarchive.org

Message:
I am trying to think of ways in which states may be able to make social progress without relying on the federal government of George W. Bush, which may end substantial parts of the welfare state and prevent enaction of necessary new programs, like port security. The following is very rough. I also have a question about whether the following is constitutional: General Summary of Plan: Imagine that some state (we'll call it the 'donor state' for reasons you see later) wants to create some government program at the state level. The federal government itself won't do that program nationwide because it is already running huge deficits and ready to largely cut existing programs to the bone in Bush's 2nd term. This 'donor state' that wants to create the program at the state level is unwilling to raise the necessary state taxes needed to to fund it, because people and businesses seeking to avoid extra taxation will move out to neighboring states, thereby partially frustrating the effort to raise revenue. The solution to this is that the donor state agrees with neighboring states (we'll call them "recipient states" for reasons we'll see in a moment) to raise taxes by the same amount. Since these neighboring "recipient states" *and* the donor state all raise their taxes by the same amount, there are fewer attractive lower-tax places for people and businesses to go, so fewer people and businesses move out of the donor state under this higher taxation. This donor state can entice other "recipient states" to cooperate and raise their taxes by creating a revenue-sharing consortium, under which these "recipient states" get back more revenue than they put in. This consortium is effectively a mechanism by which states make side payments to others in order to get cooperation. Plan in More detail: All these states form a consortium, in which they all levy a certain extra tax, say, equal to x% of income (I'm doing a flat % here, but this can be done with marginal rates too). These member states set their own state income taxes independently. But this separate x% tax on income must be uniform across states that are members of the consortium. Therefore when people pay taxes at the state level, they pay their regular state income taxes plus the extra x% of their income for this extra tax. Then the revenues from this x% income tax are pooled from the different member states and redistributed according to some pre-negotiated distribution formula among the member states. This distribution formula is negotiated between all the member states of the consortium. But, the formula must include the following two aspects to work: 1. The donor state (which is the one that originally wanted to create the program at the state level) gets back less than it contributes to the revenue pool, according to the distribution formula. This is the cost of the consortium to the donor state. The benefit they get from the consortium is fewer residents and businesses moving out of state due to higher taxes. Therefore, the donor state uses the revenue they get back from the revenue pool to fund the government program they wanted. 2. The other states (that is, the recipient states, which are the other members of the consortium) agree to join the consortium and raise their taxes by the same amount as the donor state. Their incentive to join the consortium and raise their taxes is that, under the distribution formula, they receive more from the revenue pool than they put in. Without this incentive, there would be no reason for another state to raise his taxes to the same level of the donor state. Depending on the rules of the consortium, recipient states can use this revenue from the revenue pool to pay for either the same government program that the donor state is implementing, a different specified government program, or they can use the revenue however they want at their discretion. Finally, the rule is that, if a state lowers its x% tax below some threshold amount, it gets kicked out of the consortium for some temporary period and must pay some penalty money to other states. This is the mechanism by which it is enforced that the x% tax rate is the same across member states. This idea is very flexible in its implementation. It can be modified to include several donor states and any number recipient states. It can also be applied to many different policies. It also leaves open the possibility of coordinating programs across the member states or having the states run their own programs individually. For example, if the federal government were to abolish or somehow destroy Social Security, these states could create a (partial) substitute for it by forming a consortium, pooling revenues, and then redistributing money from the revenue pool to the retired residents of member states according to some distribution formula. Specifically, I would like to see New York enter a consortium with neighbors, in order to get far better port security, which I am sure that Bush will ignore in the next few years. Environmentally conscious states can also enter consortiums where they all levy the same gasoline tax or environmental regulations, and they entice other states to join by making side payments to them (either through the revenue pool in the case of the gas tax or some other mechanism in the case of regulations). This obviously doesn't work too well for things like global warming. I'll add some qualifiers here. The exact design of the consortium depends on various empirical relationships and sensitivities between variables. For example, the sensitivity to taxation of people moving out of state might be very small. That is, if people moving out of state is very insensitive to taxation, it may be beneficial for the donor state to run the program by itself instead of starting a consortium. Also, you might need to create a very large consortium in order to decrease significantly the number of businesses and people who move out of state under higher taxes.

Subject: Re: Progress without the Federal government?
From: Terri
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 05:53:47 (EST)
Email Address: Not Provided

Message:
Excitingly creative.

Subject: Rant on Troubling 'Values' in Parts of America
From: Bobby
To: All
Date Posted: Wed, Nov 03, 2004 at 23:31:55 (EST)
Email Address: robert@pkarchive.org

Message:
If this business about 'values' causing our 2004 defeat is true, it appears that a large group of people in this country decided to vote based on things that they see on TV, which don't affect their own lives and which are none of their business. The economy surely affects everyone's lives, healthcare surely affects almost everyone's lives, the Iraq War affects many people's lives since their children or friends' children are dying or being mamed in Iraq and are in danger of being drafted. Terrorism affect the lives of those living in or visiting a large city. But 'values' (or 'moral values' as TNR now says) appears to have topped these in importance and brought John Kerry to defeat in 2004. When people talk about voting on 'values' they mean gay marriage, abortion rights (including stem cell research), and some phony image of the president 'having strong faith' religiously. A president 'having strong faith' has zero effect on people's lives, since they will never meet or know the man. The image of Bush as 'having strong faith' is pure phony advertising created by Bush's consultants and promoted dutifully by the so-called liberal media. Moreover, the coverage is not only superficial but contains such glaring omissions of central facts that any judgment of Bush's faith based on media coverage deserves zero confidence of accuracy. For example, most of those who trust in Bush's 'faith' don't know that Bush never even goes to church as TNR showed last month. People who oppose gay marriage so strongly as to make it a top priority in voting rarely, in their own lives, knowingly come into contact with gays, since few gay people would reveal that they are gay to a biggot. More importantly, gay marriage does not affect the lives or marriages of heterosexuals at all. Embryos in stem cell research are extras left over from in-vitro fertilization, which would be thrown out anyway, and are donated voluntarily by the couple that produced them. Those opposing abortions so strongly as to make it a top priority in voting don't knowingly come into contact with people who are thinking of or having abortions, unless they are protesting and harassing people outside an abortion clinic. Basically, these people are voting based on things that they only see on TV, which they think are scary and are none of their business. They are voting to interfere in things that do not affect their own lives, but they feel that their own superior 'values' give them to the right to interfere with other people's lives. Of course abortion and gay marriage are hyped and used to scare people constantly by TV news media and religious rightwing television. My trouble is with the priorities of these people: A large swath of the American populus has now traded in their jobs, their income, and their security in return for a more pleasant TV-viewing experience, where they don't have to be annoyed by such things as watching gay marriages, where they can take pleasure in reports of the abortion rights of people they know nothing about being violated, and where they can gaze on the shell of a president which conforms to their self-righteous, superficial judgment of what constitutes a moral man.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: johnny5
To: Bobby
Date Posted: Fri, Nov 05, 2004 at 13:49:56 (EST)
Email Address: johnny5@yahoo.com

Message:
Never underestimate the power of many hundreds of millions of people that simply want to come home and let the cable TV wash over them and melt thier worries away - more people spend more money on entertainment than they do on education. Understand that yes indeed - a more pleasant tv experience is very high on many peoples agenda.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: yy
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 16:31:55 (EST)
Email Address: Not Provided

Message:
'A large swath of the American populus has now traded in their jobs, their income, and their security in return for a more pleasant TV-viewing experience, where they don't have to be annoyed by such things as watching gay marriages' Absolutely wrong. As long as fear and hatre need to be generated, they will get their new due dose of unpleasant TV watching experience. No trade off.

Subject: I am proud that we lost on 'values'
From: David E...
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 13:13:27 (EST)
Email Address: Not Provided

Message:
because it is clear that values means 'hate gays'

Subject: Re: I am proud that we lost on 'values'
From: Ari
To: David E...
Date Posted: Thurs, Nov 04, 2004 at 16:48:35 (EST)
Email Address: Not Provided

Message:
Yes.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: Jennifer
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 11:41:16 (EST)
Email Address: Not Provided

Message:
The results of the election were most unfortunate. The new Congress will be considerably more of a problem for us. The Roosevelt thrust in American democracy is being undone. Possibly I am not capable of understanding conservatism and its advantages, but I find only worries that we are stepping away from a democratic idealism.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: jimsum
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 10:34:35 (EST)
Email Address: jim.summers@rogers.com

Message:
I think voters think they have the luxury of voting based on 'moral' issues because there has been no cost for Bush's mistakes. According to everything you here from Bush, there is no cost for the budget deficit, there is no cost for the trade deficit, there is no cost to having the army bogged down in an unnecessary war, and there is no cost for thumbing your nose at the rest of the world. The benefits for those actions have been gratefully noticed by the beneficiaries, but the costs have not yet come due. What really worries me is that when the bills come due, no one will connect the costs to Bush's actions, and he'll get his chance to make things even worse. If you don't think stupid policies can last for decades, consider the drug laws. Taking drugs is harmful, and society would probably be better off if no one took any (alcohol is one of the worst!). But making drugs illegal creates a black market which destabilizes countries like Columbia and Afghanistan, and provides plenty of money for local organized crime. After decades of propaganda, we have been trained to incorrectly blame drug use for the crime caused by prohibition, and the increased crime is used as a justification for more prohibition. I think the parallel to Bush's strategy should be clear. A majority is convinced that Bush's policies make things better, not worse. When it becomes clear that things are getting worse, that will be used as justification for even more of Bush's bad policies. I don't know how to make people stop believing comfortable lies and instead confront the ugly truth; but the current administration is obviously more interested in telling comforting lies than actually trying to solve problems. Let's hope that voices like PK's will eventually be heard.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: Bobber
To: jimsum
Date Posted: Thurs, Nov 04, 2004 at 20:51:38 (EST)
Email Address: bobber@jax.com

Message:
yeah, go ahead and take some more drugs...clueless

Subject: Re: Rant on Drug 'Values'
From: jimsum
To: Bobber
Date Posted: Fri, Nov 05, 2004 at 10:36:48 (EST)
Email Address: jim.summers@rogers.com

Message:
Your response makes my point. There is no correlation between the strictness of laws and how many people take drugs. States where pot is decriminalized have no greater prevalence of drug use than the states with the strictest laws. It may be worthwhile to create policies to reduce drug use (if you think there is anything wrong with taking them), but the current policies don't do that. Current drug laws are based on morals; taking drugs is bad, therefore it should be against the law. In reality, prohibition only increases the costs of drug taking to society. We learned that prohibition increases the costs of alcohol use more than 70 years ago, but to this day we are willfully blind to the fact that the same lesson applies to all drugs.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: Pete Weis
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 01:34:56 (EST)
Email Address: Not Provided

Message:
'The economy surely affects everyone's lives, healthcare surely affects almost everyone's lives, the Iraq War affects many people's lives since their children or friends' children are dying or being mamed in Iraq and are in danger of being drafted. Terrorism affect the lives of those living in or visiting a large city. But 'values' (or 'moral values' as TNR now says) appears to have topped these in importance and brought John Kerry to defeat in 2004.' Bobby. It's sad but your words ring true.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: Terri
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 06:07:19 (EST)
Email Address: Not Provided

Message:
A fine rant.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: Piranha
To: Terri
Date Posted: Thurs, Nov 04, 2004 at 12:15:02 (EST)
Email Address: Not Provided

Message:
Yes, a fine rant indeed. The question for 2008 would be: Should democrats adopt a more value-centric outlook (William Saletan wrote about this in Slate); or should they try to hammer home the realities of war, terrorism, deficit etc until the people finally 'get it'. In other words, did John Kerry need a *clearer* message, or a *different* message.

Subject: Re: Rant on Troubling 'Values' in Parts of America
From: jimsum
To: Piranha
Date Posted: Thurs, Nov 04, 2004 at 13:38:12 (EST)
Email Address: jim.summers@rogers.com

Message:
Democrats need a realistic message. Kerry was boxed into a corner where telling the truth would have lost him an election to the 'what-me-worry?' message of Bush. Unfortunately, that meant that his policies where based on the same unrealistic assumptions as Bush's, leading people to vote for Bush because 'Kerry is just the same'. I think the errors in Bush's policies will be pretty clear in 2008 (or it will be clear that he is a political and economic genius). Maybe then there can be a real debate about whether what a politician professes is more important than what he actually does. I don't think Kerry needs a different message -- Bush's policies are a disaster and I doubt that will change. In the next election, when the evidence of how bad Bush has been is more obvious, perhaps more voters will look at Bush's record and realize that counts more that Bush's professed beliefs.

Subject: Investing After
From: Terri
To: All
Date Posted: Wed, Nov 03, 2004 at 18:39:56 (EST)
Email Address: Not Provided

Message:
Well, we know the political climate. Now, we can figure out what to do about the economic climate. Should we stay down the middle of the market in investing? What of Europe? What of sectors? Health care? What of bonds?

Subject: Re: Investing After
From: Bobby
To: Terri
Date Posted: Thurs, Nov 04, 2004 at 02:16:03 (EST)
Email Address: robert@pkarchive.org

Message:
I'm going to try to convince my parents to switch their mortgage to a fixed rate immediately. I don't want to have to endure the consequences of Bush's 2nd term any more than I have to.

Subject: PK has a fixed rate mortgage
From: jimsum
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 09:54:49 (EST)
Email Address: jim.summers@rogers.com

Message:
I was reading some of PK's old columns last night (and I'm sad that a lot of what he predicted has come true, yet a majority of Americans don't care). At any rate, PK switched to a fixed mortgage more than a year ago (A Fiscal Train Wreck-3.11.03) so it's probably an even better idea now. I have stuck to fixed mortgages for the last decade or so (in Canada 5 years is about the longest term with reasonable interest rates) and I have paid more interest than I could have. But mortgage rates of 5-6% are historically quite low; why get greedy and take the risk that variable rates will go up a lot?

Subject: At their limit
From: Pete Weis
To: jimsum
Date Posted: Thurs, Nov 04, 2004 at 10:28:20 (EST)
Email Address: Not Provided

Message:
With this highly priced housing market coupled with a poor job market, most home buyers are having to realize their dream by opting for ARM's which provide only a small break on monthly payments and reverse mortgages with monthly payments up to 50% of their gross monthly income. They are literally at their limit or sometimes over their limit paying their bills. It wouldn't take much to push them over the edge. The belief, no matter how rediculous, is that housing will continue to soar. The freightening thing is that not only buyers are under this misconception but so are lenders.

Subject: Re: Investing After
From: Terri
To: Bobby
Date Posted: Thurs, Nov 04, 2004 at 05:47:55 (EST)
Email Address: Not Provided

Message:
We can expect the last years of tax cuts to be made permanent. The budget deficit will thus become more of a problem. There will be a climb for interest rates, hopefully a slow climb as government borrowing competes with private borrowing. What has puzzled me these 18 months is why Alan Greenspan thought households might properly choose adjustable mortgages when fixed rates are so low. What did I not understand?

Subject: Re: Investing After
From: Pete Weis
To: Terri
Date Posted: Thurs, Nov 04, 2004 at 09:46:35 (EST)
Email Address: Not Provided

Message:
'What has puzzled me these 18 months is why Alan Greenspan thought households might properly choose adjustable mortgages when fixed rates are so low. What did I not understand?' His desperation - leading him to say almost anything to pull a flagging economy out of its dive when there was no more significant stimulus to be put into action.

Subject: Re: Investing After
From: Pete Weis
To: Terri
Date Posted: Thurs, Nov 04, 2004 at 01:21:42 (EST)
Email Address: Not Provided

Message:
Terri. I believe Richard Russell's view that the stock markets will fall much further. But Jim Rogers view is not as gloomy on the stock markets - he simply thinks they're just a bad investment. This is from Business Week: The Bull Runs in Commodities That's the belief of Investment Biker author Jim Rogers, who recommends coffee and sugar futures, instead of stocks and bonds For the next decade, the best investment action will be in commodities. That's the view of Jim Rogers -- famous for Investment Biker, a chronicle of his motorcycle trip around the world exploring far-off lands and economies. He has also written Adventure Capitalist, another combination of travelogue and investment guide, and his most recent book is Hot Commodities. When it comes to stocks and bonds, Rogers says, 'There will not be any great bear or bull period like there was in the 1980s and 1990s.' he says. His pessimism also extends to the U.S. dollar, which he thinks will be in a decline for the next 20 years, with great volatility for all currencies in the coming decade. The commodities Rogers says he would buy today are coffee, sugar, and perhaps cotton. For income in the difficult period he sees ahead, he suggests short-term interest-bearing paper -- he expects interest rates to be rising around the world because of a period of stagflation similar to the '70s. These were a few of the points he made in an investing chat presented Oct. 28 by BusinessWeek Online on America Online, in response to questions from the audience and from Jack Dierdorff and Karyn McCormack of BW Online. Following are edited excerpts from this chat. A complete transcript is available from BusinessWeek Online on AOL at keyword: BW Talk. Q: Jim, based on your world view, what's your take on the markets right now? A: Well, the bond market has now peaked. It peaked in 2003 and will be in a bear market for 15 to 20 years, with rallies of course. The U.S. stock market will fluctuate up and down for the next 10 to 20 years. There will not be any great bear or bull period like there was in the 1980s and 1990s. On the nearer term, I expect the years 2005 and 2006 to be difficult years in the U.S. stock market. That would extend to most Western stock markets as well. If you want to be in a bull market, you should invest in commodities. That's where we'll have a bull market for the next 10 to 20 years. The currency market -- I would suggest that people sell the U.S. dollar because it will be in decline for the next 20 years. Q: Today's news of China's unexpectedly raising its key interest rate knocked down commodities prices and stocks. Is the commodities bull just about over -- or would you still invest in them at this point? A: In every bull market there are many consolidations along the way. Commodities have been very hot for the past five years or so, so we're well overdue for a consolidation. I expect things to get worse in China. I expect there to be a hard landing. But if you see the cover of BusinessWeek next year saying 'Turmoil in China,' reach for the phone and buy all the commodities you can and all the China [holdings] you can, because that will be your next great buying opportunity, if it happens that way. I'm not selling my commodities or my China [holdings], although I do expect further consolidation in both. Q: It's my opinion that Bretton Woods is on the verge of collapse. What do you think will take its place? A: I concur. I also concur that the U.S. dollar will suffer during this period. I would expect there to be a decade of great volatility in currencies around the world -- and perhaps even exchange controls in the U.S., eventually. I don't know what will take its place. I don't even see a currency that will replace the U.S. dollar as the world's reserve currency at the moment -- perhaps if things get really desperate, people may leap to gold for a while, but gold isn't something that can permanently solve the world's problems. Q: Will this country be able to get rid of its debt? Are we heading for another Depression? A: No country in the world that has gotten itself into this kind of debt situation has ever in history gotten out without a crisis or a semi-crisis. The same will happen in the U.S., unfortunately. And even then, we will not solve our debt problems. When England went from being the richest, most powerful country in the world, the situation declined for over three generations. We have entered a period like that as well. Q: Going to China -- investment ideas to look for? A: Well, it's too early to buy shares in China. I would wait for a hard landing next year. But start looking around and doing your homework while you're there. I don't know what's going to go down the most as China retrenches. Q: You had mentioned a housing bubble about a year ago -- what do you think now? A: Well, there's no question that there was and is a housing bubble in some parts of the country. It has already started leveling off and/or declining in some places. In others, it's still hot. Financial areas such as Massachusetts will certainly suffer housing losses as the bubble pops. Commodity areas such as Iowa will have nice housing markets for several years. The bubble is not everywhere and will not continue everywhere. It just depends on the location. Q: Are you still high on international investing? A: Yes. I'm high on investing in wherever the opportunities are, and that's often internationally. Therefore, yes, one should never limit one's investments to one country because you will miss great opportunities. Q: Where would you look for income/yield? A: That's a great question. I would not own bonds anywhere in the world unless it were a very special situation. I would keep my money in short-term interest-bearing paper and suffer a temporary lower income because rates will be rising in most of the world. Q: Can one be a long-term buy-and-hold investor and make money, or does one need to be a trader? A: Well, if you find the right instrument, the right security, then yes, you can be a buy-and-hold. But in my view, the next 10 to 20 years in the U.S. stock market, that will not be a satisfactory way to invest unless you find the few securities that might do well even in a period like that. The investors who'll do well are the ones who can buy low and sell when things rally and repeat the process throughout the decade. Q: What commodities would be ripe for investing now, if any? A: Oh, if I were going to buy a couple today, I would probably buy coffee and sugar, maybe cotton. Q: How does an individual investor go about investing in cotton? A: You can buy cotton futures -- it's very simple. I urge you not to do it unless you know a lot about cotton. I urge you not to do it on thin margin unless you know a lot about what you're doing. Q: What's your outlook for gold and gold stocks? A: I own some of both. I am less optimistic about gold than I am about many commodities. Q: Does the energy sector still have a significant upside left? A: Well, oil is overdue for a correction. But the price of oil will be much higher over the next few years. The surprise will be how high energy prices stay and how high they go. Q: What do you think natural gas will do? What do you think of natural gas royalty stocks? A: Natural gas will continue to go higher over the next few years. The question concerning natural gas royalty stocks is the status of their reserves. If they're not replenishing their reserves, the income will dry up as the reserves dry up. Q: How about investing in traveling around the world? A: It's a great experience. I urge everyone to do it. It's a wonderful way to find out what's really happening in a country and a wonderful way to find investments. Q: From your travels, what countries did you find most intriguing for investment? A: China, Canada, Angola, Australia, Tanzania, Ethiopia, Japan, New Zealand, and Bolivia. Q: Why wouldn't interest rates come down if economies are slowing? A: Because there is inflation in the world, and inflation will be getting worse. We'll have a period of stagflation, just as we did in the 1970s. Q: Would utilities be a good investment in stagflation? A: Not normally, because the costs of building new plants will rise dramatically. And they normally cannot get rate increases as rapidly as prices rise. However, in the next 10 years, there will certainly be a shortage of utility capacity in much of the world. So they'll be better this time around than last time. Q: Are you shorting the U.S. dollar? A: I'm not shorting the U.S. dollar, but I am moving money out of the U.S. dollar into other currencies. At this precise time, in fact, the U.S. dollar is probably overdue for a rally. So I certainly would not be shorting it now, or this week. Q: What about water shortages? Our generation or next? A: No, they're already occurring in our generation in various parts of the world. Those shortages will continue to get worse. For example, in the Southwestern part of the U.S. or in the area east of the Red Sea and other areas, if you can find a way to purify water, pump it, or move it to the needed areas, you'll make a fortune. Q: I'm wondering about soybeans and Bunge (BG ). What's your take? A: Well, I'm optimistic about most agricultural products, including soybeans. Bunge is not a grower of agricultural products, but a processor and handler of commodities. The growers will do better, but people like Bunge have traditionally done well also. Q: What's your preferred approach to commodity investments -- futures, commodity company stocks, other? A: Futures nearly always do better than stocks. A recent Yale study showed that one would have done three times as well investing in commodities rather than commodity stocks. Q: Is silver a good investment now? A: I own silver. I expect to make more in other commodities, but I do own silver. Q: If you had to put $5 million to work, what would your asset allocation be? A: Commodities and foreign currencies. And sometime this fall or winter, I would sell financial stocks short in the U.S. Q: What about oil stocks? A: Well, I own some oil stocks. I do not own U.S. oil stocks, I own international oil stocks. There probably will be a better time to buy them later as oil consolidates. Q: What's the best way to invest in coal? Would you? A: The only way I know to invest in coal is through coal shares, and I do expect coal to do well over the next several years. If you buy a coal share, make sure it has big reserves. Q: Where should the average 401(k) investor keep his money? A: At the moment, I would be keeping it in money-market funds.

Subject: Interesting
From: Ari
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 17:36:36 (EST)
Email Address: Not Provided

Message:
This is an interesting investing perspective. Commodity investing however is more costly and more risky than buying commodity company stocks or stock funds.

Subject: Re: Investing After
From: Terri
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 06:06:07 (EST)
Email Address: Not Provided

Message:
This is a valuable interview to think along with, and ask after the practicalities and alternatives. How might ordinary investors safely diversify with commodity based investments and international investments?

Subject: Markets After
From: Terri
To: Terri
Date Posted: Wed, Nov 03, 2004 at 20:15:47 (EST)
Email Address: Not Provided

Message:
The Value Index is up 8%. The Small Cap Index is up 10%. The Europe Index is up 11%. Energy is way up, REITs are way up, Health Care is beginning a climb. Long Bond Funds are up 7.5%.

Subject: Energy Prices and Japan
From: Emma
To: All
Date Posted: Wed, Nov 03, 2004 at 13:53:29 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/03/business/worldbusiness/03japanoil.html Japan's Recovery Hinges on Oil Prices By TODD ZAUN TOKYO - Like a Japanese compact car, the nation's economy is built to go a long way on a little gas. And so, Japan should be one of the best-prepared countries in the world to deal with rising oil prices. But as oil prices linger around $50 a barrel, economists now say Japan may be among the hardest hit. The Japanese economy depends less on oil than almost any nation, requiring only about half as much oil to generate $1 worth of economic growth as the United States. But while the surge in oil prices has had relatively little impact so far on corporate profits or consumer spending, the increase is beginning to take a toll on the economy by contributing to a decline in Japanese exports, the main engine of the recovery that began last year. As a result, the pace of economic growth in Japan has slowed sharply from earlier this year raising concerns about the durability of the recovery. 'We are seeing the obvious impact of higher oil prices, which are pushing down the trade surplus,' said Shuji Shirota, an economist at Dresdner Kleinwort Wasserstein in Tokyo. 'The rise is already affecting the Japanese economy.' Mr. Shirota recently cut his forecast for growth in Japan's gross domestic for 2005 to 0.9 percent from an earlier estimate of 1.1 percent, mostly because of the damage he expects higher oil prices will do to exports. The oil prices have not yet shown up in overall growth figures for 2004. The situation highlights the extent to which Japan's recovery continues to rely on overseas markets and remains vulnerable to economic conditions abroad. Exports account for less than 15 percent of the economy. But consumer spending, which accounts for about 60 percent of the Japanese economy, has been flat or falling amid a steady decline in incomes, and many economists do not expect a rebound in incomes or consumption anytime soon. Japan's economy grew at an annual pace of 1.3 percent for the second quarter of this year after expanding at a robust 6.4 percent in the first quarter, largely because of strong growth in exports of everything from cars and computers to DVD players and digital cameras. But more recently, economists say, demand for many of those goods appears to be softening.

Subject: Re: Energy Prices and Japan
From: Pete Weis
To: Emma
Date Posted: Wed, Nov 03, 2004 at 23:23:58 (EST)
Email Address: Not Provided

Message:
Higher oil prices are a problem for Japan as they are for the rest of the world. But I wonder if the Japanese economic resurgence 'earlier this year' was really more to do with the resurgence of the American consumer after the massive 2003 economic stimulus in the US. And the fall off in the Japanese economy is now more to do with the lack of this stimulus at the end of 2004 and a fading US consumer.

Subject: Re: Energy Prices and Japan
From: Terri
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 20:07:02 (EST)
Email Address: Not Provided

Message:
There is also China. The Chinese boom has been immensely helpful through Asia, but there is the prospect of a slowing in China now. Still, Japan looks to be slowly solving domestic problems. The Japanese stock market is also robust.

Subject: Re: Energy Prices and Japan
From: Dr. Funkenstein
To: Pete Weis
Date Posted: Thurs, Nov 04, 2004 at 18:54:35 (EST)
Email Address: Not Provided

Message:
Hi. I believe the recovery in Japan from 2003 to early 2004 has much more to do with the boom in China. For example, export to China increased drastically while export to US increased marginally. The boom in China might have been affected by the economic stimulus in the US, though.

Subject: Oh F#@&%
From: Mik
To: All
Date Posted: Wed, Nov 03, 2004 at 13:49:30 (EST)
Email Address: Not Provided

Message:
My condolences guys.

Subject: Living Poor, Voting Rich
From: Emma
To: All
Date Posted: Wed, Nov 03, 2004 at 12:37:28 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/03/opinion/03kris.html Living Poor, Voting Rich By NICHOLAS D. KRISTOF In the aftermath of this civil war that our nation has just fought, one result is clear: the Democratic Party's first priority should be to reconnect with the American heartland. I'm writing this on tenterhooks on Tuesday, without knowing the election results. But whether John Kerry's supporters are now celebrating or seeking asylum abroad, they should be feeling wretched about the millions of farmers, factory workers and waitresses who ended up voting - utterly against their own interests - for Republican candidates. One of the Republican Party's major successes over the last few decades has been to persuade many of the working poor to vote for tax breaks for billionaires. Democrats are still effective on bread-and-butter issues like health care, but they come across in much of America as arrogant and out of touch the moment the discussion shifts to values. 'On values, they are really noncompetitive in the heartland,' noted Mike Johanns, a Republican who is governor of Nebraska. 'This kind of elitist, Eastern approach to the party is just devastating in the Midwest and Western states. It's very difficult for senatorial, Congressional and even local candidates to survive.' In the summer, I was home - too briefly - in Yamhill, Ore., a rural, working-class area where most people would benefit from Democratic policies on taxes and health care. But many of those people disdain Democrats as elitists who empathize with spotted owls rather than loggers. One problem is the yuppification of the Democratic Party. Thomas Frank, author of the best political book of the year, 'What's the Matter With Kansas: How Conservatives Won the Heart of America,' says that Democratic leaders have been so eager to win over suburban professionals that they have lost touch with blue-collar America. 'There is a very upper-middle-class flavor to liberalism, and that's just bound to rub average people the wrong way,' Mr. Frank said. He notes that Republicans have used 'culturally powerful but content-free issues' to connect to ordinary voters. To put it another way, Democrats peddle issues, and Republicans sell values. Consider the four G's: God, guns, gays and grizzlies. One-third of Americans are evangelical Christians, and many of them perceive Democrats as often contemptuous of their faith. And, frankly, they're often right. Some evangelicals take revenge by smiting Democratic candidates. Then we have guns, which are such an emotive issue that Idaho's Democratic candidate for the Senate two years ago, Alan Blinken, felt obliged to declare that he owned 24 guns 'and I use them all.' He still lost. As for gays, that's a rare wedge issue that Democrats have managed to neutralize in part, along with abortion. Most Americans disapprove of gay marriage but do support some kind of civil unions (just as they oppose 'partial birth' abortions but don't want teenage girls to die from coat-hanger abortions). Finally, grizzlies - a metaphor for the way environmentalism is often perceived in the West as high-handed. When I visited Idaho, people were still enraged over a Clinton proposal to introduce 25 grizzly bears into the wild. It wasn't worth antagonizing most of Idaho over 25 bears. 'The Republicans are smarter,' mused Oregon's governor, Ted Kulongoski, a Democrat. 'They've created ... these social issues to get the public to stop looking at what's happening to them economically.' 'What we once thought - that people would vote in their economic self-interest - is not true, and we Democrats haven't figured out how to deal with that.' Bill Clinton intuitively understood the challenge, and John Edwards seems to as well, perhaps because of their own working-class origins. But the party as a whole is mostly in denial.

Subject: Re: Living Poor, Voting Rich
From: Bobby
To: Emma
Date Posted: Wed, Nov 03, 2004 at 15:14:22 (EST)
Email Address: robert@pkarchive.org

Message:
I wonder what would happen if the Democratic and Republican party each split up into two units. What I'm thinking is there'd be four combinations: 1. Liberal economic/liberal social 2. Liberal economic/conservative social 3. conservative economic/liberal social 4. conservative economic/conservative social Anyway, I wonder what would be the national breakdown of, say, people in Congress from each of these four parties, assuming it were organized that way. I'm really asking a question of people's opinions on breakdowns of socially liberal versus socially conservative and economically liberal versus economically conservative policies -- I know it's not that simple, but I'm trying to just get a general message. I think the South may be socially conservative but economically liberal, but that's a guess. The only reason they're representatives are conservative is the fact that they care more about social issues, and there's no way to decouple the economically conservative policies from the socially conservative policies in the Republican party. Sorry for the incoherent post. Just throwing some nonsense out here, which can hopefully be put into a coherent conclusion.

Subject: Social conservatism
From: Pete Weis
To: Bobby
Date Posted: Wed, Nov 03, 2004 at 22:44:08 (EST)
Email Address: Not Provided

Message:
Being socially conservative seems to trump all other considerations. So a politician can be totally anti-gay and anti-abortion when his opponent is not, get us embroiled in a disastrous war overseas that is likely to last for many years costing many thousands of lives, administer an economy which loses jobs and runs budget deficits through the roof, trample civil liberties, lose the respect of the world and then get re-elected. Social conservatism is precisely why Iraq will not be anything resembling a democracy for many decades to come and will likely become a theocracy like Iran is now and Afgahnistan was not long ago. Social conservatism is precisely why Moslem extremists can not tolerate living on this planet with those who do not follow to the letter their own rigid beliefs. Finally, being socially conservative has absolutely nothing to do with being 'moral'. It's about looking at the world through a very narrow scope and not understanding why the entire world doesn't fit into that narrow field of view and denying the right to exist of everything they can not and will not see.

Subject: Re: Living Poor, Voting Rich
From: Terri
To: Bobby
Date Posted: Wed, Nov 03, 2004 at 15:21:31 (EST)
Email Address: Not Provided

Message:
This is clever. Think about populists like Robert Byrd and Jay Rockefeller of West Virginia. Democrats need to pay attention to such distinctions.

Subject: Robert Burd
From: Terri
To: Terri
Date Posted: Wed, Nov 03, 2004 at 18:41:16 (EST)
Email Address: Not Provided

Message:
Could Robert Byrd get elected in any other southern state?

Subject: Grey Hairs swing it
From: johnny5
To: Emma
Date Posted: Wed, Nov 03, 2004 at 13:11:25 (EST)
Email Address: johnny5@yahoo.com

Message:
Kerry lost the older vote - the michael moore slackers tour was a waste a dem resources. http://www.cbsnews.com/stories/2004/11/03/politics/main653275.shtml Grey Power Boosts Bush NEW YORK, Nov. 3, 2004 Nationwide, seniors thought highly of Mr. Bush. Fifty-five percent of voters 60 and over had a favorable opinion of him, while 54 percent of this group approved of his job performance.
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-- A key factor in President Bush's win over John Kerry in the presidential election was Mr. Bush's ability to reverse the traditional advantage the Democratic Party has held among elderly voters. Bush initiatives targeting the elderly, from the repeal of the federal estate tax to the creation of a Medicare prescription drug benefit, appear to have made a favorable impression. Mr. Bush received support from 53 percent of voters 60 and over, compared to 46 percent for Kerry, according to CBS News exit polls. [CBS News National Exit Poll results are based on interviews with 13,531 voters. The sampling error is plus or minus 1 point.] In the last three elections, voters 60 and over have supported the Democratic nominee. Bill Clinton held a 12-point advantage over Mr. Bush’s father, and a 4-point advantage over Bob Dole. Al Gore received 51 percent of the senior vote to Mr. Bush’s 47 percent. Amazingly, nearly all the key swing states broke according to seniors’ preferences. In Florida and Colorado, where Mr. Bush received support from a majority of seniors, he won. Conversely, in the battleground states of Pennsylvania and Minnesota, where Mr. Bush failed to secure a majority of seniors, he lost. Nationwide, seniors thought highly of Mr. Bush. Fifty-five percent of voters 60 and over had a favorable opinion of him, while 54 percent of this group approved of his job performance. The president's appeal to seniors appears to stem from his positions on social issues. Twenty-one percent of voters over 60 named moral values as the issue that mattered most in their vote decision. Only 16 percent of seniors supported gay marriage, and only16 percent thought abortion should be approved under all circumstances. Mr. Bush’s stance on terrorism also appeared to underlie his appeal to seniors. Nineteen percent of voters over 60 named terrorism as the most important issue to their electoral decision, while 54 percent said the Osama bin Laden video was very important or somewhat important in their voting decision. Fifty two percent said we were safer from terrorism compared to four years ago. Fifty-eight percent would trust Mr. Bush to handle terrorism. Health care was on the minds of seniors as well. Seventy-one percent were very concerned about the cost of health care. Although only 12 percent said it was the issue that mattered the most in their voting choice, this was double the proportion of voters under 45 who named it as a key factor. Although much had been made about seniors’ confusion with different voting procedures, 86 percent were very or somewhat confident that their votes would be counted correctly.

Subject: Is Paul Krugman responsible?
From: Henry
To: All
Date Posted: Wed, Nov 03, 2004 at 09:02:55 (EST)
Email Address: henry.townsend@verizon.net

Message:
I wonder whether the commonly expressed hatred and disdain expressed for Bush (Krugman, New Yorker, NR) isn't partly responsible for Bush's victory? Just as Bush's verbal errors make him more 'like one of us' among the undecided, so does Krugman et al make one sympathize a bit for Bush and therefore help swing the undecided.

Subject: No
From: Terri
To: Henry
Date Posted: Wed, Nov 03, 2004 at 13:10:11 (EST)
Email Address: Not Provided

Message:
Phooey!

Subject: Maybe
From: johnny5
To: Terri
Date Posted: Wed, Nov 03, 2004 at 13:20:25 (EST)
Email Address: johnny5@yahoo.com

Message:
I have read on moorewatch.com that during the exit polling many older voters felt moore made them choose bush over kerry - they got tired of the constant attacks. Not only do we have class and gender warfare to consider in future elections - I think elderly versus young warfare was grossly miscalculated by the democratic party and they alienated themselves from the GREY vote that they have had for the past 16 years.

Subject: Re: Maybe
From: Terri
To: johnny5
Date Posted: Wed, Nov 03, 2004 at 15:19:04 (EST)
Email Address: Not Provided

Message:
Interesting insight, though I have never found Paul Krugman unfair in analysis. Playing to young voters has always proven a mistake, and will prove more so in future because of the population age shift to come.

Subject: Re: Is Paul Krugman responsible?
From: Ari
To: Henry
Date Posted: Wed, Nov 03, 2004 at 11:02:30 (EST)
Email Address: Not Provided

Message:
Those voters who are responsible for the loss, do not pay the least attention to the New Yorker and such. There is no hatred or disdain there, only honesty. Many voters do not seek out honesty.

Subject: The Iraq Quagmire......
From: Pete Weis
To: Henry
Date Posted: Wed, Nov 03, 2004 at 10:33:40 (EST)
Email Address: Not Provided

Message:
ironically was Bush's greatest asset in this election. It served to deflect attention from what was going on in the economy and more importantly, many voters were afraid to switch administrations in the middle of a war in Iraq. So fear, among voters who were undecided until just before polls opened, won over anger about being in Iraq in the first place. IMO, Iraq has been the worst foreign policy decision in American history - Vietnam being the second worst. But the Republicans and the Bush administration get the next four years to prove to myself and others on this site that we are wrong about Iraq and wrong about the direction of this economy. It is perhaps, fitting that they get to live with their decisions and actions of the last four years for the next four years. If the Bush administration can pull us out of this quagmire in Iraq and quagmire of an economy then they deserve all the glory. If they can not it's truely bad news for the GOP. Unfortunately it's also bad news for the rest of us.

Subject: Re: The Iraq Quagmire......
From: johnny5
To: Pete Weis
Date Posted: Wed, Nov 03, 2004 at 11:18:39 (EST)
Email Address: johnny5@yahoo.com

Message:
It seems with all the pounding of fists by al franken and michael moore and paul krugman - it really just didn't make that much of a difference. What is the lesson to be learned by this? I didn't see where a lot of younger voters turned out in the numbers that were hoped for. Kerry perhaps should have campaigned more in Florida - several counties that voted for gore went to bush in that state during this election.

Subject: John Edwards
From: Jennifer
To: johnny5
Date Posted: Wed, Nov 03, 2004 at 12:09:58 (EST)
Email Address: Not Provided

Message:
There might have been a stronger candidate for Vice President than John Edwards. Edwards was not as well regarded in the south, and did not work as hard in the south, as we might have wished.

Subject: Re: John Edwards
From: krugman en francais
To: Jennifer
Date Posted: Wed, Nov 03, 2004 at 12:22:16 (EST)
Email Address: Not Provided

Message:
It's for more years to krugman to. Democrats have none power source, only P. Krugman can use its writings as opposition force. Good luck Paul and god bless america

Subject: Paul Krugman is Wonderful
From: Emma
To: krugman en francais
Date Posted: Wed, Nov 03, 2004 at 12:40:48 (EST)
Email Address: Not Provided

Message:
Paul Krugman is wonderful. We love America and France.

Subject: Today
From: Terri
To: All
Date Posted: Tues, Nov 02, 2004 at 17:26:02 (EST)
Email Address: Not Provided

Message:
There are a series of exit poll numbers that strongly favor John Kerry. Notice the decline in the stock market between 2 and 4 today, as these numbers were posted. We may have another President.

Subject: Re: Today
From: Ari
To: Terri
Date Posted: Tues, Nov 02, 2004 at 17:40:00 (EST)
Email Address: Not Provided

Message:
November 2, 2004 4 pm est exit polls These numbers come from Slate and Kos. NV CO NC PA OH FL MI NM WI Kerry 48 46 49 54 50 50 51 50 51 Bush 50 53 51 45 49 49 47 48 46

Subject: Tomorrow
From: Ari
To: Ari
Date Posted: Wed, Nov 03, 2004 at 05:38:28 (EST)
Email Address: Not Provided

Message:
So much for exit polls. These were obviously distorted.

Subject: Thanks PK
From: Emma
To: Ari
Date Posted: Tues, Nov 02, 2004 at 20:24:12 (EST)
Email Address: Not Provided

Message:
We thank you.

Subject: Paul Krugman.....
From: Pete Weis
To: Emma
Date Posted: Tues, Nov 02, 2004 at 21:35:46 (EST)
Email Address: Not Provided

Message:
stands head and shoulders above the vast majority of his peers when it comes to defending the American ideals which once made us a great and respected nation and lately are being lost by the actions of a small but powerful group of political manipulators. He has paid a price for not being part of the 'silence', but he is telling us there is a much greater price to say and do nothing when the future of America is up for sale. I salute Paul Krugman for his patriotism!

Subject: Trade and Employment
From: Emma
To: All
Date Posted: Tues, Nov 02, 2004 at 12:38:13 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/02/business/02textile.html?pagewanted=all&position= Textile Quotas to End, Punishing Carolina Towns By ELIZABETH BECKER KANNAPOLIS, N.C. - Leann Harrington's experience losing her job has an all-too-familiar ring, one that is soon likely to be heard with even greater frequency. The textile plant where she was employed shut down last year, a victim of fierce foreign competition. After scrambling, she was lucky to land a job as manager and waitress at the Towel City Junction Cafe, earning $3 an hour plus tips, a fraction of her factory wages. For many years, textile and clothing factories in the mill towns of the Carolinas - originally drawn from New York and New England decades ago by the prospect of inexpensive nonunion workers - have been closing one after another as the industry migrated abroad in search of ever-cheaper labor. Now, this gradual loss may be about to turn into a rout. On Jan. 1, the global system of country-by-country quotas regulating the $495 billion international trade in textiles and apparel is scheduled to be eliminated. That will transform the vast business in ways that were barely glimpsed a decade ago, when the newly created World Trade Organization went along with the demands of developing countries and agreed to phase out the quotas imposed by advanced nations to protect their own industries. Today, though, poor countries at the bottom of the economic ladder, like Cambodia and Bangladesh, have a new fear: China. It is the colossus in the field, home to a seemingly endless supply of workers available to feed vast numbers of suppliers operating with high efficiency and low costs in ways that threaten to overwhelm competition from developing countries except India, Pakistan and Brazil. For China and other big developing nations with expanding apparel industries, the end of the quotas will mean tens of millions of new factory jobs for people without work or barely scraping out a living. But for dozens of even poorer Asian and African countries now relying on their clothing exports to gain a foothold in the global economy, it could be still another bitter pill to swallow. The quotas they fought so hard to eliminate had ensured that their products would have at least a narrow opening in American and European markets. Without rules, though, restricting how much fabric or how many garments they can buy from any country, name brands and merchants like Tommy Hilfiger, Ralph Lauren, J. C. Penney and the Gap will buy most of what they want from five or six countries, not the 50-plus countries that are now part of their networks. Meanwhile, here in the slowly beating heart of the remaining American textile industry, workers and owners of factories still operating along a stretch of Interstate 85 from Charlotte to Greensboro see the dawning of 2005 as a death sentence. More companies, they fear, will go bankrupt. More communities will wither like Kannapolis, and thousands more workers will be desperate for training, employment and health insurance. In hopes of staving off the worst, politicians in the Southeast from both parties are taking advantage of the close outlook for the presidential election to win last-minute concessions from the White House that could slow the flood of imports from China. And, seriously weakened as it is, the American textile and apparel industry is still flexing its political muscles. [On Oct. 29, days before the election, the Bush administration accepted the industry's petition seeking relief, promising to consider special steps to limit Chinese exports.] Most experts expect that China, left unimpeded, will gain almost half the global apparel market. Its factories now make about 20 percent of the clothing and textiles sold in the United States; China is expected to capture as much as 70 percent of that market, potentially leading to the closing of half the surviving American mills and layoffs for tens of thousands more workers. Fashion executives say that those fears are exaggerated and that American manufacturers have already weathered the worst. 'Yes, China will benefit because of the quality of its goods,'' said Robert J. Zane, senior vice president for sourcing, manufacturing, logistics and distribution at Liz Claiborne in New York. 'But it will be more at the expense of other Asian countries than at the expense of the American industry.'' And lost in the swirl of anxiety are the benefits that the change will bring to tens of millions of consumers. Americans alone are expected to save an estimated $6 billion in lower-cost goods once the quotas are gone, allowing clothing makers and designers from New York to Milan the freedom to choose factories based on cost and quality rather than a complicated system of 1,300 categories for every nation. But that is little consolation to this Carolina community of 36,000, which was reduced to an economic ghost town in little more than a year once Pillowtex, Ms. Harrington's former employer, fell into bankruptcy. The residents have remained, but the factories are being dismantled and the stores and shops shuttered on Main Street after this one-industry town lost its industry.

Subject: World job markets level rapidly
From: Pete Weis
To: All
Date Posted: Tues, Nov 02, 2004 at 11:21:35 (EST)
Email Address: Not Provided

Message:
In this age of collapsing geographic boundries to job markets, even India is looking for cheaper, high tech labor. Aren't US companies being forced to do the same or face extinction in a global market? From the New York Times: India Taps China's Reserve of Technological Talent By SARITHA RAI ANGALORE, India, Nov. 1 - When Infosys Technologies began scouting for an alternative to India as a source of unlimited, low-cost human resources, the fast-growing company came up with one answer: its home country's archrival, China. Now, a year after the Infosys Technologies (Shanghai) Company was set up, the venture center has 200 employees and 4 multinational customers. Infosys, the Bangalore-based software services company, and other top Indian outsourcing rivals, including Tata Consultancy Services and Wipro Technologies, are doing application development and maintenance work in China as they grow rapidly to keep up with booming demand from the West for their services. And they are quickly concluding that only China has a worker base equal to India's in terms of cost, quality and scale. Expansion there also offers the ability to cater to - and possibly garner more of - the local and regional markets, including Japan. Vigorous global demand - revenue from India's information technology exports was $12.5 billion in the year ended in March, up 30 percent from the previous year - has resulted in a 10 percent to 15 percent annual rise in wages in India's software and back-office services industry. According to a KPMG study for the National Association of Software and Services Companies, or Nasscom, an industry trade group in India, the country will face an acute shortage of technical employees by 2009, falling short by about 250,000 workers. 'We need a deep reservoir of talent as well as an alternative low-cost center like India as we continue to grow,' said Nandan Nilekani, chief executive of Infosys, who has talked of his company's scaling up to become the Wal-Mart of outsourcing. 'And only China can match up.' In the quarter ended in September, Infosys alone added more than 5,000 employees, for a total of nearly 33,000. And Wipro added 5,500 employees, reaching more than 36,000. As Indian companies have looked for skilled workers outside the country for software development and customer support centers, some have ventured into Mexico and Eastern Europe. But many say that China holds the most promise, in part because of its potential as a rival. Though its software export revenues were just $700 million in 2003, 'China will soon be competing with India as an outsourcing destination,' said the Singapore-based Girija Pande, director for Asia Pacific of Tata Consultancy, India's top software services exporter. It set up operations in China in 2002. And a presence now, these companies say, positions them to grab such future business. Entry into the country is made easier by the ability to piggyback onto the existing base of customers with interests in China. 'With China's economy swelling so quickly, multinationals are looking for global software firms who already understand their standards and systems,' Mr. Pande said. Tata Consultancy, for instance, is working in China with its longtime customer, General Electric. China has some 200,000 information technology workers - compared with India's 850,000 - in 6,000 local companies, according to some estimates. More than 50,000 Chinese software programmers are being added to this pool annually. Some important ingredients that have made India a formidable global software services exporter are in place in China as well, like the high value put on education and a focus on engineering in higher education. The Chinese government is sweetening the deal for the Indian concerns, as well as for global competitors like Accenture and I.B.M. Global Services, by offering high-quality infrastructure at low costs and offering alliances with local universities to recruit Chinese talent. China also offers Indian outsourcing concerns a low employee turnover rate. For instance, Tata Consultancy's staff turnover in China is less than 6 percent a year, compared with 15 percent in its Indian operations. The company says it may double the number of employees in China in the next 18 months from its current 180. For now, however, even with wages rising in India, China's information technology workers are more expensive 'because a combination of English-language and technical skills is at a premium,' Mr. Nilekani of Infosys said. According to Mr. Pande of Tata, the wage differential is about 12 to 15 percent. So while an entry-level programmer in India might earn $125 a month, a Chinese equivalent might earn $142 to $147. The managerial talent differential is even bigger. And scalability - the ability to grow quickly when circumstances warrant - is posing a challenge because of the scarcity of good English speakers and experienced managers in China. While even second-tier Indian software companies have 12,000 to 15,000 employees, only a handful of Chinese software companies have more than 3,000. When NIIT, India's top technology training company, set up by the founder of the software exporter HCL Technologies, made exploratory moves in China in 1997, it was a toss-up between setting up a software services unit or a training one. 'Available skills were so low that we went into training,' said Prakash Menon, president of NIIT China, who opened NIIT's first training center in Shanghai in 1998. The company now has 121 centers in 25 provinces and trains 25,000 Chinese annually. Wipro set up its China unit in August to develop software and maintain it for the company's global clients in the United States, Europe and Japan. Though Wipro aims to expand the unit to 200 employees next year from 10 now, projects that require a high level of management skills are unlikely to be done there soon, said Masaki Nagao, Wipro's chief executive for Japan and China operations. Mr. Nilekani of Infosys says he expects that this will change. 'In three to four years, cost and scale will be two top reasons to be there,' he said. At least for now, however, some Indian companies are choosing not to take the plunge. 'Though it is fashionable to be in China, we are skeptical' about the need to move there, said Saurav Adhikari, vice president for corporate strategy at HCL Technologies. There is enough potential to expand in markets where the company already has operations, he said, including India, the United States and Japan. For those that do move into China, said Mr. Menon of NIIT the eventual model would be to hire Chinese programmers and Indian managers, and set up operations in low-cost centers just outside high-cost business hubs like Shanghai. Some companies are already adopting variations of that model. Wipro, for instance, plans to recruit Indian or Japanese managers along with Chinese programmers to expand in China in the coming year. Zensar Technologies, based in Pune, has a new joint venture with Broadengate Systems of China; the venture, Zensar Technologies (Shenzhen), expects to grow from 14 employees to 50 by the end of the year with Indian project managers and Chinese programmers. Cognizant Technology Solutions, based in Teaneck, N.J., but with most of its development operations in India, is taking a different approach. It plans to enter China in 2005 to serve its financial services clients there, and says it will bring Chinese managers to its global development base in Chennai, India, for training. All this activity could translate into a 40 percent slice of the growing China software export pie by 2006 for Indian companies, according to Gartner, the technology research firm based in Stamford, Conn. And while few industry experts say they think that China will rival India as a viable offshore software development center anytime soon, most say they think it will happen eventually. 'The raw materials - talent and infrastructure - are there,'' said V. Sriram, the Tokyo-based vice president, Asia Pacific, at Infosys Technologies, 'so it is only a matter of time before the ecosystem evolves.'

Subject: Neoconservatives are desperate
From: Pete Weis
To: All
Date Posted: Tues, Nov 02, 2004 at 11:07:14 (EST)
Email Address: Not Provided

Message:
From attempting to deny minority voters their right to vote in Ohio by intimidation to resorting to vandalizing message boards since the vandal in question lacks the confidence in his own ability to debate the issues.

Subject: Re: Neoconservatives are desperate
From: Pete Weis
To: Pete Weis
Date Posted: Tues, Nov 02, 2004 at 11:09:47 (EST)
Email Address: Not Provided

Message:
Great! Everything is back. When I first visited the board this morning everything was gone.

Subject: Re: Neoconservatives are desperate
From: Ari
To: Pete Weis
Date Posted: Tues, Nov 02, 2004 at 11:11:30 (EST)
Email Address: Not Provided

Message:
Whew! This board is too important to be gone.

Subject: China's Talent in Technology
From: Emma
To: All
Date Posted: Tues, Nov 02, 2004 at 10:53:24 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/02/business/worldbusiness/02india.html?pagewanted=all&position= India Taps China's Reserve of Technological Talent By SARITHA RAI BANGALORE, India - When Infosys Technologies began scouting for an alternative to India as a source of unlimited, low-cost human resources, the fast-growing company came up with one answer: its home country's archrival, China. Now, a year after the Infosys Technologies (Shanghai) Company was set up, the venture center has 200 employees and 4 multinational customers. Infosys, the Bangalore-based software services company, and other top Indian outsourcing rivals, including Tata Consultancy Services and Wipro Technologies, are doing application development and maintenance work in China as they grow rapidly to keep up with booming demand from the West for their services. And they are quickly concluding that only China has a worker base equal to India's in terms of cost, quality and scale. Expansion there also offers the ability to cater to - and possibly garner more of - the local and regional markets, including Japan. Vigorous global demand - revenue from India's information technology exports was $12.5 billion in the year ended in March, up 30 percent from the previous year - has resulted in a 10 percent to 15 percent annual rise in wages in India's software and back-office services industry. According to a KPMG study for the National Association of Software and Services Companies, or Nasscom, an industry trade group in India, the country will face an acute shortage of technical employees by 2009, falling short by about 250,000 workers. 'We need a deep reservoir of talent as well as an alternative low-cost center like India as we continue to grow,' said Nandan Nilekani, chief executive of Infosys, who has talked of his company's scaling up to become the Wal-Mart of outsourcing. 'And only China can match up.' In the quarter ended in September, Infosys alone added more than 5,000 employees, for a total of nearly 33,000. And Wipro added 5,500 employees, reaching more than 36,000. As Indian companies have looked for skilled workers outside the country for software development and customer support centers, some have ventured into Mexico and Eastern Europe. But many say that China holds the most promise, in part because of its potential as a rival. Though its software export revenues were just $700 million in 2003, 'China will soon be competing with India as an outsourcing destination,' said the Singapore-based Girija Pande, director for Asia Pacific of Tata Consultancy, India's top software services exporter. It set up operations in China in 2002. And a presence now, these companies say, positions them to grab such future business. Entry into the country is made easier by the ability to piggyback onto the existing base of customers with interests in China. 'With China's economy swelling so quickly, multinationals are looking for global software firms who already understand their standards and systems,' Mr. Pande said. Tata Consultancy, for instance, is working in China with its longtime customer, General Electric. China has some 200,000 information technology workers - compared with India's 850,000 - in 6,000 local companies, according to some estimates. More than 50,000 Chinese software programmers are being added to this pool annually. Some important ingredients that have made India a formidable global software services exporter are in place in China as well, like the high value put on education and a focus on engineering in higher education. The Chinese government is sweetening the deal for the Indian concerns, as well as for global competitors like Accenture and I.B.M. Global Services, by offering high-quality infrastructure at low costs and offering alliances with local universities to recruit Chinese talent. China also offers Indian outsourcing concerns a low employee turnover rate. For instance, Tata Consultancy's staff turnover in China is less than 6 percent a year, compared with 15 percent in its Indian operations. The company says it may double the number of employees in China in the next 18 months from its current 180. For now, however, even with wages rising in India, China's information technology workers are more expensive 'because a combination of English-language and technical skills is at a premium,' Mr. Nilekani of Infosys said. According to Mr. Pande of Tata, the wage differential is about 12 to 15 percent. So while an entry-level programmer in India might earn $125 a month, a Chinese equivalent might earn $142 to $147. The managerial talent differential is even bigger. And scalability - the ability to grow quickly when circumstances warrant - is posing a challenge because of the scarcity of good English speakers and experienced managers in China. While even second-tier Indian software companies have 12,000 to 15,000 employees, only a handful of Chinese software companies have more than 3,000. When NIIT, India's top technology training company, set up by the founder of the software exporter HCL Technologies, made exploratory moves in China in 1997, it was a toss-up between setting up a software services unit or a training one. 'Available skills were so low that we went into training,' said Prakash Menon, president of NIIT China, who opened NIIT's first training center in Shanghai in 1998. The company now has 121 centers in 25 provinces and trains 25,000 Chinese annually.

Subject: Whoops!
From: Pete Weis
To: Emma
Date Posted: Tues, Nov 02, 2004 at 11:33:01 (EST)
Email Address: Not Provided

Message:
When I first visited the board everything was gone, so I missed this post Emma, and posted the same article above. It's interesting to see such a rapid leveling of the global job markets, with cheap markets gravitaing to even cheaper markets. What does this mean for European and US labor markets which are so much more expensive? How much of the world's consumption is represented by the US and Europe? Can the global economy weather the leveling of this great imbalance between consumer markets and labor markets?

Subject: Re: Whoops!
From: Emma
To: Pete Weis
Date Posted: Tues, Nov 02, 2004 at 12:39:14 (EST)
Email Address: Not Provided

Message:
The questions are critical in importance. We must think carefully of answers.

Subject: CNN international
From: krugman en francais
To: All
Date Posted: Tues, Nov 02, 2004 at 10:47:04 (EST)
Email Address: steven.coissard@free.fr

Message:
HI, I am in France and just have CNN international. I thimk it's different to CNN in US. Do you know if some krugman's interview are on this chanel or if it is only on CNN. steven.coissard.free.fr/Paul_Krugman_en_francais.htm

Subject: Krugman on PBS
From: Terri
To: krugman en francais
Date Posted: Tues, Nov 02, 2004 at 10:55:54 (EST)
Email Address: Not Provided

Message:
Paul Krugman was on PBS with Charlie Rose, yesterday.

Subject: Re: Krugman on PBS
From: krugman en francais
To: Terri
Date Posted: Tues, Nov 02, 2004 at 11:01:38 (EST)
Email Address: Not Provided

Message:
thanks, I don't knows what is PBS :( an another US channel? because I just have CNN international. What I ant to know is if we have the same emissions Thank you

Subject: Re: Krugman on PBS
From: Ari
To: krugman en francais
Date Posted: Tues, Nov 02, 2004 at 11:10:00 (EST)
Email Address: Not Provided

Message:
I suppose you have already answered the question. CNN international is different from American PBS, and American Public Broadcasting is not available in Europe. As long as we both get to watch Seinfeld reruns, all will be well however.

Subject: Europe
From: Terry
To: All
Date Posted: Mon, Nov 01, 2004 at 20:49:59 (EST)
Email Address: Not Provided

Message:
As long as there is a sense that the dollar will be weak for an extended period, why not look to Europe for investments to balance an American portfolio? The Europe Index has a lower valuation than the S&P, and even if the dollar holds value or gains European corporations are strengthening earnings. A bit of diversity?

Subject: Values
From: Terri
To: Terry
Date Posted: Tues, Nov 02, 2004 at 07:08:01 (EST)
Email Address: Not Provided

Message:
Agreed. Warren Buffett has always taught investors look for present and lasting value. So, it makes more sense to look for investments that are reasonably valued at present and buy them for a long term. Whether the REIT Index or Energy Fund or TIPS Fund are reasonably valued is questionable. We can buy the Total Stock Market Index or Value Index or Europe Stock Index, and rely on better valuation. Health Care is also better valued than 10 months ago.

Subject: Supercomputers and China
From: Emma
To: All
Date Posted: Mon, Nov 01, 2004 at 19:14:49 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/01/technology/01chen.html?pagewanted=all&position= Have Supercomputer, Will Travel By JOHN MARKOFF SAN FRANCISCO - Add Steve Chen to the growing list of America's high-technology exports. Mr. Chen, a Taiwanese-born American citizen who was considered one of the nation's most brilliant supercomputer designers while working in this country for the technology pioneer Seymour Cray in the 1980's, has moved to China - where he is leading an effort to claim the world computing speed record. Supercomputing is being seized upon by the Chinese government to help speed the nation's transition from low-cost manufacturing to becoming a more powerful force in the world economy. China's leaders know that high-speed computing is essential to global leadership in scientific fields and advanced design of a variety of sophisticated products. 'Right now the Chinese have started to pay attention; they are catching up and they learn fast,' said Mr. Chen, 60, who is splitting his time between China and San Jose, Calif., where his wife, Kate, and their four children live. Military intelligence experts in this country have long been concerned that supercomputing capabilities may aid China's weapons development. But many technologists and economists say that blazing computing speeds alone do not represent a particularly new nuclear weapons threat. Instead, they are more concerned that the Chinese may catch up more quickly with the United States in areas that have economic and scientific, rather than military, ramifications. Mr. Chen's decision to set up shop in China was driven in part by an unexpected twist: the opportunity to build a new company looked more promising to him there than in the United States, where he was unable to secure financing from American venture capitalists for his latest ideas. Mr. Chen concluded that the fallout from the collapse of the Internet bubble had poisoned the investment climate. 'I saw the crazy stuff going on,' he said recently in a telephone interview from Shenzhen, near Hong Kong. 'A lot of people got hurt.' While Mr. Chen is not a native of mainland China, his decision has parallels to an increasingly common odyssey by foreign-born researchers, who once would have found the greatest openings to use their skills in the United States. As the spread of capitalism creates opportunities elsewhere, many such talented people are returning to China, India and other developing countries to create or join advanced technology firms. In May, Mr. Chen joined Galactic Computing Shenzhen, which is backed by investment money from a Hong Kong company that supported an earlier Chen venture and with further backing from a group of Chinese universities. His move reflects the fact that the market for high-performance computing is growing more rapidly in China than elsewhere in the world. The Chinese are not yet a major force in supercomputing, but according to American computing experts, that is changing rapidly. Today there are 14 Chinese supercomputers among the top 500, ranking the country fourth in the world, equal to Germany and behind only the United States, Japan and Britain. In June, a supercomputer assembled at the Shanghai Supercomputer Center using more than 2,500 chips designed and manufactured by Advanced Micro Devices of Sunnyvale, Calif., became the world's 10th-fastest computer. 'In terms of momentum they are the most rapidly ascending country in the world,' said David Keyes, a professor of applied mathematics at Columbia University, who visited China last month to participate in a conference on high-performance computing.

Subject: Home ownership
From: Jack
To: All
Date Posted: Mon, Nov 01, 2004 at 17:33:04 (EST)
Email Address: jjlwmd@yahoo.com

Message:
Bush keeps claiming that home ownership is high, particularly among minorities, and that this is the result of his economic policies. Are these claims true, that is, is home ownership indeed up significantly and if so can Bush claim credit for this? (This was mentioned in the recent Krugman interview but not addressed) Thanks, Jack

Subject: Re: Home ownership
From: Emma
To: Jack
Date Posted: Mon, Nov 01, 2004 at 18:16:33 (EST)
Email Address: Not Provided

Message:
Home ownership expanded continually during the Clinton Administration. Job creation surged, wage and benefit levels increased, and interest rates trended down. All good reasons for more home ownership. Minorites fared well in home ownership. During the Bush Administration there has been a recession, and a recovery marked by poor job creation, and scant wage and benefit gains. But, interest rates have been exceptionally low. Home ownership has increased, swept along by low interest rates and 'creative' financing arrangements. The question is how will home owners fare if interest rates climb even a percentage point?

Subject: Wal-Mart and Health Care
From: Emma
To: All
Date Posted: Mon, Nov 01, 2004 at 11:21:01 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/11/01/business/01health.html? States Are Battling Against Wal-Mart Over Health Care By REED ABELSON In the national debate over what to do about the growing number of working people with little or no health insurance, no other company may be taking more heat than the country's largest employer, Wal-Mart Stores. The company, despite its popularity with consumers, has grown accustomed to being accused of crushing Main Street merchants with its sprawling stores and low prices and of driving down wages for workers across the retail industry. And more than a million former and current female Wal-Mart employees are part of a sex discrimination lawsuit that the company is fighting. Now, Wal-Mart finds itself under attack for what critics see as its miserly approach to employee health care, which they say is forcing too many of its workers and their families into state insurance programs or making them rely on charity care by hospitals. Wal-Mart vigorously defends its health care policies, saying it offers affordable coverage for all employees. The company says it has no way of knowing how many of its employees, whom it calls associates, or their families are insured under state programs. The larger issue of whether companies can and should absorb the soaring cost of health care is a national issue, said Susan Chambers, the executive vice president who oversees benefits at Wal-Mart. 'You can't solve it for the 1.2 million associates if you can't solve it for the country.'' A survey by Georgia officials found that more than 10,000 children of Wal-Mart employees were in the state's health program for children at an annual cost of nearly $10 million to taxpayers. A North Carolina hospital found that 31 percent of 1,900 patients who described themselves as Wal-Mart employees were on Medicaid, while an additional 16 percent had no insurance at all. And backers of a measure that will be on California's ballot tomorrow, which would force big employers like Wal-Mart to either provide affordable health insurance to their workers or pay into a state insurance pool, say Wal-Mart employees without company insurance are costing California's state health care programs an estimated $32 million a year. Meanwhile, in Washington State, where the insurance commissioner is pushing the legislature to adopt a law similar to the one on the California ballot, companies that struggle to compete with Wal-Mart while insuring most of their own workers have become openly critical. 'Socially, we're engaged in a race to the bottom,' said Craig Cole, the chief executive of Brown & Cole Stores, a supermarket chain that employs about 2,000 workers in Washington and adjoining states and pays for insurance coverage for about 95 percent of its employees. 'Do we want to allow competition based on exploitation of the work force?' he asked.

Subject: Saving More
From: Ari
To: All
Date Posted: Mon, Nov 01, 2004 at 07:05:13 (EST)
Email Address: Not Provided

Message:
What seems most obvious from the flow of economic data is that America need to save more from the federal government to households. Saving more however means that growth will slow, unless interest rates are kept low. Getting saving up will not be a simple matter, and the structure of the economy is geared to consume rather than save.

Subject: Asian Times - US dollar/US inflation
From: Pete Weis
To: All
Date Posted: Sun, Oct 31, 2004 at 19:55:27 (EST)
Email Address: Not Provided

Message:
From the Asian Times: by Henry C K Liu 'US inflation rates have been under-reported by statisticians in the name of scientific logic. The first significant downward adjustment occurred in 1996 on the recommendation of the Boskin Commission, which had concluded that the US inflation rate had been overstated by an annual 1.1 percentage points. About half of this overstatement has since been 'corrected'. America's hedonic pleasures But further, far more substantial downward adjustments in the price indices have resulted from the spreading use of 'hedonic' pricing methods, used to translate quality improvements in products into price declines even if the actual prices are climbing. Automobiles that now sell for $30,000 used to sell for $10,000, but the inflation rate of automobiles is registered as declining because cars are technically more sophisticated. The consumer is supposed to be getting more 'car' per dollar, never mind no one can now buy a $10,000 car. Rents for apartments are registered as declining even when rent payment rises, because renters get air-conditioning, marble bathrooms and granite kitchens and high rise views. Yes, the higher up you are from the dirty, noisy street, the more housing you allegedly get per dollar, a real bargain in hedonic price while the square foot price goes through the roof. Thus prices can rise with no inflation. The US Bureau of Labor Statistics (BLS) expanded the use of hedonic regressions to compare quality differences in prices. Hedonic regressions attempt to estimate econometrically the value that households put on quality differences. These methods are used for measuring quality distinctions in the categories of apparel, rent and computers and peripheral equipment, and as of January 1999, they have been used for television prices. Research is under way to extend this technique to other categories. As this measuring technique is being extended to a growing number of goods, it has become a most important factor in reducing the US inflation rate, and intrinsically raises nominal GDP growth while the real GDP may actually decline. Its overall effect on monitoring the economy is kept secret from the public. The hedonic price adjustments for computer hardware and software alone went a long way to explain US growth and productivity miracles of the past decade. Another device to lower the measured US inflation rate is the shift to 'chained' price indexing, used since 1996. It changes the weight of items in a basket of goods on the assumption that people generally tend to shift their spending to cheaper goods. If the price of apples rises, people buy more pears, whose lower prices go into the price index instead. It is reasonable to suspect that US inflation before the 2001 crash had been hovering around 5% on the old basis, the highest in more than a decade, and virtually twice the rate in Europe. Inherently, this would have cut real GDP growth by about 1.5 percentage points and kept interest rate higher. All this suggests two important things: first, that the reported new paradigm increases in real GDP and productivity growth have been exaggerated by a statistical illusion; and second, that real interest rates have been far too low in relation to real inflation, which also explains the most rampant money and credit creation that the US has ever seen in recent history. Hedonic price indexing, by keeping the official inflation rate significantly lower than reality, not only played a key role in fueling the stock market boom, but also magnified the budget surplus during the Bill Clinton years and now understates the George W Bush deficit. Such indexing reduces social security payments and welfare benefits across the board, as well as undercutting inflation-related wage adjustments. Essentially, lower hedonic prices in computers and electronic gadgets are paid for by less money for food and housing of the elderly, the unemployed and the indigent as well as the average worker. The most troublesome fact is that the BLS does not keep contemporaneous calculations of the 'old' method for historical consistency, or reveal the degree of 'new' versus 'old' distortion. This cover-up opens government statistics to challenges of reporting honesty. Bill Gross of PIMCO, the world's largest bond fund, recently wrote: 'The CPI inaccurately calculates Americans' cost of living. Since social security and pension benefits as well as the level of wage hikes are predicated upon the specific number and/or the perception of annual increases, Americans are being in effect conned by their government and falling behind the inflationary eight ball year after year. After slamming the concept of the core CPI, the primary culprits I cited were the government's use of hedonic and substitution adjustments to lower the CPI by as much as 1% in recent years.' Look who's talking Greenspan made his famous 'irrational exuberance' speech at the American Enterprise Institute in Washington DC on December 5, 1996, when the Dow was at 6,437, more than twice of the pre-crash 1987 high. Yet the market kept rising and on January 14, 2000, the Dow peaked at a hyper-irrational level of 11,723. Two months later, after settling down to hover around 10,000, it experienced its largest one-day point gain in history - 499.19 - to close at 10,630.60 on March 16, 2000. John Maynard Keynes, who famously warned that markets can stay irrational longer than participants can stay liquid, must have been laughing from heaven. Greenspan either failed to link the rise of equity prices to an undervalued dollar or he deliberately skirted the issue because foreign exchange value of the dollar was the province of the Treasury, not the central bank. Either way, there was nothing irrational or exuberant about the effect of a fall in the exchange value of the dollar on a rise in US equity prices. It was a causal effect of a finance bubble fueled by an undervalued currency, especially when price increases can be viewed as causing no inflation through hedonic regression. On April 14, 2000, some 22 trading days after its largest one-day point gain, the Dow plummeted 617.78 points, closing at 10,305.77 - its steepest point decline in a single day historically so far. This volatility came purely from speculative forces operating on a bubble. The economy did not change in 22 trading days. When the Dow started its slide downward after peaking at a historical all-time high of 11,723 on January 14, 2000, the Fed lowered the ffr target from 6.5% on January 3, 2001, but could not halt the decline. After the Dow hit a low of 7,524 on March 11, 2003, the Fed lowered the ffr target to 1% on June 25, 2003 and kept it there until July 2004. Since then, the Dow, having climbed steadily to peak at 10,737 on February 11, 2004, fell back to 10,121 by August 31, 2004 when the ffr rose to 1.5% and closed at 9,988 on September 27 with the ffr at 1.75%. The US trade deficit was 3.5% of GDP at the time of the 1987 crash. It was 5.4% by the end of the first quarter of 2004 and rose to $166.2 billion for the second quarter of 2004, annualized to $664.8 billion, or 6.5% of US-projected GDP. With every passing day, more market watchers are joining the rank of those predicting looming financial crisis in US markets from excessive debt, particularly external debt. This danger cannot possibly be defused by China, regardless of what monetary policy it adopts. The dismal record of US monetary policy that induced the 1987, 1994, 1997 and 2000 crashes discounts the value of US advice for Chinese economic and monetary policy. Too much of a good thing By 1994, excess liquidity had fueled a worldwide equity rally that found its way into the Asian emerging markets, where it fed an unprecedented bubble of easy money in the form of undervalued currencies pegged to a falling US dollar. When the Asian emerging market rally crashed abruptly on July 2, 1997, starting with the Thai central bank running out of foreign exchange reserves trying to maintain its currency peg, followed by the Russian debt crisis in 1998, all the major central banks of the world reacted yet again by pumping even more liquidity into the global banking system. Initially, this flood of hot money inflated another bond bubble, which popped viciously in 1999. Then, more liquidity boosted equity prices further and provided the fuel for the enormous high-tech, Internet and telecom stock bubbles of 1999 and early 2000. The first three years of the 21st century saw a worldwide equity market crash followed by a recession plagued by overcapacity, over-indebtedness and over-leverage. And the responses of central banks were always more liquidity through lower short-term interest rates, which helped pump up the bond bubble in 2003, with the high fixed yields of outstanding long bonds translating into higher bond prices. Excess liquidity supported artificial rallies in housing prices, equities, corporate debt, commodity prices and mushrooming emerging markets, particularly China. Fools are calling it a US-led recovery. The Fed was caught again in its own ideological vice between contradicting interest rate policies to balance stimulating growth and preventing inflation. To avoid the boom-and-bust cycle, the Fed attempted to drive its monetary vehicle in opposite directions at the same time, simultaneously fighting inflation and stimulating the economy. Despite the Fed's announcement that it will raise interest rate to ward off inflation only at a 'measured pace', much talk of a repeat of a 1994 burst of the bond bubble has since been circulating. Pushing China to raise yuan interest rates now will only heighten the Fed's difficulty in keeping its 'measured pace' of interest rate hikes. Bond traders know that a five-year duration bond fund can drop 5% in value with an interest rate rise of one percentage point. Conversely, a one percentage point drop in rates would cause the same fund to increase by 5% in value. For long-term bond funds with effective durations of at least seven years, a rise in long-term interest rates of 2 percentage points over the next 12 months would cause at least a 14% drop in value. With yields on long-term Treasury bonds now around 5%, such an increase would translate into a loss of 9% or more for shareholders - similar to the last time the Fed tightened monetary policy in 1994. Many market participants intuitively concluded that long-term rates, following the ffr, would also rise, causing prices of outstanding long bond to decline. Speculators shorted Treasury long bonds - that is, they borrowed bonds to sell by promising to return them at a later date when they hope to buy back the same bonds at a lower price, profiting from the anticipated price differential. But long-term rates moved counter-intuitively in the credit markets. What the short-sellers failed to take into account was that foreign central banks now must buy each day between $1-2 billion of government bonds to park the additional foreign exchange reserves they earn from the US trade deficit. This was a factor of much smaller scale and consequence in 1994 when the bond market collapsed from the Fed raising the ffr target in quick succession. Because traders grossly misjudged the bond market's likelihood to rally in the face of the Fed tightening and stubbornly hanged onto conventional intuitive moves in expectation of an easy killing, throwing in the towel only when it was too late, the rush to cover short positions pushed bond prices even higher from technical effects of a short squeeze. On Wednesday, September 22, the 10-year-note fell below the psychological 4% (3.98%) for the first time since April when the Fed made its third tightening in 2004. That shifted market sentiment, and traders decided to stop throwing good money after bad just to humor Greenspan's fantasy of a recovery. They reacted to the rise in bond prices as a signal to buy more. It was the market's vote that the economy would not be heading north for a while. Shorting on bonds began when the non-farm payroll unexpectedly surged by 308,000 in March 2004, suggesting that an end might be in sight for the three-year-long recession and the corresponding bull run on bonds. In June, the 10-year note yielded 4.9%, only a few weeks before the Fed raised the ffr target for the first time in four years. Surely, bond prices had no place to go but down with a rising ffr, so figured the smart money intuitively. The market, however, moved counter-intuitively against the smart money. Morgan Stanley announced on Wednesday, September 22, that its fixed income trading revenue fell 35% in the quarter ended August 31 from the previous quarter due mostly to betting wrong on bond prices falling and rates rising. Most of the other big firms suffered similar fates. The October 6 Wall Street Journal reported on dismal second half 2004 bonus outlooks for Wall Street bankers and traders. At the current inflation rate of 1.5%, the neutral rate for ffr is 3.5%, double the current 1.75% target. According to Greenspan's announced strategy of the 'measured pace' of short-term interest rate rises, it may take a long time to raise seven steps of 25 basis points each to reach the level of neutrality, if ever, because below-neutral rates cause more inflation. The Fed may be pedaling hard to reach a moving target mounted on the front of his interest rate bike. The harder he pedals, the faster the target moves with him. But the longer the Fed takes to bring ffr back to neutral or restraining levels, the bloodier will be the crash of the bond market when it happens. And it will happen. Reality does not stop merely because some short-sellers lost money. Borrowing short-term to finance long-term bets is a deadly game that cannot be made safe by hedging, no matter how sophisticated the strategy. Hedging does not eliminate risk; it only transmits unit risk onto systemic risk. Once the genie of excess liquidity is out of the bottle, it is almost inevitable that more genies will get out of more and bigger bottles to keep the ongoing bubble from bursting to avoid nasty consequences for the financial system and the real economy. In a planned economy, liquidity provided by a national bank can serve a constructive purpose by financing planned growth. In a market economy, liquidity provided by the central bank lets the market allocate credit to the highest bidders rather than to where it is needed most in the economy. This means the liquidity often ends up fueling high-profit speculative bubbles. Central banks, led by chief wizard Greenspan, despite their central role in helping to create financial bubbles, nevertheless declare that bubbles cannot be anticipated and nothing can be done to prevent them. But central bankers comfort markets by claiming near-magical power to handle the destructive consequences of bubbles, through a one-note monetary policy of rate cuts to inject more liquidity, to save a bursting bubble by creating a bigger bubble. Greenspan asserted in his Jackson Hole symposium speech on August 30, 2002 that it is virtually impossible to diagnose a bubble with any certainty until it bursts, and even if a bubble could be diagnosed, it is not the task of central banks to target asset price, but only to control inflation and target growth. And even if central banks were to react to asset bubbles by raising interest rates, the extent of the rate hikes needed to reverse asset prices in times of exuberance might be so large that it would destabilize the real economy worse than a bubble bursting in its own course would. Greenspan has admitted more than once that one of the roles of a central bank is to support the market value of financial assets. China's reluctance to raise yuan interest rates reflects its adherence to the Greenspan argument that the rate hike needed to slow the overheated economy is so large that serious economic damage may result, making the cure worse than the disease, particularly when China's overheated economy does not manifest itself in a typical stock market bubble, since its stock market is not fully developed. Chinese stock market performance is more reflective of anticipatory reactions to policy reform momentum than actual economic conditions. China's price bubble is more like a mountain of foam of tiny bubbles, each with its own unique characteristics. The steel bubble is caused not by lack of demand but by bottlenecks of supply, particularly in electricity and transportation. On the other hand, the real estate bubble is caused by speculative over-investment in a stagnant purchasing power environment associated with low wages even for the growing population of middle-income earners. China has an export bubble, blown up by the US asset bubble. China's overheated inflation is not wage-pushed, but import-pushed. China is not the source of world inflation. It is a re-exporter of inflation from the skyrocketing rise of imported energy and commodity prices and from speculative profiteering. China also faces a problem in duplicate investment. Localities understandably copy the successful investment strategies of other localities. That itself should not be a bad thing for the world's largest disaggregated domestic market. But much duplicate investment in China has been concentrated in the export sector, where demand is externally constrained. The result drives otherwise profitable enterprises into bankruptcy and exacerbates the non-performing loan problem in the banking system. The problem then is not with the duplication of investment in China's huge domestic market, but that such duplication is not directed to expand the disaggregated domestic market, but concentrated in the relatively slow growth export market. Keep your dollars Led by Japan and China, East Asian central banks have been acting as lenders of last resort to rising US external indebtedness so that US consumers can continue to buy Asian exports. In the process, they are exporting real wealth to the dollar economy while subjecting their own local currency economies to mounting financial strains and risk of instability. Asian central banks now hold about $2.2 trillion, or 80% of the world's official foreign exchange reserves. Dollar-denominated assets constituted 70% of these reserves in 2003 while the US share of the world economy was only 30%. Japan's foreign exchange reserves are now in excess of $825 billion and China's now exceed $480 billion and growing. Together, they account for more than half of Asia's total foreign exchange reserves that are trapped in the dollar economy, while their own economies are forced to beg for foreign capital denominated in dollars. The US current account deficit reached a record 5.7% of GDP in second quarter of 2004 and a net national saving rate that fell to 0.4% in early 2003. It has since rebounded to 1.9% in mid-2004. The US now absorbs 80% of the world's savings not to finance economic growth, but to finance debt-fueled over-consumption collateralized by an asset bubble. In 2003, US net capital investment was 60% below 2000 levels. US net international indebtedness is expected to reach 28% of its GDP by the end of 2004. Since 1990, foreign-owned US assets increased from less than $2.5 trillion to approximately $10 trillion at the end of 2003 - a fourfold increase, and approaching the entire annual GDP. Over the same period, US ownership of foreign assets has increased from $2.3 trillion to nearly $7.9 trillion, resulting in a negative net international investment position for the US, amounting to about $2.7 trillion at the end of 2003 when valuing direct investment at market value. But in a fundamental sense, the entire $17.9 trillion of assets are in the dollar economy regardless of location or ownership. How is the US able to earn a significantly higher return on its assets abroad than foreigners earn on their assets in the US? Consider currency, which pays a zero return. At the end of 2003, dollars held abroad was estimated to be about $320 billion, whereas only a trivial amount of foreign currency is held in the US. America's currency circulating abroad is about half the total US currency outstanding. That means that the US economy only makes up half of the dollar economy. The reason the US can do this is because of dollar hegemony, a phenomenon created by the dollar, a fiat currency no longer backed by specie value such as gold since the collapse of Bretton Woods in 1971, continuing to assume the status of a major reserve currency for international trade. Trade is now a game in which the US produces dollars by fiat, and the rest of the world produce goods and services fiat dollars can buy. The dollar economy is in fact devouring not just non-dollar economies, but also the US economy. The dollar is like the rebellious computer HAL 9000 in Stanley Kubrick's 1968 film 2001: A Space Odyssey. Hal 9000 was programmed to believe that 'this mission is too important for me to allow you to jeopardize it', and proceeded to kill everyone who tried to disconnect it. Dollar hegemony kills all, pushing down wages everywhere with no exceptions made for nationality. As Pogo used to say: 'The enemy, it is us.' The issue is not whether Asian central banks will continue to have confidence in the dollar, but why Asian central banks should see their mandate as supporting the continuous expansion of the dollar economy at the expense of their own non-dollar economies. Why should Asian economies send real wealth in the form of goods to the US for foreign paper instead of selling their goods in their own economy? Without dollar hegemony, Asian economies can finance their own economic development with sovereign credit in their own currencies and not be addicted to export for fiat dollars. As for Americans, is it a good deal to exchange your job for lower prices at Wal-Mart?' Henry C K Liu is chairman of the New York-based Liu Investment Group

Subject: Re: Asian Times - US dollar/US inflation
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 20:32:15 (EST)
Email Address: Not Provided

Message:
When was this interesting article written? I could not find this on the Asia Times site.

Subject: Re: Asian Times - US dollar/US inflation
From: Pete Weis
To: Terri
Date Posted: Sun, Oct 31, 2004 at 21:54:32 (EST)
Email Address: Not Provided

Message:
Oct 23, 2004. Entitled 'PART 1: Follies of fiddling with the yuan' By Henry C K Liu It's a very long piece. I posted approximately the last 5th of the text.

Subject: The Dollar and the Yuan
From: Terri
To: Pete Weis
Date Posted: Mon, Nov 01, 2004 at 15:59:11 (EST)
Email Address: Not Provided

Message:
http://www.atimes.com/atimes/China/FJ23Ad06.html China PART 1: Follies of fiddling with the yuan By Henry C K Liu Dollar hegemony emerged after 1971 from the peculiar phenomenon of a fiat dollar not backed by gold or any other species of value, continuing to assume the status of the world's main reserve currency because of the US's geopolitical supremacy. Such currency hegemony has become a key dysfunctionality in the international finance architecture driving the unregulated global financial markets in the past two decades. China's overheated economy is the result of hot money inflow caused by dollar hegemony. China's developing economy should be able to absorb huge amounts of capital inflow, but dollar hegemony limits foreign investment to only the Chinese export sector, where dollar revenue can be earned to repay capital denominated in dollars. Since China's export sector cannot grow faster than the import demands of other nations, excessive dollar capital inflow overheats the export and exported-related sectors, while other sectors of the Chinese economy suffer acute capital shortage. Overheated economies produce growth-inhibiting inflation through excessive import of money and sudden rises in prices for imported commodities and energy. The imported inflation is then re-exported, causing inflation in other parts of the global economy. Inflation causes interest rates to rise, which in turn causes unemployment and recession in all economies that are plagued by it. China's currency, known as the renminbi (RMB) yuan, has been pegged to a fiat dollar within a narrow band (0.3%) around an official rate of 8.28 to 1 since 1995. Even though the yuan is still not entirely freely convertible, any change in dollar interest rates will impact yuan interest rates due to the peg. While the linkage between exchange rate and interest rate is direct, the exchange rate policies of most countries do not always operate in sync with their interest rate policies, leading to imbalance and disequilibrium in their economies. This is because these two related policies impact different segments of the population differently. Thus conflicting political dynamics push them in conflicting directions. Capital generally prefers a strong currency since it reflects financial strength, while labor prefers a weak currency to boost exports that provide domestic employment. Capital prefers high interest rates for better returns while labor prefers low interest rates for cheaper consumer loans and affordable mortgages. China will be no exception as its moves toward interest rate liberalization and free currency conversion. Dollar hegemony enables the US to be the only exception from macroeconomic penalties of unsynchronized exchange rates and interest rates. The US, because of dollar hegemony, is the only country that can claim that a strong currency that leads to trade deficits is in its national interest in a global economy dominated by international trade. This is because a strong dollar backed by high interest rates helps produce a US capital account surplus to finance its trade deficit. While other economies must earn dollars to finance their dollar deficits, US trade and fiscal deficits need only be repaid with dollars that the US can print at will, not from dollars that the US must earn. That in essence is the benefit of dollar hegemony to the dollar economy. But while dollar hegemony is good for the dollar economy, it imposes costs of job loss and a debt bubble on the US economy.

Subject: Jobs
From: Pete Weis
To: All
Date Posted: Sun, Oct 31, 2004 at 18:49:54 (EST)
Email Address: Not Provided

Message:
From Comstock Partners: Still No End to the Soft Patch Recent Market Commentary: 10/28/04 Still No End to the Soft Patch As everyone has already noted, the stock market this year has been highly correlated to the daily and weekly fluctuations of oil prices. In our view, however, rising energy prices have only exacerbated the inherent weak spots in the economy resulting generally from the post-bubble structural imbalances, and specifically by the unusually weak employment situation that has put a lid on the growth of wages and salaries. As we have mentioned a number of times in these comments, payroll employment growth at this stage of past expansionary cycles averaged well over 7 percent from the official recession bottom, compared to less than 1 percent in the current cycle. If this cycle had followed the pattern of past periods there would be more than 9 million additional jobs in existence today. Furthermore most of the jobs that were added are part-time or temporary, and therefore pay less than the average. Although some argue that the household survey shows far more jobs added, we note that that these numbers are taken from a far smaller sample and include those who say that they are self-employed. We note, though, that most self-employed earn less than the average, and many have turned to self-employment out of desperation after they couldn’t find well-paying employment elsewhere. Other observers point to the relatively low unemployment rate as a sign of strength, although this figure too is somewhat deceptive. While the current unemployment rate of 5.4 percent is relatively low, this is largely a result of people dropping out of the labor force. Over a period of time the Bureau of Labor Statistics has gradually narrowed its definition of unemployment to a point where only those who have actively looked for a job in the past four weeks are considered to be unemployed. If the labor force participation rate was the same as it was in early 2000, the current unemployment rate would be a far higher 7.5 percent. The negative effect of poor jobs numbers on incomes is easy to see. In past expansionary cycles personal income adjusted for inflation and transfer payments was up an average of 12 percent at this stage, compared to only 4 percent now. To maintain even the present level of tepid spending, consumers have gone into record debt in addition to getting plenty of help from tax refunds and mortgage refinancing. Now mortgage refinancing is down over 80 percent from the peak, and the tax refunds are in the past. Under these circumstances consumer spending is likely to be restrained and the economic soft patch is likely to continue. With Taiwan Semiconductor recently confirming the continuing pattern of gloomy forecasts for the chip industry from leading companies, we see no relief from the tech sector as well.

Subject: Re: Jobs
From: Ari
To: Pete Weis
Date Posted: Mon, Nov 01, 2004 at 05:02:15 (EST)
Email Address: Not Provided

Message:
Unless economic growth and the rate of job creation increase, long term interest rates are likely to remain low even if the Fed continues to raise short term interest rates. Most unusual.

Subject: 2004 and 1994
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 19:32:59 (EST)
Email Address: Not Provided

Message:
http://www.comstockfunds.com/index.cfm/MenuItemID/139/MenuGroup/Home.htm October 14, 2004 Why 2004 is Not Like 1994 Comstock Partners Some observers compare this year’s stock market to that of 1994, when the major indexes traded within a narrow range as they have been doing for the first nine an a half months of 2004. They like to point out that ten years ago the market broke out into a long bull market and that the current market can do the same. The spread between the highs and lows of the S&P 500 was 9.2 percent in 1994, and 8.8 percent so far this year. Although it’s true that these are extremely narrow annual historical ranges, we believe that is where the superficial comparison ends. When digging more deeply into the technical and fundamental factors that move markets, the two periods are vastly different, and we think it is much more probable that the current stalemate will be resolved by a significant decline. In late 1994 investors were very pessimistic about the market, while they are quite optimistic today despite numerous problems. In late 1994 the Investors’ Intelligence survey showed only 32 percent bullish and 50 percent bearish, compared to today’s 54 percent bullish and only 24 percent bearish. In addition the cash-to-asset ratio in equity mutual funds was about 8 percent then, and only 4.1 percent now. When the market trades in a narrow range for lengthy periods the direction of the eventual breakout is highly likely to move against the prevailing sentiment. In terms of valuation the current market is substantially more expensive than in 1994. The S&P 500 is now selling at about 21 times this year’s trendline reported earnings compared to 15 times ten years ago. From that point the market soared to 37 times trend earnings in early 2000. That price-earnings ratio capped the bubble, and was 76 percent higher than the top of any market P/E for over a hundred years. It is unlikely to happen again anytime soon. In 1994 we were in a secular bull market, and the high end of the S&P 500 range was an all-time high. Today, we believe we are in a secular bear market with this year’s high a full 24 percent lower than the 2000 peak. Fundamentally there are other vast differences between the two periods. In the 12 months ended September 30, the economy added 1.7 million jobs in 2004 compared to a much larger 3.8 million jobs in 1994 on a smaller base. Today the consumer savings rate is down to 0.9 percent as opposed to about 8 percent in 1994. The trade deficit is $560 billion now and about $90 billion then. Household debt as a percentage of GDP is currently 86 percent compared to 64 percent 10 years ago. There is still one more item of great importance that should not be overlooked. In 1994 the introduction of the Netscape browser provided the first user-friendly graphics that made the internet accessible to hundreds of millions of individuals and businesses around the globe. This set off the great technology boom that culminated in the bubble that came to an end in 2000. There is nothing anywhere near that magnitude on the horizon today, and the major structural imbalances left over from the bubble have yet to be corrected. In sum, we believe that the odds are high that the breakout from the 2004 market trading range will be on the downside.

Subject: Drug Shortages in America
From: Emma
To: All
Date Posted: Sun, Oct 31, 2004 at 16:56:57 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/31/weekinreview/31harri.html In American Health Care, Drug Shortages Are Chronic By GARDINER HARRIS ANGRY about not getting a flu shot? Imagine being unable to find supplies of a medicine that limits damage from a spinal cord injury, a medicine that improves the health of a premature baby, or a medicine that fights systemic bacterial infectious. Each of these drugs, and dozens of others, are in shortage in the United States right now. On any given day, 50 to 80 drugs, many of them life-saving, may be difficult or impossible to find. Some patients die waiting for them, or because a frustrated doctor substituted another drug without having adequate training. The larger story behind the flu vaccine shortage is that drug supply disruptions in the United States have become routine. The immediate causes are myriad - drug company mergers, production snags, low and high prices, even outbreaks of mad cow disease. But some economists say that they all stem from one central feature of the nation's public health system: no one is in charge. 'We're so concerned in this country about inappropriate public intervention that we're willing to pay very high costs - including shortages - to avoid that,' said Marc Roberts, a professor of political economy at Harvard University. In Europe, where governments play a much larger role in managing health care, shortages are much less common. For example, while America's supplies of flu vaccine have been short in three of the last four years, Europe's have not. 'Europe's peaceful market guarantees that supplies are available,' said Uwe Reinhardt, professor of health economics at Princeton University. But there is so little political support for government intervention in the health care market in the United States that Senator John Kerry took pains in a recent presidential debate to say that his plan for expanding access to health insurance would not create a new government program. And some economists say that the disadvantages of the European model of heavy intervention outweigh the advantages. Paul Ginsburg, president of the Center for Studying Health System Change, argued that drug shortages happen in the United States not because the government fails to intervene but because the health care market has a conscience that overrides market logic. 'If you could just double or triple the price whenever the supply chain was disrupted, it might be worth it to have excess capacity,' Mr. Ginsburg said. But such price increases would be decried as unseemly profiteering. 'It is the inability of the price system to react to these disruptions that is what leads to the potential for shortages,' he said. American hospital pharmacists say that chronic shortages have obliged them to become crisis managers.

Subject: The Future of Health Care?
From: Emma
To: All
Date Posted: Sun, Oct 31, 2004 at 11:03:01 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/31/business/yourmoney/31hmo.html? Is Kaiser the Future of American Health Care? By STEVE LOHR AFTER 18 years in private practice, Dr. Victor Silvestre was exhausted from his lonely battle, day after day, with a health care system that seemed to be working against him. A general practitioner, Dr. Silvestre found it increasingly difficult to get his patients appointments with specialists, who tended to focus on lucrative procedures instead of routine care. Paperwork and haggling with insurance companies, he said, took more and more time. 'There just had to be a better way,' he recalled. For Dr. Silvestre, the better way was not across the border in Canada, or in some affluent nearby suburb, but in his own backyard, in Oakland. Two years ago, he joined Kaiser Permanente, the huge health maintenance organization based here. 'So many of the solutions, the ingredients of a more rational system for delivering health care, were there,' he said. It may seem unlikely, given Kaiser's past image as a ham-handed H.M.O., but plenty of others are reaching the same conclusion. High-level visitors from across the political spectrum - the Bush administration and National Health Service of Britain, for example - are coming to California these days to look at Kaiser as an institution that is actually doing some of the things needed to improve health care. Obviously, there is no single model for revamping the nation's costly, disjointed health care system, and Kaiser certainly has its share of problems. But according to economists and medical experts, Kaiser is a leader in the drive both to increase the quality of care and to spend health dollars more wisely, using technology and incentives tailored to those goals. 'Quality health care in America will never be cheap, but Kaiser probably does it better than anywhere else,' said Uwe E. Reinhardt, an economist at Princeton who specializes in health issues. HEALTH care systems in most industrialized countries are in crises of one form or another. But the American system is characterized by both feast and famine: it leads the world in delivering high-tech medical miracles but leaves 45 million people uninsured. The United States spends more on health care than any other country - $6,167 a person a year - yet it is a laggard among wealthy nations under basic health measures like life expectancy. In a nutshell, America's health care system, according to many experts, is a nonsystem. 'It's like the worst market system you could devise, just a mess,' said Neelam Sekhri, a health policy specialist at the World Health Organization in Geneva. In this political season, the health care debate has been mostly about who will pay the bill. President Bush talks about tax credits and health savings accounts that are intended to give people more control over their care but would also mean that they would pay more out of their own pockets. Senator John Kerry wants the government to pay more, and he has proposed a major, and costly, program to cover the uninsured. The favored solution of many liberals - and of no small number of health care experts - is a single-payer system of health insurance, covering the entire population and underwritten by the government. For the foreseeable future, that is considered politically off-limits, which was the message Washington absorbed from the abandoned effort to fashion a national health program in the Clinton administration. How to finance health care is only one side of the problem. The other is how to deliver the care more intelligently, and that is where the Kaiser experience holds lessons. Given the demands of an aging population and steady advances in medical technology, national health spending will continue to climb. Yet by all accounts, there is plenty of waste - estimates range up to 30 percent or more of total spending - from unnecessary clinical tests, hospital stays and prescriptions, and the bedeviling sea of paper used to handle bills, claims and patient records. 'We're not going to spend less, but figuring out how to get the most value out of our health spending is going to be the big issue of the future,' said David Cutler, a health care economist at Harvard. But Kaiser as a model? Wasn't Kaiser, an H.M.O., part of the 'managed care' movement that faltered in the 1990's amid protests from doctors and patients? In fact, Kaiser, with its origins in the 1930's and 1940's, when the industrialist Henry J. Kaiser provided health care for his construction and shipyard workers, has always been a hybrid. The managed care concept of the 1990's was about having an outside bean counter, usually an insurance company, looking over the shoulder of the doctor - managing costs instead of managing care. Kaiser has a different setup with different incentives. It emphasizes preventive care and managing chronic diseases like heart disease and diabetes to keep people healthier. And that saves money because healthier people require less costly care like hospitalization.

Subject: Long Term Stock and Bond Returns
From: Terri
To: All
Date Posted: Sun, Oct 31, 2004 at 10:48:19 (EST)
Email Address: Not Provided

Message:
http://www.russell.com/ww/Search/default.asp Single-Asset vs. Multi-Asset Portfolios For 30 years of S&P, Small Cap, International, REIT, and Bond Index returns, type this heading in the Russell search box.

Subject: REITs are Stocks
From: Ari
To: Terri
Date Posted: Sun, Oct 31, 2004 at 14:22:48 (EST)
Email Address: Not Provided

Message:
Real Estate Investment Trusts that makes up the REIT Index are all publicly traded stocks. These stocks can all be bought on the NYSE or the NASDAQ. All the stocks in the REIT Index are included in the major stock indexes.

Subject: Re: REITs are Stocks
From: Ari
To: Ari
Date Posted: Mon, Nov 01, 2004 at 04:52:26 (EST)
Email Address: Not Provided

Message:
REITs only differ from other stocks in paying dividends that are partly a return of capital and partly dividends that are taxed at the same rates as interest payments from bonds. Right now the price to earning ratio of the REIT Index is 30, which strikes me as most expensive. Unless property rents are going to rise rapidly, REITs seem to be most expensive investments.

Subject: REIT Prices
From: Ari
To: Ari
Date Posted: Mon, Nov 01, 2004 at 05:25:11 (EST)
Email Address: Not Provided

Message:
Also, the taxable dividend on the REIT Index is 4.2%. This is a very low dividend by historical standards. What is pushing the price of the REIT Index higher, are rising commercial property prices and expectations that these prices will continue to rise.

Subject: Re: REIT Prices
From: David E...
To: Ari
Date Posted: Mon, Nov 01, 2004 at 14:13:35 (EST)
Email Address: Not Provided

Message:
Ari - Here are some counter views. Maybe I will REIT's claim that when interest rates/inflation rise their business benefits in an expansionary time. Or, falling rates/deflation lowers their cost and makes them competive. REIT's correlations are low to stocks and bonds. The prelude now is the same as the early 70's. A war unpaid for and oil price shocks. There is a better than average chance of a repeat of 70's hyperinflation. Owning hard assets that pay dividends seems like a good idea. Inflation protection with TIPS is very expensive. David

Subject: Re: REIT Prices
From: Terri
To: David E...
Date Posted: Mon, Nov 01, 2004 at 14:38:06 (EST)
Email Address: Not Provided

Message:
The analysis makes complete sense to me. If an investor has owned the REIT Index for several years, then stay stay stay. For new money the REIT Index is most expensive unless there is a sharp rise in inflation. Hyperinflation however can not occur as long as the Federal Reserve can raise interest rates, and the Fed will surely raise rates when inflation picks up even a little. The Fed spent years getting inflation lower and lower from 1982. The Fed mistake in not stifling inflation in the 1970s is not likely to be repeated.

Subject: REITs and TIPS
From: Terri
To: Terri
Date Posted: Mon, Nov 01, 2004 at 15:41:15 (EST)
Email Address: Not Provided

Message:
What do you mean when you write that inflation protection with TIPS is very expensive? Are TIPS too expensive? Why do you not use the Vanguard TIPS fund? Going forward I prefer High Yield Corporate Bond Fund, because TIPS have become so expensive. But, High Yield Corporate has significant quality risks. Still, I do not think hyperinflation is a realistic possibility. Moderately more inflation should make large cap stock indexes in America and Europe good enough hedges.

Subject: Re: REITs and TIPS
From: David E...
To: Terri
Date Posted: Mon, Nov 01, 2004 at 17:26:31 (EST)
Email Address: Not Provided

Message:
The real rate of return on tips is 1.7%. (Go to vanguard for the yield rate). I have a feeling that REITS adjusted for risk pay more than that, so I call TIPS expensive. I say feeling because I am working to know that with a higher degree of certainty. TIPS are a different Asset Class not closely correlated with REITs, so you might want both. Stocks offer inflation protection, but I am considering REITS for the following two reasons. 1. Stocks and REITS don't have a high degree of correlation. 2. REITS are in my mind a harder asset than stocks. With stocks, value has three main components - facilities, people and goodwill. REITS have much harder assets because most of the value is the facility. Hard assets, like gold and real estate have held value in the past. Terri- Last time – the problem was stagflation. A close relative of what Greenspan was afraid of a few years ago. Deflation. And the problem is the same, how to keep interest rates low to encourage growth and at the same time keep rates high to discourage inflation. Greenspan has some untried tricks left in his bag, and I hope they work.. If they don’t, REIT’s might take up some slack.

Subject: Re: REITs and TIPS
From: Terri
To: David E...
Date Posted: Mon, Nov 01, 2004 at 18:40:23 (EST)
Email Address: Not Provided

Message:
REITs make long term sense. But the price earning ratio of the REIT Index is high at 30, and the taxable dividend is low at 4.2%. I would at least use averaging in entering the fund, to protect against short term swings. The rate of return on TIPS just does not seem interesting. I would rather use the Large Cap Value Index or Small Cap Value Index.

Subject: I'll Take Value
From: Terri
To: Terri
Date Posted: Mon, Nov 01, 2004 at 19:52:29 (EST)
Email Address: Not Provided

Message:
The Vanguard TIPS fund has a yield of 1.42%. When we can get a dividend of 2.42% from the Value Index, why should we use TIPS? Remember, dividends are taxed at the 15% level unlike interest payments from TIPS.

Subject: Re: I'll Take Value
From: David E...
To: Terri
Date Posted: Tues, Nov 02, 2004 at 13:07:22 (EST)
Email Address: Not Provided

Message:
Good, I am glad that you looked it up the TIPS yield, butI think that number is the real yield, nominal yield for 6 year govt instruments is somewhere just under 4%.

Subject: Lowest Personal Saving Rate Ever
From: Emma
To: All
Date Posted: Sat, Oct 30, 2004 at 21:08:15 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/30/business/30econ.html? Growth Rate of Economy Edged Higher Over Summer By EDUARDO PORTER The economy picked up a little more speed during the summer quarter from July through September, expanding at a 3.7 percent annual rate, the government reported yesterday. The growth in the nation's output of goods and services, according to the Commerce Department's initial estimate, exceeded the 3.3 percent rate registered in the second quarter - when the economy was held back by a surge in energy prices, which took a big bite out of the budgets of American households and dented consumer spending. But despite the third-quarter improvement, some analysts and business executives expressed worries over the economy's vulnerabilities. Growth could be crimped by everything from continued high oil prices and lackluster income gains to the deepening trade and balance of payments deficits.... Perhaps most importantly, consumers may have squeezed themselves into an excessively tight spot. Even as the spending accelerated in the third quarter, income growth slowed, leading to a fall in the personal savings rate to 0.4 percent of disposable income. That is the lowest ever.

Subject: Re: Lowest Personal Saving Rate Ever
From: Terri
To: Emma
Date Posted: Sun, Oct 31, 2004 at 12:04:24 (EST)
Email Address: Not Provided

Message:
'In another sign of economic stress, The Wall Street Journal reported that big auto dealers have been putting pressure on auto companies like Ford and General Motors to cut back further on car production.' Why should there be a surge in business investment unless there is a promise of burgeoning consumer or government demand? Capacity utilization is historically low several years in a recovery, and business leaders seem intent on investing for efficiency not expansion. Also, expansion is possible abroad.

Subject: Re: Lowest Personal Saving Rate Ever
From: Emma
To: Emma
Date Posted: Sat, Oct 30, 2004 at 21:17:54 (EDT)
Email Address: Not Provided

Message:
'Perhaps most importantly, consumers may have squeezed themselves into an excessively tight spot. Even as the spending accelerated in the third quarter, income growth slowed, leading to a fall in the personal savings rate to 0.4 percent of disposable income. That is the lowest ever.' There are times when the lack of household saving and government deficit seem especially troublesome. Japan may have had a serious government deficit, but there was a large personal saving rate to cushion the effect and contribute to a balance of payments surplus. Oh well.

Subject: Re: Lowest Personal Saving Rate Ever
From: Ari
To: Emma
Date Posted: Sun, Oct 31, 2004 at 06:02:02 (EST)
Email Address: Not Provided

Message:
This low personal saving rate means consumers will have to extend debt to increase spending. This may mean that unless there is another stimulus plan from the coming Administration, there is little reason to believe the rate of economic growth will soon increase.

Subject: Re: Lowest Personal Saving Rate Ever
From: time
To: Ari
Date Posted: Sun, Oct 31, 2004 at 10:06:08 (EST)
Email Address: Not Provided

Message:
'there is little reason to believe the rate of economic growth will soon increase' not necessarily, many people here have complained about how corporations have made record profits the past year or so, but have kept money on the sidelines. It is possible that businesses might start spending that money at a significant rate after nov 2, once they have a better idea of who is in the white house and how their policies may affect their industry. The missing ingredient in the recovery has been business investment, and its quite possible business may feel much more comfortable investment decisions once they know what the landscape will look like over the next 4 years.

Subject: Re:The wolf at the door
From: El Gringo
To: time
Date Posted: Sun, Oct 31, 2004 at 16:02:59 (EST)
Email Address: nma@hotmail.com

Message:
'...Until recently, some argued that America's current-account deficit was sustainable because foreign investors were eager to buy American assets to take advantage of the economy's faster productivity growth and hence its higher returns. But private inward investment has slumped, leaving America dependent on foreign central banks. And foreign savings are no longer financing investment and hence future productivity gains as they were in the late 1990s. Foreigners are now financing consumption and government borrowing. America's current-account deficit largely reflects puny domestic saving, so dollar bulls often argue that a fall in the dollar is neither necessary nor sufficient to trim the deficit. But Stephen Roach, chief economist at Morgan Stanley, reckons that a weaker dollar would spark a rise in real bond yields, as foreign creditors demanded extra compensation for currency risk. That would slow consumer spending, boost saving and reduce the deficit....'

Subject: Re: Lowest Personal Saving Rate Ever
From: Pete Weis
To: time
Date Posted: Sun, Oct 31, 2004 at 11:47:34 (EST)
Email Address: Not Provided

Message:
'The missing ingredient in the recovery has been business investment, and its quite possible business may feel much more comfortable investment decisions once they know what the landscape will look like over the next 4 years.' time. That's a very generalized statement. Since 2000 the government has been pumping record economic stimulus. 2003 saw a substantial market rally, yet little of that money found its way into capital expenditure. In fact executives in US companies showed little faith in the ability of the US consumer to expand demand for what their companies were selling. So they 'sold stock options at record levels' throughout the rally of 2003 and through the first half of 2004 according to Thompson First Call'. That's how we get record inflows into equity markets by small investors in early 2004 while equity markets remained flat, even dropping slightly. Regardless of who wins the coming election, American businesses will not expand business investment if they don't believe there are increasing consumers at the end of their product lines. Job growth and wage growth is simply not their yet for the US consumer. Because of that, this economy has become dependent on the ability for US consumers to extract equity out of a housing market now propped up by reverse mortgages, ARM's, 40 year mortgages, little-to-no-money down, monthly payments up to 50% of gross income, and negative real interest rates. The money 'on the sidelines' will stay on the sidelines and not find its way into capital investment until both the job and wage situation and personal debt situation truely improve. Articles this week talk about Ford and GM corporate bonds on the brink of junk status. GM is getting ready to 'shut down 5 plants, laying off over 10,000 workers' in the process. Airlines pilots and other airlines employees are taking '30% cuts or more'. Articles in the Silicon Valley area talk about a build-up of inventory for chip makers due to a 'slowing of business'. The dollar is being threatened by the 'twin deficits' to the extent that our past Federal Reserve Chairman, Paul Volker suggests a 75% chance of a financial crisis in the next 5 years. The truth - as a recent Economist article stated - neither presidential candidate really dealt with these issues. Perhaps, as the article stated, a slight majority of economists gave Kerry an edge since he talked about ways to reduce the budget deficit. The war in Iraq has served to deflect the 'debate' from very serious economic issues.

Subject: Re: Lowest Personal Saving Rate Ever
From: time
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 13:07:38 (EST)
Email Address: Not Provided

Message:
'Job growth and wage growth is simply not their yet for the US consumer' sounds like a chicken or the egg argument, business need to spend in order to have job growth, but you need increasing income for business to spend. My whole argument on money on the sidelines and that it might be invested in the near future comes from a combination of articles/interview with ed yardeni and jim oelschlager over at oak associates and why they feel now is the time to invest in growth stocks.

Subject: Re: Lowest Personal Saving Rate Ever
From: Pete Weis
To: time
Date Posted: Sun, Oct 31, 2004 at 14:35:17 (EST)
Email Address: Not Provided

Message:
'sounds like a chicken or the egg argument' time. You are exactly right. This is the great debate between the supply siders and demand siders. It has to do with where the economic stimulus should be targeted. Right now, the supply siders control the stimulus targeting. But as you stated - business expenditure does not seem to be there. If it hasn't been there for the last four years, since the Fed started its easy money policies, how do you expect it to change in the next four years depending on which candidate is elected?

Subject: Negative Real Interest Rates?
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 12:29:08 (EST)
Email Address: Not Provided

Message:
Please explain why you believe there are negative real interest rates? This is interesting.

Subject: Re: Negative Real Interest Rates?
From: Pete Weis
To: Terri
Date Posted: Sun, Oct 31, 2004 at 13:32:13 (EST)
Email Address: Not Provided

Message:
'The CORE is running at just under 2%,' the barkers shout with glee because a low CORE number tells us that we can continue to run monetary policy with NEGATIVE REAL INTEREST RATES and fiscal policy with $400 billion deficits.' - Bill Gross Terri. Rather than repost the Bill Gross piece 'Haute Con Job', I'm posting Fleckenstein's comments on the the Bill Gross' article published by PIMCO. The capital letters for negative real interest rates are mine. Fom MSN Money: The government's inflation con job They tell us prices are under control and 'prove' it with cynical manipulation of data. That’s why fixed-income investments like bonds offer little value. By Bill Fleckenstein In the nearly eight years since I began writing my daily column, I have been rather vocal on the subject of fun with numbers, both corporate and governmental. With a couple of little tricks at its disposal, the government has made a practice of understating inflation, and by extension, overstating GDP and productivity. I have also discussed this many times in the Contrarian Chronicles, most recently in 'Yet another way the government hides inflation' and 'How the government manufactures low inflation.' Despite the fact that there are potentially damaging consequences to this statistical manipulation, it has attracted little attention and aroused scant outcry. That may change prospectively, thanks to the publication last week of an important article titled 'Haute Con Job,' written by someone considered the country's foremost authority on bonds, Pimco's high-profile portfolio manager, Bill Gross. Given Gross’ stature and widespread audience, perhaps the story will get some legs. If so, this thought process is negative for fixed income, negative for the dollar and bullish for the metals, as a crisis of confidence undermines the credibility of all the government data distorted by these machinations. Banks and insurers check your credit. So should you. A mini-oeuvre on numerical maneuver I am going to quote liberally from Gross' article, starting with his conclusions, just so you'll know from the outset where he comes down on these subjects. (Here's the link if you want to print it out and read it yourself.) 'The CPI as calculated may not be a conspiracy, but it's definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn’t created any jobs over the past four years. 'High productivity? Nonsense, in part -- statistical, hedonically created nonsense. My sense is that the CPI is really 1% higher than official figures and that real GDP is 1% less.' Gross backs up his 1% estimate with some work his firm has done. I wouldn't be surprised to find out that it's even higher, though there's really no way to know for sure. Rotten-to-the-core inflation Next, before hacking away at the hedonic and substitution fiddles used by the government, Gross pops off about the whole nonsense of core inflation -- which is, of course, another subject near and dear to my heart and completely and totally absurd -- because it strips out food and energy, two things that everybody must have: '(There's a) con job perpetually foisted on the American public about the low level of inflation. 'Inflation under control' -- (ex food and energy, of course) shout the carnival barkers. 'The CORE is running at just under 2%,' the barkers shout with glee because a low CORE number tells us that we can continue to run monetary policy with negative real interest rates and fiscal policy with $400 billion deficits. A low CORE number allows us to pretend that American productivity is the best in the world, that the dollar should be strong, and that the markets, by golly, are going up. No matter that a gallon of gasoline is over two bucks or that a half-gallon of milk will set you back $3.69; the CORE is under 2%.' Inflation ointment: Apply liberally to affected areas But as you'll see, the core rate is not Gross' major beef. It's the nonsensical extremes to which hedonic adjustments have been taken, something that my good friend Jim Grant has written about on many occasions as well. Though the hedonic adjustments began as a way to turn computer horsepower into price reductions, they have since been applied to lots of other goods. As Gross notes: 'In 1998, the methodology was adopted for computers -- surely the biggest step backward in realistic inflation calculations. Since then, the BLS has expanded the concept to include audio equipment, video equipment, washers/dryers, DVDs, refrigerators and, of all things, college textbooks! Today, no less than 46% (my emphasis) of the weight of the U.S. CPI comes from products subject to hedonic adjustments,' Gross wrote. That's 46% and probably growing. Speaking of college textbooks, I bumped into a young college student who mentioned that his new math book cost $175. (Having been a math major myself, I don't recall paying much over about $30 a book.) It would be interesting to know how one calculates that the book has become six times better. Meanwhile, Gross notes that if you were to strip out some of the hedonic magic since 1987, as his firm has done, the PCE (or personal consumption expenditures, which is Federal Reserve Chairman Alan Greenspan's favorite inflation statistic) would turn out to have been between 0.5% and 1.1% higher every year. Obviously, that number adds up over time. Substitution is no substitute Continuing, Gross tackles the government's other intellectually dishonest stratagem, namely, substitution: 'In addition, when 'substitution bias' (a BLS maneuver that follows your preference for Chicken McNuggets vs. a Quarter Pounder) is eliminated, the gap gets even worse. For those of you sophisticated economists who feel the substitution bias is more than justified, chew on this for a second: If you substitute a pound of chicken for a pound of beef because it's cheaper, then switch back to beef later on because it came back down in price, the overall round trip which resulted in no ultimate substitution and no relative price change winds up reducing the stated PCE. Oh man, what a con.' Gross then discusses the motives behind the government's (and Greenspan's) reasons for believing these rather unbelievable numbers: 'Deceptive hedonic/substitution adjustments also serve a government burdened not only with hundreds of billions of annual deficits as far as the eye can see, but laden with a demographically aging U.S. workforce rapidly approaching Social Security time. By fudging on inflation, they pay less, and the amount could cumulatively run into the hundreds of billions over the next few decades.' The con job that hurts many Lastly, Gross points out who is penalized by this cheating: 'They disserve, of course, all of those who receive Social Security, as well as other private pensioners dependent on an accurate accounting of prices paid. They disserve buyers and holders of TIPS -- inflation protected securities -- which adjust inadequately to a faulty and near fraudulently calculated CPI that one day could total billions of dollars per year for TIPS holders. And they disserve all owners of U.S. Treasury obligations -- including foreign central banks and institutions. . . .' One of these days, the world is going to figure this out. There will be a run on the dollar, and at some point, Treasury yields will be affected. One of my favorite expressions (besides this: In a social democracy with a fiat currency, all roads lead to inflation.) is: We know the government is going to cheat us, via inflation. The only question is whether they offer us a rate of interest that compensates us for this cheating. Bonds' warts That's the reason I find fixed income unattractive. Bill Gross' arguments are the very same ones I have long made for why I don't like TIPS. Yes, maybe they're the best of a bad lot. But I would prefer not to buy longer-dated fixed income until such time as I thought I was being compensated for the risks. That is not to say I would be willing to short fixed income. I wouldn't, because I think the upcoming economic weakness may benefit that market. However, I don't consider bonds a sound investment. For folks who need income, I would not want to own anything longer than just a few years, a position I have maintained for quite some time.

Subject: Precise definition
From: Pete Weis
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 14:20:07 (EST)
Email Address: Not Provided

Message:
Real Interest Rate = Nominal Interest Rate - Inflation. If the CPI is being significantly understated, then the 'real interest rate' is more negative than we are being led to believe. Hence we have many investers looking for riskier strategies to keep up with inflation, since fixed income investments, especially here in the US are so poor. Insiders, IMO, are taking advantage of this situation and basically extracting wealth from small investors. I'm not saying that all insiders are thieves (like the Enron and Worldcom execs). However I'm saying that when 401K money heads their way, they don't see any reason to recycle it back into their companies when they don't expect business to get better. Rather they award themselves large stock options and then cash them in. This has been going on for some time now. I posted a piece entitled 'The Stock Market' by Mark Cuban which talked about this. Remember 'the thousand little cuts'?

Subject: Re: Precise definition
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 14:32:09 (EST)
Email Address: Not Provided

Message:
'Real Interest Rate = Nominal Interest Rate - Inflation: If inflation is understated, then the 'real interest rate' may be negative.' What troubles me is not finding academic economists like Brad DeLong or Paul Krugman who will support complaints about the way in which the price indexes are calculated. These posts are excellent arguments, but not convincing.

Subject: Being convinced
From: Pete Weis
To: Terri
Date Posted: Sun, Oct 31, 2004 at 15:18:02 (EST)
Email Address: Not Provided

Message:
Terri. What I actually said in my post: 'Real Interest Rate = Nominal Interest Rate - Inflation'. and 'If the CPI is being significantly understated, then the 'real interest rate' is MORE NEGATIVE THAN WE ARE BEING LED TO BELIEVE'. Few would argue (save pure classical economists) that the Fed shouldn't adjust rates to some degree (sometimes negative) to stimulate the economy when needed. But they need to be honest about the numbers they publish. I think if you have to wait to get a majority of economists to agree that the present government is 'fudging' the numbers or that most companies are still 'fudging' earnings reports, then you'll have to wait forever. If, on the other hand, you feel that you have done your 'homework' and have confidence in your own ability to sift through the conflicting information out there and evaluate which are the more strongly and thoroughly supported arguments, then you will fair better than most of the rest of us. No one can 'convince' us of anything, ultimately we 'convince' ourselves and whether we're bearish or bullish we usually 'convince' ourselves of what we WANT to believe. In the 'real world' of events this has no bearing other than the influence that it has on our 'herding' behavior.

Subject: Re: Being convinced
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 18:57:01 (EST)
Email Address: Not Provided

Message:
Real Interest Rate = Nominal Interest Rate - Inflation. If the CPI is being significantly understated, then the 'real interest rate' is MORE NEGATIVE THAN WE ARE BEING LED TO BELIEVE. When computing Real Interest Rate numbers, what interest rate is used? Do we use the 10 year Treasury Note? What Consumer Price Index number should we use? Why do you write that the Real Interest is negative?

Subject: Re: Being convinced
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 16:01:49 (EST)
Email Address: Not Provided

Message:
Still, I can find no academic economist who agrees that inflation is significantly above the consumer price index readings. I reshaped your explanation to make it clear for myself. Tomorrow we may find Paul Krugman or Alan Blinder or Brad DeLong questioning the inflation numbers, and I will adjust immediately. Even now, I have portfolio positions protecting against an increase in long term interest rates. But, the bond market number make sense to me and I accept the inflation figures for now. All the warnings are warranted, and attended to. Thank you so much!

Subject: Re: Being convinced
From: Pete Weis
To: Terri
Date Posted: Sun, Oct 31, 2004 at 18:44:45 (EST)
Email Address: Not Provided

Message:
'Still, I can find no academic economist who agrees that inflation is significantly above the consumer price index readings.' Unfortunately Terri, this is generally true - there is a strange silence and not just about this issue.

Subject: Silence
From: Terri
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 19:00:25 (EST)
Email Address: Not Provided

Message:
Another academic silence revolves about the ethics violations that Eliot Spitzer is fighting. I may argue with you, but I am asking about these issues.

Subject: Energy Stocks
From: Terri
To: All
Date Posted: Sat, Oct 30, 2004 at 19:35:28 (EDT)
Email Address: Not Provided

Message:
Energy companies have had fine growing earnings since 1999, and the stocks have been strong since then. Holding on to energy stocks makes sense for a long term investor. The question an investor must ask however is whether to continue to buy the stocks after this sort of run as a further hedge against a climb in energy prices.

Subject: Re: Energy Stocks
From: time
To: Terri
Date Posted: Sat, Oct 30, 2004 at 20:01:12 (EDT)
Email Address: Not Provided

Message:
are you saying you should be overweighted in energy stocks relative to the rest of the equity market?

Subject: Re: Energy Stocks
From: Terri
To: time
Date Posted: Sat, Oct 30, 2004 at 20:18:30 (EDT)
Email Address: Not Provided

Message:
Fine question. The S&P Index energy sector is 7%, while the Value Index energy sector is 12.7%. There is no reason to be overweighted in energy stocks after a 5 year run of 18% returns unless an investor is convinced that 50 dollar a barrel oil and natural gas to match will persist for another 5 years. Chasing returns makes me wary, so I would stay at even weight to either the S&P or Value Index. What do you think?

Subject: Weighing Sectoirs Stocks
From: Terri
To: Terri
Date Posted: Sat, Oct 30, 2004 at 20:36:53 (EDT)
Email Address: Not Provided

Message:
Starting points are important. This is not the time to overweight Energy or Real Estate Investment Trust stocks. Large drug and medical equipment makers? Possibly.

Subject: Re: Weighing Sectoirs Stocks
From: time
To: Terri
Date Posted: Sat, Oct 30, 2004 at 22:12:23 (EDT)
Email Address: Not Provided

Message:
REITS aren't part of the Wilshire 5000, S&P 500, etc; energy is. My question was pertaining to the equity allocation of a portfolio. Kind of confused why you highlight energy, but it appears you believe you should have the same allocation of the total market. Why not point out consumer durables, technology, etc? just trying to figure out the rationale. I think you might be a little confused about REITs, as you called them stocks before, check out this link, it might give you a better idea of what REITs are http://www.reitnet.com/reits101/

Subject: REITs
From: Terri
To: time
Date Posted: Sat, Oct 30, 2004 at 22:36:56 (EDT)
Email Address: Not Provided

Message:
Through 1998 energy stocks were negative, because oil prices fell as low as 12 dollars a barrel. That seemed to be a perfect time to buy the Vanguard Energy Fund. Not that I anticipated 50 dollar a barrel oil, but certainly prices higher than 12 dollars. What I try to do is think ahead several years and look for where value might be. That may involve overweighting a market sector, because I find it attractive. Of course, the same could have been done with the REIT Index in 1998 or 1999. REITs are also part of the Vanguard Mid Cap and Small Cap Value Indexes. Thank you for the link to reitnet. Now, to think about your question on consumer durables and technology.

Subject: Re: REITs
From: time
To: Terri
Date Posted: Sun, Oct 31, 2004 at 09:54:38 (EST)
Email Address: Not Provided

Message:
i was unaware REITS were in vanguard's mid cap (1.89%) and small cap value funds (.97%), but there allocations are so small they most likely have impact on the total return of portfolio. I'm quite suprised they would include a different asset class in a equity portfolio, but i'm sure they see it as adding value.

Subject: Re: REITs
From: Terri
To: time
Date Posted: Sun, Oct 31, 2004 at 12:50:33 (EST)
Email Address: Not Provided

Message:
REITs are part of the Vanguard Total and Extended Stock Market Index Funds, also the Mid and Small Cap Index Funds. All REIT Index components are part of the main indexes. These past 30 years, the retunrs of the REIT Index are quite impressive.

Subject: Re: REITs
From: time
To: Terri
Date Posted: Sun, Oct 31, 2004 at 13:17:53 (EST)
Email Address: Not Provided

Message:
They may be part of vanguard funds, but my point is REITS are not stocks, nor are they part of the major indices such as S&P, Russell, Wilshire, etc. You can't go out and buy one a REIT in the NYSE, NASDAQ, etc.

Subject: REITs are Stocks
From: Ari
To: time
Date Posted: Sun, Oct 31, 2004 at 14:09:02 (EST)
Email Address: Not Provided

Message:
No. I just checked each of the top holdings of the REIT Index and all can easily be bought on the NYSE and other exchanges. REITs are stocks.

Subject: REIT Returns
From: Ari
To: Terri
Date Posted: Sun, Oct 31, 2004 at 05:55:41 (EST)
Email Address: Not Provided

Message:
Vanguard lists Real Estate Investment Trusts as equity or stocks. The REIT Index is listed in the small cap value stock category. The dividends of REITs are partly return of capital, and partly treated as income and taxed at our regular income tax brackets rather than at 15% as other dividends. The REIT Index has a terrific long term record according to the data from 1973 from Russell. A higher return than the S&P with less variability.

Subject: Long Term REIT Returns
From: Terri
To: Ari
Date Posted: Sun, Oct 31, 2004 at 10:29:07 (EST)
Email Address: Not Provided

Message:
http://www.russell.com/ww/Search/default.asp Single-Asset vs. Multi-Asset Portfolios For 30 years of REIT Index returns, type the heading in the Russell search box.

Subject: Re: REIT Returns
From: time
To: Ari
Date Posted: Sun, Oct 31, 2004 at 10:00:01 (EST)
Email Address: Not Provided

Message:
vanguard may list REITs as equity or stocks, but they are definitely a different investment. You don't buy REITs in on the NYSE exchange or NASDAQ.. For the most part, people/organizatiions etc invest directly in a trust for a stated period of time. With vanguard you can buy mutual fund shares of investments in many REITs, but its not a stock. Which index are you looking at for REITs from russell. Would the NCREIF or NAREIT be a more appropriate benchmark?

Subject: Weighing Sectoirs Stocks
From: Terri
To: Terri
Date Posted: Sat, Oct 30, 2004 at 20:36:52 (EDT)
Email Address: Not Provided

Message:
Starting points are important. This is not the time to overweight Energy or Real Estate Investment Trust stocks. Large drug and medical equipment makers? Possibly.

Subject: Forgive the Double Post
From: Terri
To: Terri
Date Posted: Sat, Oct 30, 2004 at 20:39:22 (EDT)
Email Address: Not Provided

Message:
Forgive the double post and botched title.

Subject: An End of Deflation in Japan
From: Emma
To: All
Date Posted: Sat, Oct 30, 2004 at 19:19:04 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/30/business/worldbusiness/30japan.html Japan's Long Run of Deflation Is Expected to End Next Year By TODD ZAUN TOKYO - Japan's central bank said on Friday that consumer prices would turn higher in 2005, if only by a sliver, heralding a possible end to the deflation that has plagued the nation for more than five years. The Bank of Japan's policy board forecast that the core consumer price index, which excludes prices of fresh food, would rise 0.1 percent for the fiscal year ending in March 2006. Even such a tiny increase would be welcome in a nation where consumer prices have been flat or have fallen in every month but one since May 1998. The central bank governor, Toshihiko Fukui, was quick to stress that the forecast was in no way a sign that the Bank of Japan was considering any tightening in its ultra-easy monetary policy anytime soon. Mr. Fukui reiterated the position that the bank would need convincing evidence of a lasting rise in prices before it ended its zero-interest-rate policy. Short-term interest rates in Japan have been set at virtually zero since March 2001 in an attempt to reverse the price declines and foster economic growth. And the central bank remains 'firmly committed' to the policy for now, Mr. Fukui said Friday. Most economists agree that the end of the central bank's zero-rate policy is probably more than a year away. Still, the official forecast of an upturn in prices, however tiny, offered a confirmation of sorts that Japan was nearing the end of one of its most nagging economic problems. 'We are now in the final stages of deflation,' said Mamoru Yamazaki, chief economist at Barclays Capital. 'Moderate inflation next year would be a very good thing for the economy.' To be sure, there have been few signs so far that prices are turning higher. Consumer prices in the Tokyo area fell 0.3 percent in October compared with a year earlier, figures released Friday showed. Nationwide consumer prices were flat in September from a year earlier. The long bout of deflation has served to lower once sky-high prices of food, clothing and other goods to levels closer to those in other developed countries. But the steady decline has also taken a toll on corporate profits. Deflation is also a drag on economic growth as it encourages consumers to put off big purchases on the expectation of lower prices to come. Furthermore, the price declines are seen as a contributing factor in a long slump in incomes, which, in turn, is prompting many Japanese to tighten spending. Spending by Japanese households fell 1 percent in September from August, figures released Friday showed. Although Japanese consumers have been restrained, many companies are pulling in record profits thanks to booming exports of Japanese cars and electronic equipment. Earlier this week, Sony, Matsushita Electric Industrial and Canon all reported solid profit growth for the most recent quarter, thanks to rising sales of flat-panel TV's, digital cameras and other electronic equipment. Central bank forecasters expect that over the next year this corporate prosperity will translate into better job prospects for Japanese workers, higher wages and more spending. If people start buying more, an increase in prices is sure to follow, they reason.

Subject: The Effects of Deflation
From: jimsum
To: Emma
Date Posted: Mon, Nov 01, 2004 at 10:00:08 (EST)
Email Address: jim.summers@rogers.com

Message:
'Deflation is also a drag on economic growth as it encourages consumers to put off big purchases on the expectation of lower prices to come.' I've always wondered about the truth of this statement. Even if there isn't deflation it is always cheaper to put off big purchases. If you don't have the money and delay the purchase, you'll save interest payments; if you do have the money and stick it in the bank earning interest before buying, you'll pay less too. As long as nominal interest rates are higher than the nominal inflation rate, you're better off delaying a purchase. I thought the economic decisions are made based on real interest rates and real inflation rates; why do the nominal rates matter, even if the signs of the nominal rates are negative?

Subject: Re: An End of Deflation in Japan
From: Pete Weis
To: Emma
Date Posted: Sun, Oct 31, 2004 at 10:55:48 (EST)
Email Address: Not Provided

Message:
'Although Japanese consumers have been restrained, many companies are pulling in record profits thanks to booming exports of Japanese cars and electronic equipment. Earlier this week, Sony, Matsushita Electric Industrial and Canon all reported solid profit growth for the most recent quarter, thanks to rising sales of flat-panel TV's, digital cameras and other electronic equipment.' Looks like US consumers as well as (and maybe more importantly) Chinese consumers are buying those Japanese goods. For the time being open markets are helping. As long as the US consumer keeps up the voracious buying of Chinese goods, the Chinese consumer should be able to continue buying Japanese autos and electronics. To bad there is such a huge and growing US budget and trade deficit - all eyes are on the dollar.

Subject: Re: An End of Deflation in Japan
From: Emma
To: Pete Weis
Date Posted: Sun, Oct 31, 2004 at 15:22:37 (EST)
Email Address: Not Provided

Message:
Informative and thought provoking posts as always. We must watch Japan carefully. Will there indeed finally be a recovery from deflation and slow growth? What can we learn from Japan?

Subject: Medicine Without Borders
From: Emma
To: All
Date Posted: Sat, Oct 30, 2004 at 18:09:20 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/30/opinion/30rost.html Medicines Without Borders By Dr. PETER ROST I have a confession to make. I am a drug company executive who believes we should legalize the reimportation of prescription drugs. I know that I have a different opinion from that of my employer on this matter, but to me, importation of drugs is about much more than money; it is about saving American lives. According to a study by the Kaiser Family Foundation issued in 2000, 15 percent of uninsured children went without prescription medication in the previous year because of cost, 28 percent of uninsured adults went without prescription medication because of cost, and 87 percent of uninsured people with serious health problems reported trouble obtaining needed medication. We have 67 million Americans without insurance for drugs, according to the foundation. They pay cash - full price - and can't always afford life-saving drugs. American drug prices are about 70 percent higher than in Canada and almost twice as high as in Europe. Drugs won't help save millions of lives if people can't afford to take them. I know that some people do not agree with me. Among them is President Bush. Senator John Kerry noted in the second presidential debate that Mr. Bush in 2000 had said that importation of drugs approved in the United States 'makes sense,' but that Mr. Bush had blocked legislation allowing it. Mr. Bush countered: 'When a drug comes in from Canada, I want to make sure it cures you and doesn't kill you,'' and added, 'What my worry is, is that, you know, it looks like it's from Canada, and it might be from a third world.' What Mr. Bush didn't say is that regulated importation of drugs would take away that risk, a risk Americans now face every day when they go surfing on the Internet for cheaper drugs. In fairness, Mr. Bush did say that he hoped to revisit the issue soon. What I know about importation of drugs is based upon my experience in marketing pharmaceuticals in the United States and Europe for two decades. Importation or parallel trade of drugs has been done safely within Europe for over 20 years. A few years back I was responsible for a region in Northern Europe. We had lots of drugs coming into my area through parallel traders. I countered by lowering some of my own prices and in the process doubled sales in my region in just two years. In Europe, importers supply only authorized wholesalers or registered pharmacies; they do not sell to the public. So the chain remains closed. Authorized drugs are purchased from authorized wholesalers in one European Union country and sold to authorized distributors in another union country. This is the kind of system we should put in place in the United States. Until that happens, to ensure safety, a good intermediate step is for states and cities to step in and provide access to lower-priced drugs. Boston and Springfield, Mass., have already established import programs for low-cost, Canadian drugs, while states like Minnesota and Wisconsin have established Web sites linking residents to Canadian pharmacies approved by state health officials. Make no mistake about it, they are the real heroes in this battle. Every day Americans die because they can't afford life-saving drugs. Every day Americans die because Congress wants to protect the profits of giant drug corporations, half of the top 10 of which are French, British and Swiss conglomerates. I have another confession to make. Americans are dying without the appropriate drugs because my industry and Congress are more concerned about protecting astronomical profits for conglomerates than they are about protecting the health of Americans.

Subject: Per capita consumption of oil
From: Pete Weis
To: All
Date Posted: Sat, Oct 30, 2004 at 12:19:57 (EDT)
Email Address: Not Provided

Message:
From Bloomberg: $200 Oil? It Could Be Asia's Gift to World: William Pesek Jr. Oct. 29 (Bloomberg) -- The e-mail's subject line jumps right out at you: ``Anyone Willing to Forecast $200 Oil?'' The report by Action Economics LLC explores the worst-case scenario for energy markets in the years ahead. On whether the price of a barrel of crude oil will go that far, Action Economics Chief Economist Mike Englund is quite right when he says ``we suspect it's well beyond the willingness of most oil analysts to reasonably project.'' Perhaps not in the near future, but thanks to economic trends in Asia, can $200 per-barrel crude oil really be ruled out? No, says Marc Faber. One of Asia's best-known contrarians, the Hong Kong-based head of Marc Faber Limited has been managing money in this region for more than 20 years -- $300 million at the moment. He publishes a monthly newsletter called ``The Gloom, Boom & Doom Report.'' When it comes to oil-price trends, Faber wonders if investors realize just how bad things could get for bond markets. ``The fundamentals, long term, of the oil market are very compelling, extremely compelling,'' he explains. ``I wouldn't be surprised to see $100 or $200 (for a barrel of) oil in the next five to 10 years. It's not a projection. It's that I wouldn't be surprised.'' Demographic Trends It's a purely connect-the-dots exercise, though demographic trends here in Asia could have a bigger influence on oil than investors may appreciate. With the exception of Brunei, Indonesia and Malaysia, Asians import just about all of their oil. Populations here are surging, incomes are rising and oil consumption has nowhere to go but up. In China, Faber thinks, ``we have a per capita consumption of oil of 1.7 barrels. In America it's 28 barrels, in South Korea 17 barrels, Japan 17 barrels, in India 0.7 barrels. In Vietnam it's probably also less than one barrel. So in Asia on the population of 3.6 billion people we consume less oil than the U.S. on a population of 295 million.'' Looking ahead, Faber adds, ``I would imagine that in Asia the demand will certainly double by comparison. Say Mexico has a per capita consumption of 7 barrels, Latin America 4.4 barrels. Asia, as I said, it's anywhere around 1.5 barrels.'' Consumption of oil in Asia may double to 40 million barrels a day from 20 million barrels, Faber says. ``The question is, is it six years or 12 years, but the doubling is easy to project,'' he says. Monetary Stimulus Add to that equation the amount of monetary stimulus currently making its way around the global economy. As Ray Dalio, who manages $38 billion as chief investment officer at Bridgewater Associates Inc. in Westport, Connecticut, puts it: ``An abundance of dollars and a shortage of oil is a dangerous combination.'' It's not just the U.S. Federal Reserve holding short-term interest rates near record lows. There's no end in sight to the Bank of Japan's zero-interest-rate policy amid few signs its seven- year bout with deflation is over. It means the central banks of the world's two biggest economies continue to print lots of money. That monetary stimulus, along with rising demand, concerns about supply and geopolitical uncertainties, helped fuel a 76 percent surge in oil prices over the last 12 months. Now, those who worried about the economic effects of crude oil at $40 a barrel are wondering about what $60 or $70 a barrel will do to global interest rates and markets. The Fallout What all this means for global growth isn't clear, yet it's hardly good news for Asia's oil-import-dependent economies. Asian countries holding down currencies to support exports will increasingly import inflation. That will lead to higher interest rates, rising bond yields and lower consumer spending. If there's a silver lining to all this, it's that oil prices may in fact need to push the $200-a-barrel mark to shoulder check the global economy. For example, the U.S., says Englund of Action Economics in Boulder, Colorado, may be half as dependent on oil as it was in 1970s. ``While the recent run-up in prices is indeed significant'' it shouldn't ``prove nearly as disruptive as prior oil price shocks even if prices sustained at current levels.'' The bad news, of course, is that Asia's rising demand for oil may outpace the world's ability to meet it or find alternative energy sources. If so, $200 oil could just be Asia's gift to the world in coming years. Stopping the Rise Of course, one wonders if economic forces would allow crude oil to approach that level. Prices even half that high would be far too expensive for Asia, rapidly reducing demand. And central banks might raise rates aggressively. If today's Fed boosted short- term rates to the 20 percent former Chairman Paul Volcker did two decades ago, it would devastate U.S. consumers and, by extension, demand for Asian goods and Asia's need for more oil. At the same time, though, it's hard to argue with demographic trends in Asia and how that will boost oil demand.

Subject: Re: Per capita consumption of oil
From: Terri
To: Pete Weis
Date Posted: Sat, Oct 30, 2004 at 14:05:37 (EDT)
Email Address: Not Provided

Message:
The oil price increases so far has been partly driven by demand and temporary supply limitations and partly speculative. China has been building a strategic reserve, as well as booming in growth, but China is now trying to lessen growth. There is every reason to believe we are near the high price for oil in this cycle at 55 dollars a barrel. There is considerable potential oil supply from sands in Canada and shale in America. Current prices are high enough to bring new supply sources in time. There is also a move towards efficiency that should slow grow in demand. I just wish America were more concerned with energy efficiency. The guess is oil ranges in price from 40 to 60 dollars a barrel for some time.

Subject: Re: Per capita consumption of oil
From: Pete Weis
To: Terri
Date Posted: Sat, Oct 30, 2004 at 17:08:25 (EDT)
Email Address: Not Provided

Message:
'The guess is oil ranges in price from 40 to 60 dollars a barrel for some time.' Do you think the 'proven reserves' reported by the Saudi's and major oil companies are accurate? What if they are overstated? How does the dollar which needs to drop substantially to help with the trade deficit factor into this? If oil remains at only $50.00 per barrel for 'sometime', what would that mean for the world's economy?

Subject: Re: Per capita consumption of oil
From: Terri
To: Pete Weis
Date Posted: Sat, Oct 30, 2004 at 17:55:51 (EDT)
Email Address: Not Provided

Message:
Though Royal Dutch Shell has reduced its estimated reserves several times, other prime corporate suppliers appear to have properly estimated reserves. Whether nationally controlled reserves might be poorly estimated, we can not know. Further exploration and conservation and efficiency measures should be our policies. The dollar has risen and fallen in value over the years, with no direct effect on the price of oil. A decline in the value of the dollar might have an effect in future, but we can not know. A high price of energy acts as a tax on an economy, and 50 dollars a barrel of oil counts as a high price. We are not growing fast enough to have a fully healthy labor market, and further slowing would not be welcome. High oil prices will slow growth in many economies, but there is monetary and fiscal policy to offset slowing growth. We have to be watchful.

Subject: Economic Growth and Debt
From: Terri
To: All
Date Posted: Sat, Oct 30, 2004 at 06:21:58 (EDT)
Email Address: Not Provided

Message:
The most important immediate economic problem we have is spurring growth that is strong enough to increase the rate of job creation and allow for faster rising wage and benefit levels. There is ample time to deal with long term debt if we can spur growth in the near term. All the Federal Reserve can do in this regard is to keep interest rates low as long as inflation is not evidenced. Fiscal policy that will also spur growth but help solve our debt problem is the responsibility of the President and Congress. I find little reason to criticize the Federal Reserve on monetary policy. Through a difficult period, we are growing with low inflation. The stock market is slowly building value and gaining, while the bond market is again strong. The rest is up to the coming President and Concress.

Subject: Stocks and Bonds
From: Terri
To: All
Date Posted: Fri, Oct 29, 2004 at 17:59:16 (EDT)
Email Address: Not Provided

Message:
Vanguard The S&P Stock Index is up about 3%, with the Value Index up 6.4% and the Growth Index down 0.5%. The Small Cap Index is up 7.6, while the Small Value Index is up 11%. The Europe Index is up about 8.4%. Health Care Fund is up about 1.2%, while Energy Fund is up 28.5% and the REIT is up 20% The Long Term Bond Index is up about 7.5%.

Subject: Re: Stocks and Bonds
From: Ari
To: Terri
Date Posted: Sat, Oct 30, 2004 at 07:27:51 (EDT)
Email Address: Not Provided

Message:
After 10 months of the year, a diversfied stable portfolio of stock and bond funds should have held up nicely. Earnings have been increasing faster than stock prices this year, which allows for better valuations. For all the economic problems from low level of job creation, to government and consumer debt, to the insurance industry and mortgage company distortions, to drug company difficulty, the stock and bond markets are holding and slowly gaining. Portfolio diversity and a long term perspective are encouraging.

Subject: Re: Stocks and Bonds
From: Jennifer
To: Terri
Date Posted: Fri, Oct 29, 2004 at 19:50:36 (EDT)
Email Address: Not Provided

Message:
This is very much pattern we have been discussing through the year. Interesting, how well bonds have held up with the Fed raising the Federal Funds Rate. But, the economy is just not growing fast enough for longer term interest rates to rise. Thanks.

Subject: Re: Stocks and Bonds
From: time?
To: Terri
Date Posted: Fri, Oct 29, 2004 at 19:29:17 (EDT)
Email Address: Not Provided

Message:
not that you can't get index returns from any website, but if you are going to post returns you need to include time periods otherwise the data is absolutely worthless.

Subject: Re: Stocks and Bonds
From: Terri
To: time?
Date Posted: Sat, Oct 30, 2004 at 11:45:32 (EDT)
Email Address: Not Provided

Message:
Absolutely right. The data is year to date, and I find it useful to notice market trends regardless whether they fit investment plans.

Subject: Re: Stocks and Bonds
From: time
To: Terri
Date Posted: Sat, Oct 30, 2004 at 20:00:02 (EDT)
Email Address: Not Provided

Message:
You say you find it useful to notice 'market trends', then how do you use the information. To me its pointless to notice trends unless you are using this information to make decisions. Do you have a model/formula to act upon these market trends. By looking at the YTD returns every other day, how is that affecting your long term investment philosophy.

Subject: Re: Stocks and Bonds
From: Jennifer
To: time?
Date Posted: Fri, Oct 29, 2004 at 19:45:34 (EDT)
Email Address: Not Provided

Message:
What a snit you are. I love these notes. Obviously, the time is the year so far.

Subject: Re: Stocks and Bonds
From: time
To: Jennifer
Date Posted: Sat, Oct 30, 2004 at 09:42:32 (EDT)
Email Address: Not Provided

Message:
Actually, in the past its been listed as a one year return, as opposed to year to date. Thats a very significant difference. If it is a one year number (don't really care to check), the change in returns can be highly attributable to removing data from 2003 due to the extreme growth in equity indices during that period. Sorry you think i'm a snit, i just don't find much value in the postings about 'market patterns', How are returns for a one year period going to help someone invest over 10-20 years? With this info, I would think the person would just buy into yesterdays winners. Why not use major indices like S&P, Russell, Lehman, etc.

Subject: Re: Stocks and Bonds
From: Jennifer
To: time
Date Posted: Sat, Oct 30, 2004 at 09:54:40 (EDT)
Email Address: Not Provided

Message:
Thank you so much for explaining. This helps me understand your complaint. Each month we can make investment decisions, as we add to accounts. Knowing today's winners and losers, can help us look for tomorrow's winners. If interest rates had risen this years and bond prices had fallen, we should be more inclined to buy bond funds. This is interesting and fun.

Subject: A Wageless Recovery
From: Terri
To: All
Date Posted: Fri, Oct 29, 2004 at 17:27:26 (EDT)
Email Address: Not Provided

Message:
http://maxspeak.org/mt/archives/000889.html The Prez says the economy is strong and getting stronger. By the evidence of the labor market, however, it is weak and getting weaker. My colleague and labor market genius Jared Bernstein shows that from the third quarter of last year to this year, the wage and salary component of the Employment Cost Index increased by 2.4 percent, relative to inflation of 2.7. The does not mean that total compensation in these terms is less, since these figures do not reflect fringe benefits, but it does mean that for workers this recovery stinks. Faster employment growth and better jobs would put upward pressure on money wages. This is the slowest growth rate on record. The most recent comparable period was the first half of 1993 -- Poppy Bush's economy, for all practical purposes.

Subject: Good Luck with your elections Guys
From: Mik
To: All
Date Posted: Fri, Oct 29, 2004 at 16:50:47 (EDT)
Email Address: Not Provided

Message:
Only a couple days to go. Good luck with the elections. Contrary to what the polls show, I hope it won't be a close contest but rather have a very decided victory with no bickering, law suits, etc.

Subject: Re: Good Luck with your elections Guys
From: Ari
To: Mik
Date Posted: Fri, Oct 29, 2004 at 17:10:18 (EDT)
Email Address: Not Provided

Message:
Florida, Ohio, Wisconsin. There you probably have it.

Subject: Re: Good Luck with your elections Guys
From: Jennifer
To: Ari
Date Posted: Fri, Oct 29, 2004 at 20:07:27 (EDT)
Email Address: Not Provided

Message:
Wisconsin? I suppose so. If Bush and Kerry split in Florida and Ohio, then Wisconsin becomes the deciding state and Wisconsin is leaning to Bush.

Subject: China's Bank in Transition
From: Emma
To: All
Date Posted: Fri, Oct 29, 2004 at 13:18:54 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/29/business/worldbusiness/29yuan.html?pagewanted=all&position= China's Bank, in Transition, Raises Rates By KEITH BRADSHER HONG KONG - China's central bank raised official borrowing costs for the first time in nine years Thursday night, a step aimed at slowing breakneck economic growth and inflation but one that could risk social unrest if heavily indebted state companies respond by laying off more workers. Beijing also removed the ceiling on what banks could charge for loans, a measure that paradoxically could make more loans available to risky private enterprises and ultimately enhance China's long-term growth prospects and give its economy much greater stability. The two moves shift China further toward a Western-style financial system in which markets determine the allocation of credit, not government officials. The interest rate increase, a little more than a quarter of a percentage point, is not big enough by itself to change the direction of the Chinese economy. But it is widely expected by economists to be the first in a series of increases that could lift rates by as much as two percentage points in the coming year, which could seriously curtail economic growth. That would damp demand for products offered by the United States and other countries rushing to take advantage of the Chinese market. But the effect on American consumers is likely to be quite small, as Chinese companies are expected to take the steps needed to keep prices low and maintain their exports. For Beijing, the interest rate increase is a historic embrace of free-market tools of economic management despite possible internal political repercussions, said Tao Dong, the China economist at Credit Suisse First Boston's office here. 'This probably will anger a lot of people, but I give the government high marks,' he said. Indebted property developers and laid-off workers are likely to be among the angriest. By seeking to control inflation with higher interest rates, Beijing may limit some profit opportunities for a long list of companies and countries involved in the roaring Chinese market - from luxury automakers in Europe, to iron ore producers in Brazil and Australia, to oil exporters in the Middle East. Higher interest rates could also cause some hiccups for American companies with large beachheads in China, like General Motors. Indeed, prices of oil, copper, cotton and other commodities declined Thursday, underscoring concerns among investors that demand is easing in China for many raw goods used in manufacturing, everything from clothes to washing machines. After concluding last spring that the economy was expanding at an unsustainable pace and fueling inflation, Chinese leaders initially chose mostly administrative methods to try to limit excessive growth, like the denial of approvals for construction projects. But these methods have failed to rein in rising prices. Consumer goods, on average, cost 5.2 percent more last month than a year earlier despite price controls on many products. Price increases are running at nearly twice that pace for goods traded between companies, which are subject to fewer price controls. In making its move, the Peoples Bank of China, the central bank, raised the benchmark rates that the state-owned banking system offers for one-year loans and one-year deposits by a little more than a quarter of a percentage point: 27-hundredths of a percentage point, to be exact. The lending rate rose to 5.58 percent and the deposit rate climbed to 2.25 percent. The Peoples Bank also ended years of regulations tightly limiting the maximum interest rates that banks could charge on loans. The limits, which the Peoples Bank started to loosen last December, had discouraged the country's banks, almost all state-owned, from taking the risk of lending to small and medium-size private companies. Similar businesses in other countries can attract loans by agreeing to pay higher rates of interest. Most state-owned enterprises already have the political connections to borrow at no more than the benchmark rate, and sometimes pay an even lower rate. Raising the benchmark rate will hit them especially hard at a time when many of them are struggling to repay previous loans and avoid laying off workers.

Subject: 'Not to worry'
From: Pete Weis
To: All
Date Posted: Fri, Oct 29, 2004 at 09:56:08 (EDT)
Email Address: Not Provided

Message:
Greenspan: Playing the Fool Or the Scoundrel? By Steven Pearlstein Friday, October 29, 2004; Page E01 Oil prices soar above $50 a barrel with little prospect of returning to more normal levels anytime soon. Not to worry, says Fed Chairman Alan Greenspan, new sources of energy are just over the horizon. House prices continue rising several times as fast as everything else, driven by record levels of household debt. Not to worry, says Greenspan, the debt is manageable and housing isn't susceptible to speculative bubbles. The nation's current account deficit heads toward 6 percent of gross domestic product , a level unheard of for a major industrial economy. Not to worry, says Greenspan, financial markets will gradually bring things into balance. The urgent question before us today is: What has the chairman of the Federal Reserve been smoking? I will leave it to others to speculate on Greenspan's motive for taking his one-man Dr. Pangloss show on the road in the months leading up to a hotly contested presidential election. But what are we to say about a Fed chairman whose biggest economic concern a few years ago was that the government was projected to run such a big budget surplus that it could eventually force the Treasury to invest some of it in corporate stocks and bonds? There aren't too many people worrying about that one any more. Of course, one reason we're worrying about record deficits rather than record surpluses is that Greenspan gave his seal of approval to a series of tax cuts that the country could ill afford. Two possibilities present themselves: • Greenspan figured that, once the tax cuts were in place, Congress would cut spending to match, in which case he's more of a fool than anyone imagined. • He knew all too well that the spending cuts would not follow, in which case he's a scoundrel. I leave it to you to judge. The fact is that, as an economic prognosticator, Greenspan has been about as effective as a Cardinal trying to hit Red Sox pitching. In 1990, he underestimated the economic impact of the bursting of a commercial real estate bubble and the ensuing credit crunch, which combined to throw the economy into recession. And during the late 1990s, he was so busy touting the productivity miracle of the new economy that he failed to see the biggest equity bubble in history developing right under his nose. And when it finally burst and began to take the real economy down with it, Captain Greenspan was confidently predicting a soft landing almost until the moment the wheels came off the landing gear. As it turns out, Greenspan is a better rhetorician than he is a forecaster. In his recent speeches and testimonies, he cleverly frames his what-me-worry message in apposition to the more extreme doomsayers who warn that the world is about to run out of oil or that foreign investors are about to trigger a financial meltdown by dumping their dollar assets. He's also careful to include hedges and caveats that he can point to when things don't turn out as swimmingly as he suggests. But through it all, the consistent message is that global financial markets have become so gloriously efficient and flexible in pricing risk and intermediating capital that they can cushion any shock, correct any imbalance and cure your lumbago besides. In the World According to Greenspan, the only real threats come from those who would tamper with this machinery by reversing the march toward deregulation, open markets and the free flow of capital. Unfortunately, what Americans desperately need now is not a Fed chairman pushing an ideological agenda -- not a Paul Wolfowitz of economic policy -- but a clear-eyed pragmatist willing to tell Americans the truth that nobody else dares: That they are living beyond their means, that their profligacy has put the global economy out of whack and that the only way to avoid a bad ending is to save more, import less, raise taxes and accept lower levels of government services and benefits.

Subject: Krugman interview in Texas Observer
From: John
To: All
Date Posted: Fri, Oct 29, 2004 at 07:10:03 (EDT)
Email Address: lbsgrad2003at@yahoo.co.uk

Message:
http://www.texasobserver.org/showArticle.asp?ArticleID=1777 (remove the first at to reply to my email)

Subject: Re: Krugman interview in Texas Observer
From: Bobby
To: John
Date Posted: Fri, Oct 29, 2004 at 14:05:41 (EDT)
Email Address: robert@pkarchive.org

Message:
Thanks. I posted it.

Subject: The 'insurance mess'
From: Pete Weis
To: All
Date Posted: Thurs, Oct 28, 2004 at 20:57:45 (EDT)
Email Address: Not Provided

Message:
From MSN-Money: Insurance mess may ignite bigger problems The insurance scandal is another strong signal that our financial system is vulnerable to serious disruptions. The next 18 months could be dangerous ones. By Bill Fleckenstein When future historians look back on this period, with all its attendant dangers and warning lights flashing in neon, they will scratch their heads as to why everyone was so complacent and so supremely confident right before the financial hurricane hit. Last July, I talked about the potential for a market dislocation in my column 'Odds of a crash are higher than you think.” Once again, I want to reiterate that it's a low-probability event. But whatever the probabilities were when I laid them out a few months ago, they can only be higher now. A watchdog smells a rat Marsh & McLennan (MMC, news, msgs), the subject of a continuing investigation by New York Attorney General Eliot Spitzer, demonstrates the problem that could happen in many other arenas. As Gretchen Morgenson of The New York Times pointed out last Wednesday in 'Investors Are Losing Ground As Insurance Inquiries Expand:' Banks and insurers check your credit. So should you. 'The pain of losing almost 50% in share value is perhaps most excruciating to the thousands of Marsh & McLennan employees who have bought Marsh stock. . . . There is a pension plan, a stock purchase plan, 401(k) accounts, stock option grants and a cash bonus deferral plan to name a few. And in all cases, Marsh stock or Putnam funds dominate the offerings. . . . According to Marsh filings, at the end of last year, a defined-contribution plan for Marsh & McLennan employees had assets of $2.24 billion. Almost 60% of the plan's assets were in Marsh stock -- $1.3 billion worth.' The eggs-in-one-basket aftermath However, it won't be just MarshMac employees who will be affected. If any employees had thought they were wealthy because they held a lot of MarshMac stock, and if they used that wealth to buy expensive homes during the housing bubble, they'll be in trouble when the housing bubble starts to reverse along with their net worth. The banking industry could wind up with a lot of bad paper. I'm not saying that events surrounding MarshMac will play out exactly this way. Down the road, though, I expect that we'll see dominoes fall in this manner on a large scale when the bear market really gets rolling in stocks (again) and housing. These two asset-class declines are going to feed on each other, and a whole lot of credit is going to be impaired. Playing debt dominoes . . . Though the financial industry has managed to remain unscathed (thanks, in no small part, to its absurd accounting), it too will get mauled if shenanigans are turned up and that impacts credit rates. Most of these financial companies have a good deal of debt, and it's held by other companies, both within and beyond the financial arena. So, the potential for this investigation to snowball is not trivial. Of course, if you add a problem in the financial industry to problems in real estate and the stock market generically, you can see how we would be headed for a world of hurt. It's what happens when you pursue irresponsible, reckless policies for so long. . . . and derivatives dominoes The probability of a dislocation may also have increased due to the location of the ticking time bomb known as derivatives. American International Group (AIG, news, msgs), another target of Eliot Spitzer's investigation, is very active in the derivatives market. If the company -- one of the few AAA credits left in America -- has a problem of any magnitude that impacts their perceived credit quality or credibility, it would in all likelihood wreak havoc in the derivatives market. (As Warren Buffett said last July, 'We have trillions of dollars of derivatives, of which we have no knowledge of how they might work in a market meltdown.') Think about this from the perspective of foreigners. They now look at Fannie Mae (FNM, news, msgs), MarshMac, AIG and Merck (MRK, news, msgs) and observe a black cloud hanging over what have been deemed to be some of the best corporations in America. It's just another psychological negative for the dollar, in my opinion, and a reason for foreigners not to want to own our stocks. (Editor’s note: the euro is up 4% against the dollar in the last month.) Trouble is so close you can taste it Meanwhile, for the 'professionals' who play with other people's money, the rally cry is: Buy stocks first and ask questions about fundamentals later. With a huge chunk of third-quarter earnings behind us, we're at the point in the quarter when the bulls typically like to throw a party. They figure there's no more bad news in the offing, and in the absence of bad news, stocks should always go up. Over the next couple weeks, I'm sure that the bulls will attempt to rally the market whenever they can. They may be able to party a bit longer, but big trouble seems so close, you can almost taste it. Once we get past the election and its attendant noise, attention will be turned to the fourth quarter and, more importantly, 2005. By my reckoning, the next 18 months look to be one of the most dangerous periods for financial markets in the last 50 years. The destruction of capital measured in the trillions lies ahead in the not-too-distant future.

Subject: The Ethics Mess
From: Terri
To: Pete Weis
Date Posted: Fri, Oct 29, 2004 at 12:34:42 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/29/business/29spitzer.html Big Insurer Denies Any Ties to Plan to Attack Spitzer By ALEX BERENSON With Eliot Spitzer pounding the insurance industry, American International Group, the world's largest insurer, needs all the good press it can get. Instead the company faces a new mini-controversy to go with Mr. Spitzer's investigation into bid rigging and price fixing among insurers and insurance brokers. A Washington agency that represents public speakers sent e-mail messages to four financial industry experts on Monday, offering them fees of at least $25,000 if they would attack Mr. Spitzer and defend the insurance industry. Two weeks ago, two A.I.G. executives pleaded guilty to criminal involvement in what Mr. Spitzer described as a widespread conspiracy to cheat customers. In its e-mail message, Leading Authorities, the speakers' bureau, said it was making the offer on behalf of American International. 'We have had an inquiry from A.I.G. for assistance in getting the insurance industry's side of the story out to the public,' wrote Mark French, the president of Leading Authorities. Yesterday, Mr. French and a spokesman for A.I.G. said the e-mail was incorrect. A.I.G. did not know of the offer, they said. Mr. French said he had sent out the e-mail at the behest of Qorvis Communications, a Washington public relations firm that until Monday worked for A.I.G. Qorvis hoped to identify possible insurance industry supporters, Mr. French said. 'We had simply responded to their request for potential people,' he said. 'We never spoke with A.I.G., and I've had no communication with them.'

Subject: Re: The 'insurance mess'
From: Terri
To: Pete Weis
Date Posted: Fri, Oct 29, 2004 at 05:33:17 (EDT)
Email Address: Not Provided

Message:
Remember, the S&P index is still mildy positive for the year, while middle and small size company stocks have been stronger. Stock valuations are slowly improving, interest rates are low, and international stock markets are nicely positive. Bonds are again moderately strong and have again nicely protected portfolios. There is reason to hope the continuing adjustment period will be as gradual as these last 10 months. Eliot Spitzer has done us all a wonderful service, and we can expect the insurance industry can be strengthened as a result of the investigation. I expect Fannie Mae and Freddie Mac to be strengthened as well.

Subject: Systemic risk
From: Pete Weis
To: Terri
Date Posted: Fri, Oct 29, 2004 at 10:31:12 (EDT)
Email Address: Not Provided

Message:
From the Economist: The coming storm Feb 17th 2004 From The Economist Global Agenda Banks are risking ever more of their own money in search of returns. Have they really learned nothing? IN THE autumn of 1998, Buttonwood was at a conference organised by Credit Suisse First Boston in—appropriately enough—Monte Carlo, when Allen Wheat, the then head of the investment bank, stood up after dinner and delivered a breathtaking mea culpa. Some sort of apology certainly seemed in order given the huge sums the bank had just lost from extravagant punts on Russia in particular and financial markets in general. The bets went spectacularly wrong after Russia defaulted, financial markets went berserk, and Long-Term Capital Management (LTCM), a very large hedge fund, had to be rescued by its bankers at the behest of the Federal Reserve. CSFB eventually admitted to losses of $1.3 billion, though the bank’s official figures and the numbers bandied about by insiders were somewhat at variance. To cut to the chase: had they Mr Wheat’s balls, Buttonwood thinks that the bosses of many a big bank will be making a similar speech before the year is out. The reason is simple: the size of banks’ bets is rising rapidly the world over. This is because potential returns have fallen as fast as markets have risen, so banks have had to bet more in order to continue generating huge profits. The present situation “is not dissimilar” to the one that preceded the collapse of LTCM, says Michael Thompson, a strategist at RiskMetrics, a consultancy that specialises in the very risk-management models that banks use. Like LTCM, banks are building up huge positions in the expectation that markets will remain stable. They are, says Mr Thompson, “walking themselves to the edge of the cliff”. This is because—as all past financial crises have shown—the risk-management models they use woefully underestimate the savage effects of big shocks, when everybody is trying to wriggle out of their positions at the same time. Even the banks themselves admit that they are taking more risk. Though they do not divulge the size of their positions, or in which markets they are concentrated, the degree by which those positions have grown can be gleaned from the risk-management models that all the big banks use (which are released in their financial statements). So-called value-at-risk (VAR) models determine the amount of capital that banks must set aside against their trading positions, and purport to show how many millions of dollars a bank might lose should markets turn against it. If its VAR is rising, a bank is, in effect, taking more trading risk—and VARs have been climbing for just about all of the banks that dabble seriously in financial markets. The VAR at Goldman Sachs, which is known on Wall Street as a hedge fund with an investment-banking business on the side, has more than doubled. One of the bank’s senior traders was even told recently that he must take still more risk. Rest assured that he is far from the only one being told this at Goldman Sachs, or anywhere else for that matter, even though it was only a few years ago that many banks specifically eschewed punting as a good way to make money. Earlier this month UBS, a big Swiss bank, said that “with markets and investor sentiment starting to improve” it would gradually increase credit and trading risks. Even the likes of Citigroup, which stopped explicitly trading for its own account a few years back, and HSBC, a bank that used to think of trading as rather common, both announced recently that they too are increasing the amount of trading they do with their own money. Having previously scaled back its own trading, CSFB is also now increasing the amount of money it devotes to trading, though it claims that it will no longer “bet the ranch”. Allied Irish Banks, which you might have thought had had more than its fair share of trading fiascos, having lost nearly $700m thanks to activities of John Rusnak, one of its foreign-exchange traders, is trying to hire another 20 traders in Dublin. VAR crash Of itself, VAR is not the best guide to the huge size of banks’ current positions. In simple terms, these models assess the amount of risk that a bank is taking by looking at the volatility of the assets it holds and the correlation between them (the less correlation the better). In that way, banks can see how much they might lose were these bets to sour. A cynic would say that such models thus purport to measure an uncertain relationship between lots of uncertainties. Crucially, if markets become less volatile, banks can pile on more positions and still have the same VAR. With the exception of Treasuries, markets have indeed become much less volatile—volatility has roughly halved in many financial markets over the past year-and-a-half; equity markets are now less volatile than they have been for a decade. Roughly speaking, if markets are half as volatile, banks’ positions can be twice as large for the same amount of capital. But since VARs have in fact risen, some banks’ positions are probably three times what they were in the autumn of 2002. Or at least the ones they have on their balance sheets. For banks have been increasing their trading exposures in other ways, too. The most notable is via direct investments in hedge funds, often those set up by traders who used to work for the banks themselves. Chemical Bank, now part of J.P. Morgan Chase, started the trend 15 years ago. Now, almost all big banks invest their own capital in hedge funds. Citigroup may have shut down its “proprietary” trading operations five years ago (temporarily, it now transpires) but it invested a few hundred million dollars of its money in a hedge fund set up by those proprietary traders. Deutsche Bank recently invested $1 billion in a hedge fund run by its erstwhile traders. J.P. Morgan Chase is thought to be the most generous in doling out its cash, but CSFB, Goldman Sachs, Lehman Brothers and BNP Paribas together also invest hundreds of millions of dollars of their shareholders’ money in hedge funds. In total, banks have invested many billions of dollars in such funds. The reason, apart from an understandable desire to invest money with good traders, is that the money invested in this way is counted as an investment, and not as a trading position, so is not included in the banks’ own trading books. Most of the money that banks invest has gone into hedge funds that specialise in bonds and other sorts of fixed-income instruments. Like the banks, hedge funds have been leveraging up their exposures to markets. All of which is splendidly profitable, as long as markets behave themselves. But the strategy puts banks and hedge funds alike at huge risk if markets suffer a severe shock—a far more common occurrence than banks allow for. Their models (and, yes, hedge funds use VAR models as well) assume a certain level of losses for moves of a given magnitude. The problem comes for the tiny number of crises when markets move much more and, to add insult to injury, banks’ assumptions about the diversity of their portfolios are shown to be wrong. In other words, the models, says one regulator with a chuckle, are of least use when they are most needed. By regulatory fiat, when banks’ positions sour they must either stump up more capital or reduce their exposures. Invariably, when markets are panicking, they do the latter. Since everyone else is heading for the exits at the same time, these become more than a little crowded, moving prices against those trying to get out, and requiring still more unwinding of positions. It has happened many times before with more or less calamitous consequences. It could well happen again. There are any number of potential flashpoints: a rout in the dollar, say, or a huge spike in the oil price, or a big emerging market getting into trouble again. If it does happen, the chain reaction could be particularly devastating this time. Banks and hedge funds have increased their exposures most to those markets that they are least able to get out of. Think, if you will, of the extraordinary rise in the price of emerging-market debt and junk bonds. “I used to sleep easy at night with my VAR model,” said Mr Wheat in his speech in Monte Carlo. Suffice to say that he suffered a sleepless night or two when that model was found wanting—and that bank bosses could be in for many a sleepless night this year.

Subject: Re: Systemic risk
From: Terri
To: Pete Weis
Date Posted: Fri, Oct 29, 2004 at 12:37:40 (EDT)
Email Address: Not Provided

Message:
We must be cautious, but awareness of these problems allows for gradual address of the problems.

Subject: What 'awareness'
From: Pete Weis
To: Terri
Date Posted: Fri, Oct 29, 2004 at 15:00:08 (EDT)
Email Address: Not Provided

Message:
Greenspan has stated there is little risk with regard to over-the-counter derivative contracts and contradicts Buffet and others on this issue. So there is no 'gradual address'. If troubles arise within the banking industry, GSE's or insurance giants in a way which threatens this huge web of derivative contracts, then it will require a very rapid 'address'.

Subject: Re: What 'awareness'
From: Terri
To: Pete Weis
Date Posted: Fri, Oct 29, 2004 at 18:05:49 (EDT)
Email Address: Not Provided

Message:
There were problems with derivatives in 1994, and in 1998, but for investors who did not hold derivatives, there were only a few short term price declines of stocks and bonds. The options markets may be a problem, but I would not think long term individual investors have much to worry about from derivatives.

Subject: South Africa's Fences
From: Emma
To: All
Date Posted: Thurs, Oct 28, 2004 at 18:45:15 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/28/international/africa/28africa.html?pagewanted=all&position= Speaking of Fences, Street Crime and, Ultimately, Race By MICHAEL WINES JOHANNESBURG - As Nick Karvelas would be quick to point out, this is not a Robert Frost kind of town. Mr. Frost, as an American schoolchild could testify, is the poet who once wrote that 'good fences make good neighbors.' That should make Johannesburgers exceptional ones: in the last decade, they have erected fences and gates that block off 1,245 ostensibly public streets from the outside world. In practice, of course, the barriers are the antithesis of neighborliness. Their purpose is to shield the people behind them - mostly better-off whites - from an epidemic of street crime, largely by lower-class blacks. Which is why Mr. Karvelas is on a single-minded crusade to tear them down. The notion that whites can bar poor blacks from city streets, he insists, is not just illegal. It's a throwback to the days when millions of blacks were herded into homelands and townships, and barred from walking in white areas without a government pass. 'I just firmly believe that people actually went from fencing the masses in to fencing the masses out,' he said. 'I really believe that this is just another form of apartheid.' Mr. Karvelas, a white school principal and university lecturer when he is not tilting at fences, has formed a lobbying group and a Web site to promote his cause. He has pestered Johannesburg's government, hinted at a lawsuit testing the constitutionality of street barriers and, last month, argued his case before the national Human Rights Commission. In most big cities, he might be dismissed as that ubiquitous brand of civic gadfly that buzzes irritatingly around every council meeting. Indeed, in most big cities, the issue of street closings would be settled in soporific sessions of traffic-department subcommittees or neighborhood councils. Not in Johannnesburg. Here, it resonates among rich and poor, black and white alike. The debate over street closings not only poses thorny questions about balancing a person's right to walk freely and a homeowner's right to be safe. It also challenges a notion that still binds this multiracial society together 10 years after apartheid's demise - the concept of a miraculous rainbow nation, sprung fully formed from Nelson Mandela's tolerant brow. Mr. Karvelas's stridency aside, however, this is not entirely a black-and-white issue, in more ways than one. Street barriers (South Africans call them 'booms') first sprang up in the city's wealthier northern suburbs after the 1994 transition to majority rule - and the exodus of many white civil servants - led to a dramatic decline in police protection and a rise in violent crime.

Subject: Re: South Africa's Fences
From: Mik
To: Emma
Date Posted: Fri, Oct 29, 2004 at 10:38:31 (EDT)
Email Address: Not Provided

Message:
Emma, The whole story posted seems to power down the very last line, '....a dramatic decline in police protection and a rise in violent crime.' You know the story has a point about restricting freedom of movement, etc. But the issue of protecting against violent crime is just too difficult to argue. South Africa's annual murder rate stands at 21,000 people. Imagine the crowd at a hockey game, and then imagine to yourself, 'This year all these people will be murdered.' Without going into too much personal detail: When I lived in Johannesburg, every single night and every two or three hours, I would hear gunshots in the distance. It got to the point that I could recognise the type of gun by the sound of the gunshot. I did not live in one of those closed-off areas, and as a consequence, in my area violent crime happened right on my street front. I actually wished and campaigned to have my street closed off - for my safety. Since the start of what is known as street-closures, whole neighbourhoods have closed themsleves off with limited access. At this stage I found an unbelieveable occurance. People in those neighbourhoods removed their electrified fencing, bought cuddly pets for dogs (instead of dangerous guard dogs) and people came out onto the street. Children played on the street, etc, etc. So do we keep the street-closures and allow for pockets of normality, or do we remove them and allow violent criminals to rule? South Africa has gone through an unbelievable transition. For a country with more diversity and more hatred than Yugoslavia, South Africa escaped from the brink of civil war (not bad for an African country). Today South Africa is going through a very dark period in their history as the social imbalance of utter poverty has to face up against unbelievable wealth. Coupled with this, a history of violence that is inbread into a culture. It will take a few generations before we start to see an element of normality in South Africa. However, I am optimistic that the country will succeed. Further, there will be a serious turning point in their history... in the year 2010. That will be the year that South Africa hosts the greatest show on earth - the World Cup Foot Ball......

Subject: Re: South Africa's Fences
From: Emma
To: Mik
Date Posted: Fri, Oct 29, 2004 at 12:17:49 (EDT)
Email Address: Not Provided

Message:
Another most thought filled response. Thank you so much.

Subject: China Raises Interest Rates
From: Terri
To: All
Date Posted: Thurs, Oct 28, 2004 at 18:39:19 (EDT)
Email Address: Not Provided

Message:
October 28, 2004 China Raises Rates for First Time in 9 Years By Reuters BEIJING - China's central bank on Thursday raised interest rates for the first time in nearly a decade in a surprise move that was the boldest so far aimed at guiding a heated economy onto a path of slower growth. The announcement of the hike of just over a quarter of a percentage point by the People's Bank of China marked a shift away from the central directives the government has so far used to cool the world's seventh-biggest economy.

Subject: Re: China Raises Interest Rates
From: Ari
To: Terri
Date Posted: Thurs, Oct 28, 2004 at 19:40:13 (EDT)
Email Address: Not Provided

Message:
Interesting to find out if a change in economic policy in China has a market impact in Asia or further.

Subject: THE TRRORIST ATTEMPPT IN SATURDAY
From: Fernando Franco
To: All
Date Posted: Thurs, Oct 28, 2004 at 16:45:06 (EDT)
Email Address: pontodefuga1@uol.com.br

Message:
Mr. Paul Krugmam This material to site e-scapepoint.org,br was developed in response the worst chance of which we could imagine in this election. A terrorrist attempt of great proportions, which would guarantee Bush in the government. This material on video then would be the only capable form of avoiding this situation, which, even thogh I don´t wish that this happens, I feel it´s impending. The evil powers which domain this American government don´t find limits to remain in the power. Our site will be on Thursday, October 28th, we hope to estimulate people to see the madness which they will commit voting on this killer, also estimulate people to wear white on Nov 2nd, claimming with it for peace, no matter what happens. Vote and see where this option will take your sould to the rest of eternity! And, the person have two possibilite: Alpha-Kerry or Omega-Bush. Vote and see. Fernando Franco (5-43-3322-5526) This material is annex our site in the morning: Vote and see where this option will take your sould to the rest of eternity! A country that can afford to 'invest' over 200 billion dollars in order to kill more than 1,000 of its sons and thousands more of innocent people, can be seen as rich? Or poor of spirit? Can a nation that, looking forward to 'world peace' challenges its allies, violates all the treaties and international laws, earning with it, just promote more violence and legitimate the terrorists attempts, be considered just? Can a leader who forges lies and uses the most striking pain of his nation to originate more deaths and destruction, in the name of electoral and financial credits designated to the sponsors of his campaign, be considered respectable? And, can the people which sponsors all these vain deaths, all these infamies and atrocities and votes on the 'Liar', on the 'Disreputable' be considered innocent? God or Satan, who commands the hearts of the most powerful nation in the world? Never has Lucifer been so well represented.* Few days to the election, Osama bin Laden will commit an attempt in America. As an obvious result, Bush will be reelected. If an attempt represents a reelection guarantee, and THE WHOLE WORLD KNOWS ABOUT IT, the one who commits this attempt is Bush's ally, or enemy? Has Osama been against, or pro Bush? Why then, doesn't he commit this terrorist attempt one day after the election? Isn't this attempt itself enough proof of the links between Bin and Bush? Sorry. George Laden? Sorry again. After all, are Bin Laden and George Bush so different? Why is BLOOD the only thing able to calm them down? Why do the American people feel so delighted over spilled innocent blood? I don't know if Vietnam had any factor which legitimated it. However, as Iraq didn't have anything to do with the 9/11, or neither 'massive destructive weapons', nor direct links with al-Qaeda, how many families were slaughtered over the 200 Billion, in cash, destined to the 'war lovers'? How many innocent victims of a coward war. Bombs thrown aimlessly... Lies, deaths,treasons... Is it all the American people is about? Is it the only thing they believe in? Would those who granted power to Hitler, be much different from those who dare voting for Prescott Sheldon Bush´s grandson? TO VOTE ON GEORGE W. BUSH IT’S THE SAME AS VOTING IN HITLER AND HIS ACCOMPLICES. IS TO BRING BACK TO THE WORLD THE DEVASTATING PROPOSAL OF THAT GENOCIDAL, TO SAY GOODBYE TO PEACE AND TO ASK FOR THE 3RD WORLD WAR New Jerusalém or Babylon, this is what has been put to voting. Love or Hatred? Peace or war? Life or death? Truth or lie? Heaven or Hell? Kerry or Bush? Which of these proposals will the American vote on to dictate the future of the world? But they had better be aware of something. There is an irrevocable law among ALL the religions: Responsibility! “Here is where you pay for what you have done” Voting on George W. Bush is like taking each lost life away in this shameful combat. It's like sending each soldier to death, it's like launching a bomb over innocent homes, it's like committing each violence provided from these. Voting on George W. Bush is like signing a contract with the devil and say 'YES' to all the violations and atrocities commanded by this scoundrel. Blue, the color of hope, or blood red, basic colors of the American flag. Which one of these better suits the American people? The only remaining thing to us is to pray for the White of Peace to win this election and rules over the world. Pray so that the 'Statue of Liberty' won't be just a fictitious work, but the symbol of a nation which will free the world from the slavery of death and selfishness! We've come to moment of Truth! Who do you serve? Who dictates the courses of your life? God or money? The love, or the Works of Lucifer? LET THE AMERICANS KNOW: WHEN THEY GO TO THE BALLOT BOXES, THEY WILL NOT BE SAYING WHO THEY WANT AS PRESIDENT, BUT WILL BE SAYING WHO THEY SERVE: GOD OR SATAN. The moment is now! Vote and see where this option will take you to, invariably, to the rest of eternity! Apha-Kery or Omega-Bush Are we going to change the world for better or for worse? Vote responsibly! e-scapepoint.org.br

Subject: The Trade Deficit
From: Terri
To: All
Date Posted: Thurs, Oct 28, 2004 at 15:34:28 (EDT)
Email Address: Not Provided

Message:
http://www.j-bradford-delong.net/movable_type/2004-2_archives/000462.html David Wessel Worries About America's Trade Deficit Wall Street Journal: The easiest way for the U.S. to save more is for the government to borrow less. But the U.S. isn't going to raise taxes and cut spending enough to solve the problem.... An alternative fix is for the dollar to weaken enough to make imports prohibitively expensive to Americans and U.S. exports irresistible to foreigners.... [T]he cure could be nearly as painful as the averted crisis. It would take a huge dollar move -- a decline of at least 20%, and maybe 40%, against all trading partners, economists Maurice Obstfeld and Kenneth Rogoff estimate. A 30% decline in the dollar against major currencies but not China's would shrink the U.S. current-account deficit by 1.4 percentage points of GDP, the Organization for Economic Cooperation and Development projects. And it would hurt. Global growth would slow, the Federal Reserve would boost short-term interest rates by three full percentage points to resist inflation.... 'The global economy is more vulnerable today than it seemed four years ago, when it already looked worrisome,' Mr. Rogoff says. 'If the current account closes up under relatively benign circumstances, then the effects may not be too traumatic'... The only hope is a little of everything and a lot of luck. Cut the U.S. budget deficit to raise U.S. savings, while encouraging Americans to save more. Get China and other Asian economies to let their currencies strengthen so the dollar can slide, convincing them that the alternative risks inflation in their economies and a global market crash that will hurt them, too. Persuade central banks in Japan and Europe to keep rates low enough for their consumers to pick up some of the slack as the U.S. saves more. The day after the election would be a good time to start. Brad DeLong Once again, there is a huge puzzle here. We academic economists all see a large forthcoming decline in the dollar. But financial markets don't--or, rather, holders of dollar-denominated assets don't appear to want to be compensated for bearing the risk of the substantial dollar decline sometime over the next decade that we economists read written on the wall by the course of the U.S. current account deficit.

Subject: Re:Foreign confidence...
From: El Gringo
To: Terri
Date Posted: Thurs, Oct 28, 2004 at 17:49:47 (EDT)
Email Address: nma@hotmail.com

Message:
'So the policy moral of this analysis (chapter 2.4 Policy Implications, Currencies and Crisis) is one that has become boring through repetition but is still as true as ever. The United States needs to restore its national savings rate to historical levels as soon as it can. International investors have signaled that they are not willing to continue financing massive current account deficits, not by cutting off capital flows suddenly but by driving the dollar down to unprecedented lows. Putting aside the alarmist or conspirational views of some fire sale theorists, the point remains that the growing complacency about perpetual foreign borrowing will lead us to a rude awakening, sooner than most economists think.'

Subject: Monetary Policy Makers
From: Terri
To: El Gringo
Date Posted: Thurs, Oct 28, 2004 at 18:42:34 (EDT)
Email Address: Not Provided

Message:
Notice how Brad DeLong closes: And monetary policymakers? I cannot tell. They seem to be split. I'm told that X makes 'a pretty persuasive case that the U.S. current account deficit will fall with a substantial period of very low consumption growth' and dollar decline, as happened in the late 1980s. In the 1980s the falling dollar was not accompanied by (much) higher U.S. interest rates--for reasons we don't understand. Y is deeply puzzled by the failure of financial markets to have already priced the likely fall in the U.S. current account deficit and the value of the dollar. Z, W, and V believe that, as in the 1980s, the U.S. current-account adjustment is likely to be prolonged and 'smooth.' And U is quietly freaking out.

Subject: Old Industry and Consolidation
From: Emma
To: All
Date Posted: Thurs, Oct 28, 2004 at 14:17:59 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/28/business/worldbusiness/28mittal.html?pagewanted=all&position= Finding the Future in an Old Industry By HEATHER TIMMONS LONDON - The $17.8 billion, three-way deal that Lakshmi N. Mittal, a financier based in London, announced this week would put him at the head of the largest, most geographically diverse steel company in the world. Despite his low profile in the United States, international peers and investors say that Mr. Mittal's ascendancy was predictable - over several decades of acquisitions, he has shown an uncanny knack for buying assets shunned by others and turning them into viable businesses just before demand for their products surged. The new Mittal Steel would be made up of LNM Holdings and Ispat International, two Mittal family companies that would be merged and then would buy the International Steel Group for $4.5 billion. The Mittal family would end up with 88 percent of the new company. Once up and running, Mittal Steel would ship 57 million tons of steel a year from plants in 14 countries, and generate annual operating income of about $7 billion. Mr. Mittal, 54, has made little secret of his intent to pursue more acquisitions in the future. 'We are a global company, we look at opportunities,' he said in a telephone interview. Steel industry specialists say that Mr. Mittal's skill lies in finding bargains where others see little of value. 'This guy has bought things that a lot of other people thought were dead ducks,' said Peter Fish, the managing director at Meps (International), a British consultant to the steel industry. For example, 'while the Europeans and the Americans and the Japanese were sitting and thinking about' investing in the former Soviet republics like Kazakhstan, Mr. Mittal moved in, Mr. Fish said. Admirers say he has the courage to take bold chances. 'You have to ask yourself, 'Why is he, or Rockefeller, or any other big businessman, successful?' ' said Erlan Idrissov, Kazakhstan's ambassador to Britain and formerly its minister of foreign affairs. 'I believe it is because he has guts.' In many ways, Mr. Mittal does not fit the mold of a corporate poker player. In conversation, he is reserved and a good listener, associates say. He says he likes to spend his free time with his wife of 30 years, Usha, and also enjoys going to the gym. In an interview, he repeatedly deflects questions about personal ambition or his deal-finding acumen, and instead simply gives his outlook on the steel industry. 'I have always believed in consolidation,' he said. But Mr. Mittal, one of the wealthiest men in Britain, has far from austere tastes. Born in Calcutta, he has made his home in London for more than 20 years, and the British tabloids revel in reporting the spending habits of the man The Economist has called the 'Carnegie from Calcutta.' In April, he purchased a house near Kensington Palace for an estimated £70 million ($128 million). And in June, he threw a five-day, 1,000-guest wedding celebration in Paris for his only daughter, Vanisha, who married Amit Bhatia, a London investment banker who was born in New Delhi. The wedding featured performances by the British pop singer Kylie Minogue and several Bollywood stars. He has also been criticized by some British politicians for donations to Prime Minister Tony Blair's Labor Party. In 2001, Mr. Blair wrote a letter congratulating the Romanian government on the sale of some mills to Mr. Mittal. At the time, Britain's local steel company, Corus, was shedding jobs, and some viewed Mr. Blair's support for a non-British company as suspect. Ispat International is based in Rotterdam, the Netherlands. Even critics, though, say his views on the steel industry seem prescient. Mr. Mittal says he believes that in 10 years, the steel industry will be dominated by a handful of companies, which will ship 80 to 100 million tons a year each. Today, the six largest producers control just 18 percent of the world's steel output, according to the CRU Group, a metals consulting firm. That number will climb to 23 percent when the Mittal Steel deals close, expected in the first quarter of 2005.

Subject: Where Are the Economists?
From: Emma
To: All
Date Posted: Thurs, Oct 28, 2004 at 11:08:22 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/28/business/28scene.html? Where Are the Economists? By JEFF MADRICK WHEN you think about the economic issues facing the next president, you have to wonder why either candidate wants the job. There are the outsize budget deficits, high levels of private debt, a soaring trade deficit, growing numbers of Americans without health insurance, a possible bust in the housing bubble and an expansion that is not creating enough jobs and is probably already tapering to a crawl. But at least these issues have come up in the campaign. One issue that has not is the corporate scandals that rocked the nation two years ago. Now Eliot Spitzer, New York's attorney general, has uncovered another dark hole of apparent corporate wrongdoing among the nation's largest, most respected insurance companies. It is fair to ask where the federal government has been. But it is also fair to ask where the economists are. 'The economists are leaving this mostly to the law schools,' said the Yale economist Robert J. Shiller, author of 'Irrational Exuberance,' the best seller about the overvalued stock market. 'They are not comfortable with issues concerning human behavior.' To be a little more precise, there is a lot of economic research in the field, but it often reduces behavior to a set of predictable possibilities. 'They see the organization as merely a nexus of individual contracts,' complains Rakesh Khurana, an assistant professor of organizational behavior at the Harvard Business School and author of 'Searching for a Corporate Savior' (Princeton University Press, 2002). 'This is a highly unrealistic description and has no support in any social science other than economics.' Of course, knowing economists, that might make them proud. But the result is that many economists lean against financial regulation in general and have been in favor of only modest reforms in the wake of the scandals. The general argument they make is that free markets check corrupt behavior more than is realized, the courts can handle other disputes, and government regulations often serve business interests anyway. To David A. Skeel, a University of Pennsylvania law professor, however, reforms are badly needed to correct conflicts of interest and abuses in executive compensation. And the opportunity to adopt them does not come around often. Interest in any serious reform almost fizzled, in fact, after the Enron scandal in late 2001, and was revived only with revelations that WorldCom misstated profits by roughly $11 billion. 'After WorldCom, President Bush made a speech saying it was just a few bad apples,' Mr. Skeel says. 'But that didn't go over well in the financial community any longer. They wanted firmer action. Finally, he supported the Sarbanes-Oxley bill.' Mr. Skeel and others say Sarbanes-Oxley, the principal reform measure to come out of the scandals, is inadequate. It largely calls for new disclosure requirements and more independent auditors. In a new book, 'Icarus in the Boardroom' (Oxford University Press), Mr. Skeel proposes a number of new reforms, including more stringent demands for independent auditing. He would require auditors to be assigned by the stock exchanges themselves. The true measure of the lame regulatory environment, however, has been the lack of action, either by the accounting standards organization or the government, to restrain the stock options so generously given to top executives. Academic research strongly supported aligning executives' incentives with rising stock prices. But when options gave them the right to buy shares in the future at a given price, executive income soared. In 1991, the average chief executive of a large company earned 140 times the pay of an average worker. By 2003, it was 500 times. Lucian A. Bebchuk, professor of law, economics and finance at Harvard Law School, and Yaniv Grinstein of Cornell Business School find that a proper calculation of the total compensation of the top five executives of all companies, including salaries, stock options and pensions, came to a stunning $260 billion over the last 10 years. This might be justifiable if there were ample evidence it was based on market performance or corporate earnings. But Mr. Bebchuk and Mr. Grinstein find that since the early 1990's pay has risen about twice as fast as the market value of stocks and much faster than corporate income. Total compensation was 5.7 percent of total corporate income in the early 1990's; it is now under 10 percent. Mr. Bebchuk concludes that, contrary to arguments made by many economists, compensation agreements between boards and high-level executives are not done at arm's length; managers have a great deal of influence over what they get paid. Moreover, the options so widely advocated by these economists can often induce misbehavior as executives misstate earnings and liabilities, and take on dubious projects, to pump up stock prices in the short run.

Subject: 'Tipping over'
From: Pete Weis
To: All
Date Posted: Thurs, Oct 28, 2004 at 10:21:26 (EDT)
Email Address: Not Provided

Message:
Investment Outlook Bill Gross | November 2004 Tipping Over Things are never what they seem Skim milk masquerades as cream – Lewis Carroll Through the Looking Glass It’s an uncertain world these days, with the polls split down the middle and Heisenberg long ago having declared that something can be here or not here at the same instant. And for those of you who have no idea what I’ve just said I can only offer you congratulations on your blissful certitude. Death and taxes may head up both of our lists, but your list is probably much longer and therefore the midnight hours much shorter. But it being near November 2nd and all, I will offer up one sure-fire prediction that will scare the hell out of all you Republicans and maybe a few Democrats as well. If George Bush is re-elected, you can be sure that Hillary is next. That’s enough to get you to pull the lever for Ralph Nader I’ll bet. Despite candidates’ insistence that this is the most important election of our lifetime, I suspect that the ones in 1980 and 2000 were more important, and the latter was decided by 500 votes in Florida or the U.S. Supreme Court depending on your political persuasion. Four years later and much deeper in debt, there’s little either candidate can do to stop the near inevitable hegemonic (not hedonic!) decay. It’s really quite simple you know. Asia has hollowed out our manufacturing base and is now making inroads into services. Job growth is and will continue to be hard to come by. To compensate we temporarily turned ourselves into a finance-based economy, dependent on paper profits and capital gains that in turn were driven by the march to historically low interest rates. That journey ended sometime over the last year or so – some marking their hegemonic calendar at June 13, 2003, the 3.13% low of the 10-year Treasury, others signaling the beginning of the end on June 29, 2004, the point of the Fed’s first cyclical hike in short-term rates. Whatever, whenever. If the driver of profits and job growth is the price of money as opposed to domestic investment, it should come as no surprise that when the price goes up, the good times fade away. Either Bush or Kerry – Hillary as well – will have to contend with this near inevitability. Looks like James Carville was right after all. I suppose I sound pretty certain about this, a little anomalous you might say after having led off with reference to Heisenberg’s “Uncertainty” principle. My highly probabilistic attitude stems from the commonsensical observation that we can’t really educate or innovate our way out of this. 250 million Americans sitting around thinking up ways for the rest of the world to support us is not my idea of a real world outcome. At some point we have to begin to give something back besides Krispy Kremes, Starbucks franchises, and Treasury bonds. Unfortunately that will require some other kind of work than checking for messages on our BlackBerrys or managing investment portfolios for that matter. And it will require saving as opposed to consuming – something that several generations of Americans know nothing about.

Subject: 'Tipping over' Policy
From: Terri
To: Pete Weis
Date Posted: Thurs, Oct 28, 2004 at 12:38:54 (EDT)
Email Address: Not Provided

Message:
http://www.pimco.com/LeftNav/Late Breaking Commentary/IO/2004/IO_Nov_04.htm But enough of the economics of despair, I write to bring you an investment idea of hope. Recently, I presented a PIMCO client seminar with a handwritten memo entitled “The Things I’m Most Certain Of.” That’s what investing is all about of course: determining what it is you can be most confident of and then placing your bets in a measured proportion that reflects that confidence. To think that any idea has anything more than a 2:1 outcome given the near transparency of information and its immediate influence on prices would be somewhat delusional I suspect, but there is always something that we are most certain of. The trick is to avoid the slam-dunk exuberance, which could spell disaster for a portfolio. The one investment certainty is that we are all frequently wrong. But I wax philosophical and not financial. My/our most certain idea, as expressed in previous Outlooks, is that real interest rates in the United States will have to be kept low, that the old Taylor rule is out. Too much debt in a finance-based economy precludes raising interest rates like we have in the past and while that keeps the patient/economy breathing; it leads to asset bubbles, potential inflation, and a declining currency over time. How should an investor attempt to exploit this condition? Buy the assets that are being bubbled, invest in bonds that are protected against inflation (TIPS, German bonds with less inflation risk) and short the dollar – all very carefully, by the way, as described in the above paragraphs. Some asset and currency prices are nitroglycerine. One false move can ruin more than your day. While currencies are not my specialties, bonds are, and I have a few more specific thoughts on TIPS and the yield curve in particular, especially in reference to the thing I’m most certain of – low short rates. The low rates I speak to are really low real short-term rates. If inflation continues upwards it would be logical for the Fed to raise nominal short rates just enough to contain prices, but not kill the economy. We have suggested ½% real as a future Fed target, but no one really knows – we will all just have to find out. With so much debt in our economy as seen in Chart I, a subjective analysis would caution against raising real rates too high, and so far the Fed seems to agree. Fed governor Janet Yellen in an October 21st speech made a distinction between the “long-run equilibrium real rate” (Taylor rule) and the “intermediate equilibrium real rate,” stating that factors such as oil prices, investment spending, job growth and consumption – in other words the economy – must improve before we can safely raise real rates back to recent decade norms. PIMCO believes that will be a long time coming.

Subject: Conservative Magazine supports Kerry
From: EZ
To: All
Date Posted: Thurs, Oct 28, 2004 at 09:50:55 (EDT)
Email Address: ezamon@excite.com

Message:
Very well done editorial http://www.amconmag.com/2004_11_08/cover1.html www.amconmag.com/2004_11_08/cover1.html

Subject: Market Patterns
From: Terri
To: All
Date Posted: Wed, Oct 27, 2004 at 17:39:05 (EDT)
Email Address: Not Provided

Message:
This is generally the time of most market gains, November through January. The market is especially sensitive to the price of oil. As the prices climbs that market tends to level off or decline. Then with oil price stability or a mild drop, the stock market picks up. When the market rises solidity, bonds sell off. There is trading going on between stocks and bonds. The patterns in stocks are the same. The S&P is moderately positive, with value leading growth. Smaller stocks are stronger, again with value leading growth. European and Pacific stocks are stronger than American stocks. The dollar has been weakening against European and Pacific currencies. Energy and real estate are quite strong, while health care is surprisingly weak.

Subject: Brokering Insurance
From: Emma
To: All
Date Posted: Wed, Oct 27, 2004 at 14:43:21 (EDT)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/10/27/business/27insure.html?pagewanted=all&position= Insurance Broker's Cozy Ties May Prove Hard to Untangle By GRETCHEN MORGENSON Marsh & McLennan, the world's largest insurance broker, is promising to change the way it does business in an effort to satisfy regulators' concerns about potential conflicts of interest. But Marsh's extensive and lesser-known ties to the rest of the industry may prove much harder to untangle. As scrutiny of the insurance industry intensifies, experts say, the investigations are likely to underline the extensive web of relationships between insurers and Marsh, an insurance broker that can bring them more business than any other. These links are forged in the significant investments in insurance companies made by Marsh. In some cases, former Marsh executives run the new companies and current Marsh executives sit on their boards and own individual stakes in them. Marsh's involvement as a financier of insurance companies, while entirely legal, gives it an unusual position of enormous power in the industry, insurance executives say. Perhaps most significant, Marsh's investments have helped to create a clubby industry that some competitors say they find hard to penetrate. This cozy aspect of the business, developed over more than a decade, may make changes at Marsh more complex than investors suspect. The potential for conflicts in the setup at Marsh certainly looms large. The company can, for example, profit by steering clients seeking insurance to the insurers it owns stakes in; at the same time, the deals may have encouraged the insurers Marsh has capitalized to pay it higher incentive fees or to send lucrative reinsurance assignments to a subsidiary, a practice known as tying. Conflicts can also arise if Marsh has not disclosed to its customers the financial interests it holds in insurers that it recommends. A broker has a duty to find the best coverage at the best price for its corporate clients. Herbert Hovenkamp, a law professor at the University of Iowa, said: 'Bias in brokerage where people are purportedly acting as neutrals but steering customers toward suppliers with whom they have an ownership interest, those things are all regulatory problems. Depending upon mainly state insurance law, they are probably something that insurance regulators want to look into.' A spokeswoman for Marsh said it was always careful to disclose to its customers any financial interests the brokerage company had with insurers it recommended. She added that the company and its executives recognized that practices that might have been acceptable in the past are being reassessed at Marsh from a stricter viewpoint on corporate governance. The company's investments in the insurance industry are among those under fresh scrutiny. Yesterday, Michael G. Cherkasky, its new chief executive, said Marsh was setting up a compliance department that would monitor all negotiations with insurers. Still, among the changes Marsh outlined yesterday, none involved its role as a financier of insurers, even though those activities present the potential for multiple conflicts of interest. According to a person briefed on the investigation of Marsh by the New York State attorney general, Eliot Spitzer, investigators are looking at the role Marsh has played helping to set up other insurers and whether that role unfairly enriched its operations and curtailed competition in the industry. Mr. Spitzer's lawsuit asserted that there was evidence of bid-rigging at Marsh but provided no examples of tying. There is no doubt that forming new insurance companies benefits clients by making insurance more readily available than it would have been otherwise. And indeed, some of the biggest insurers Marsh helped to finance were formed immediately after the terrorist attacks of September 2001, when insurance could be scarce. It is very difficult to start insurance companies from scratch, industry experts say. Marsh is not the only insurance broker that also acts as an industry financier. Aon and Willis capitalize new companies, though Marsh does it on a much larger scale. Nevertheless, Marsh's investments have the potential to compromise its independence as a broker with a duty to offer the best coverage at the best price to its clients. If a company seeking insurance is steered to an insurer because it has close ties to Marsh, a result could be a higher price for the coverage than the company would otherwise have paid.

Subject: Re: Brokering Insurance
From: Pete Weis
To: Emma
Date Posted: Thurs, Oct 28, 2004 at 20:59:14 (EDT)
Email Address: Not Provided

Message:
The 'tip of the iceberg'.

Subject: Republican econ statistics
From: Joe Savitsky
To: All
Date Posted: Wed, Oct 27, 2004 at 14:38:30 (EDT)
Email Address: joesavitsky@hotmail.com

Message:
I received this message from a Republican and would love to get everyone's thoughts/critiques. He also posted a chart which unfortunately, I cannot easily reproduce here, but the gist is that . Thanks in advance! *********** To refresh your memory, the misery index is inflation plus unemployment rate. With the exception of the stock market, gasoline prices, and the Federal Debt, the Bush administration is performing somewhat better than the Clinton administration [circa 1996 election] in mortgage rates, homeownership, violent crime rate, real GDP growth, and the Federal Tax Burden. John Kerry refers to the Clinton years positively, as he should, with the one great exception, the slashing of the military budget and capability. While the Bush era has outperformed the Clinton era on those parameters, primarily due to the tax cut [like Kennedy and Reagan before him], he has done a poor job on fiscal control by never vetoing a single entitlement bill coming from Congress. He has exacerbated the debt with the Iraq War and the Tax Cut, both we think necessary and which will have positive effects on the country and on the economy in time. The economic evidence of the tax cut is with us now. In spite of the deficit, consider the following data for 2004, compared to 2003 that also came out of the research:* Consumer spending is up 3.6% Residential housing investment up 13.2% Capital goods investment up 13.9% Exports and Imports are up 11% Industrial Production up 5.2% High tech production up 23.7% Productivity up 4.6% [#1 in the world!!!! thanks to IT] Household wealth up 11.1% [$46 trillion] Net profits [after taxes] up 19.5% Interest rates at 45 year lows, with short term rates at less than 2%--the kind businesses, including my own,use. 15 year mortgage rates are at 5% * Many of these numbers appeared in Lawrence Kudlow Op-Ed in the WSJ. I corroborated those numbers through the AEA archives data base.

Subject: Misery index
From: Pete Weis
To: Joe Savitsky
Date Posted: Wed, Oct 27, 2004 at 21:27:42 (EDT)
Email Address: Not Provided

Message:
You started your post talking about the misery index - inflation and unemployment. We've been posting about the changes in calculating CPI since 1999. El Gringo just posted the Bill Gross piece regarding the use of hedonics and substitution which the government now uses to substantially reduce CPI from the number which would have been published using the Laspeyres method used before 1999. Of course this lower CPI number conveniently boosts the GDP number since CPI is subtracted from GDP. Despite this, GDP has flagged in 2004 after a very brief runnup in 2003 - what happened to all that stimulus? I believe any reasonably observent person realizes that the 'necessities' of life have been escalating in cost with the rather sharp decline in the dollar over the last three years. If you don't need to eat, buy a house, put gas in your car, buy insurance (health or otherwise) or heat your house, then for you there has been little inflation. You can fill your expensive house with plenty of cheap TV's, computers, and clothing - most of which, if not all, was bought from overseas manufacturers. 'Exports and imports are up 11%' - this seems like an attempt to turn what actually is a very bad number into something good - on Wall Street they call it 'puting lipstick on the pig'. The 11% mostly represents a large increase in the current account deficit - an increase in the dollar value of imports relative to lackluster exports. It also represents the higher dollar cost of imported oil - not a good thing. It's interesting to see Republicans lumping exports with imports and crowing about an 11% increase - it doesn't show a lot of respect for the intelligence of voters. Did you notice anything unusual about this Joe. When you were 'corroborating those numbers' did you ask yourself why the dollar increase in exports wasn't separated out from the dollar value of imports? Employment is another area where our present government likes to fudge things a bit. That's how you get the government reporting net losses of jobs during some months in 2003 at the same time they are lowering the unemployment rate since they are continuely dropping folks off the uemployment roles if they haven't been able to find a new job within a given time - for the government they no longer exist. Furthermore we know that we need 150,000 new jobs created per month just to keep up with all those sons and daughters reaching employment age each month. Without a job they are either sitting on a sidewalk somewhere or living with there parents who must take on the extra expense of supporting them. Also you might not be aware that most of those jobs which the government reports are being created every month are actually assumed to be created. We only find out if, in fact, they were created when we get income tax data for 2004 in 2005. 'Household wealth up 11.1% [$46 trillion]'. The $46 trillion number has got to be a typo ($4.6 trillion maybe) - even Larry Kudlow wouldn't exagerate things this much - or would he? However the 11.1% represents the record runnup in housing resulting from record relaxed lending practices and near record low interest rates relative to real inflation. At some point this will come to an end and many lenders will end up holding the bag on real estate not worth the mortgages - especially where the runnup has been the greatest. Credit will be tighter down the road. There have been numerous postings on this site regarding this. Joe, I'm assuming you are an intelligent person and also an honest person. Disagree with me if you wish, but give me good reasons why you disagree. Then your post will be a worthwhile post.

Subject: Republican Fakery
From: Ari
To: Pete Weis
Date Posted: Thurs, Oct 28, 2004 at 07:17:44 (EDT)
Email Address: Not Provided

Message:
Misery is Republican economic policy. The post was Republican economic fakery and trollery. We can only hope for the economic policy of Bill clinton and Robert Rubin.

Subject: Re: Misery index
From: setanta
To: Pete Weis
Date Posted: Thurs, Oct 28, 2004 at 05:05:15 (EDT)
Email Address: Not Provided

Message:
great response peter, excellent analysis as always!

Subject: Great Response Peter
From: Ari
To: setanta
Date Posted: Thurs, Oct 28, 2004 at 07:22:21 (EDT)
Email Address: Not Provided

Message:
Great response Peter, but the Republican post is all distortion.

Subject: Trolling
From: Ari
To: Joe Savitsky
Date Posted: Wed, Oct 27, 2004 at 19:42:22 (EDT)
Email Address: Not Provided

Message:
This post is Republican trolling.

Subject: Re: Trolling
From: El Gringo
To: Ari
Date Posted: Wed, Oct 27, 2004 at 19:47:30 (EDT)
Email Address: nma@hotmail.com

Message:
What's the matter? You're better!

Subject: Re: Trolling
From: Ari
To: El Gringo
Date Posted: Wed, Oct 27, 2004 at 19:51:59 (EDT)
Email Address: Not Provided

Message:
The idea of comparing the Bush and Clinton economic policies and successes is absurd. There are no Bush economic successes.

Subject: Re:Ari
From: El Gringo
To: Ari
Date Posted: Wed, Oct 27, 2004 at 20:09:27 (EDT)
Email Address: nmq@hotmail.com

Message:
Why?

Subject: Re: Republican econ statistics
From: El Gringo
To: Joe Savitsky
Date Posted: Wed, Oct 27, 2004 at 18:43:57 (EDT)
Email Address: nma@hotmail.com

Message:
Do numbers always reflect reality?

Subject: Re: Republican econ statistics
From: Mik
To: El Gringo
Date Posted: Wed, Oct 27, 2004 at 19:08:40 (EDT)
Email Address: Not Provided

Message:
Good point, El Gringo. At a glance, I get irritated when they are including Monetary policy issues such as the lending rate- to the best of my knowledge, Bush is involved in the Fiscal policies, not Monetary. So giving Bush credit for low mortgage rates is somewhat unfair. Also at a glance, the productivity scale is utter bull. The measurement comes from some stupid concept of measuring productivity by the amount of hours worked in a week. The 'productivity' rating given there refers to the fact that Americans work the longest hours in the world. Which can quickly be extrapolated to show that Americans are taking on two jobs and working serious overtime - more than any other country. To me that is a serious sign of social trouble. Productivity as a measure of output per capita - the US is no where near the top - but that is also understandable as it also has to do with currency value. Some developing countries rely on their currencies consistently dropping so that they can have high productivity rating. In essence - numbers do not necessarily reflect reality. But as some reality on numbers - the US has gone into debt like never before, and it is going deeper and deeper into debt with no end in sight. In the face of this and a war, the US has cut taxes and implemented supply side economics. The US has one of the lowest tax rates in the world, tax is not even seen by the majority of people as a serious problem yet it is an ideal political tool.... I wish some higher power could come in and say, 'Enough now!' For the sake of the US and the world, stop it.

Subject: Re: Mik
From: El Gringo
To: Mik
Date Posted: Wed, Oct 27, 2004 at 19:30:06 (EDT)
Email Address: nma@hotmail.com

Message:
'For the sake of the US and the world, stop it.' Well, I could ask you: 'Mind your own business'

Subject: Re: Mik
From: El Gringo
To: El Gringo
Date Posted: Wed, Oct 27, 2004 at 21:28:06 (EDT)
Email Address: nma@hotmail.com

Message:
Mik, don't bother, that only was a sort of provocation!

Subject: El Gringo
From: Mik
To: El Gringo
Date Posted: Thurs, Oct 28, 2004 at 18:00:13 (EDT)
Email Address: Not Provided

Message:
Well we are all worried about what goes on in the States. What happens in the world's biggest economy affects us all. So I am minding 'my own' business. Unfortunately we don't have the power (nor the will) to attack the US and force regime change to suit our economic needs. But that is only a provocation.

Subject: Re: Mik
From: El Gringo
To: Mik
Date Posted: Thurs, Oct 28, 2004 at 18:31:53 (EDT)
Email Address: nma@hotmail.com

Message:
He, he...

Subject: Con Job Redux
From: El Gringo
To: All
Date Posted: Wed, Oct 27, 2004 at 13:56:17 (EDT)
Email Address: nma@hotmail.com

Message:
Investment Outlook Bill Gross | October 2004 Con Job Redux A man hears what he wants to hear and disregards the rest. -Paul Simon Bloomberg’s John Berry and the Fed’s William Poole are well intentioned I’m sure but they have an agenda like we all do. As I told a client last week, my agenda is to promote the interests of bond holders and by osmosis PIMCO’s and my own. Their agenda is to support the Federal Reserve, its strategies, and by osmosis the thinking of its chairman, Alan Greenspan. I was not surprised, therefore to read their criticism of my October Investment Outlook Haute Con Job, which called into question the validity of our government’s inflation numbers. Berry and Poole read what they wanted to read and, as Paul Simon once suggested, disregarded the rest. My point, however, was as follows. The CPI inaccurately calculates Americans’ cost of living. Since Social Security and pension benefits, as well as the level of wage hikes are predicated upon the specific number and/or the perception of annual increases, Americans are being in effect conned by their government and falling behind the inflationary eight ball year after year. After slamming the concept of the core CPI, the primary culprits I cited were the government’s use of hedonic and substitution adjustments to lower the CPI by as much as 1% in recent years. John Berry, the columnist, claimed my report was “inaccurate and flawed.” William Poole, the Fed Governor, in effect said I didn’t know what I was talking about. I think they read what they wanted to read, and I would hope that they would hear what needs to be heard. I did not dispute the fact that the quality of goods and even services can improve and that the government shouldn’t recognize that “hedonically.” I do disagree with those adjustments being reflected in a CPI that is used to calculate the benefits of wage earners and retirees. The U.S. government has over 40 different CPI indices – there is not one sacred calculation. There is a CPI for medical care for instance, and a CPI for services, as well as a CPI for transportation. Take your pick. But in using for retirement benefits an hedonically adjusted CPI that lowers annual price increases by as much as 1%, they take money unjustly out of Americans’ pockets. Peter Bernstein, in an article I cited in the Investment Outlook, suggested the same thing. He recommended the adoption of a new form of the CPI, which he dubbed the CPI/DX that excludes all durable goods prices – the items most subject to hedonic calculations. He wrote that “what people see and feel as inflation is what they pay for services and non-durables” not hedonically adjusted durable goods such as computers and DVDs. I would take that assertion one step further by using the following example that strikes to the heart of the hedonic debate. Say the only product that Americans purchase and consume are bags of gumdrops – 100 to a bag that cost $1.00 per bag, with each citizen limited to 1 bag. Through the miracle of productivity, a way is found to fill each bag with 110 gumdrops that is now priced at $1.10. The government’s hedonic adjustments would now calculate that the bag really only costs $1.00 and that the CPI has not gone up. After all, each gumdrop in the bag still only costs a penny does it not? It does. But here’s the catch and the con. The price of a gumdrop hasn’t gone up, but the cost of a bag of gumdrops has. Because Americans must buy 1 bag as opposed to individual candies, their cost of living has increased by 10%. They must fork out an extra dime even though they’re getting more for their money. Now turn the gumdrops into computers, cell phones, refrigerators, etc. and you see my point. We can’t buy individual pieces of memory in a computer – we have to buy the entire package. And the package costs more whether it’s improved or not. The government’s hedonic adjustments may accurately reflect productivity increases, but they should not be part of a CPI, which is intended to depict America’s cost to live. In effect, that allows the benefits of productivity to accrue to businesses (which don’t provide adequate raises) and government (which under-compensates Social Security recipients). Holders of TIPS who are hoping to keep up with the cost of living via their “inflation protection” are disadvantaged as well. It’s a con – pure and very, very simple. William H. Gross Managing Director

Subject: Re: Con Job Redux
From: Pete Weis
To: El Gringo
Date Posted: Wed, Oct 27, 2004 at 19:53:42 (EDT)
Email Address: Not Provided

Message:
Whether or not there is agreement on how CPI is calculated, the changes instituted in 1999 have reduced the CPI numbers substantially and therefore inflated GDP. I wouldn't think CPI or GDP numbers which are put out there now are useful in comparison with the performance of the US economy before 1999.

Subject: Re: Con Job Redux
From: El Gringo
To: Pete Weis
Date Posted: Wed, Oct 27, 2004 at 20:14:27 (EDT)
Email Address: nma@hotmail.com

Message:
'I wouldn't think CPI or GDP numbers which are put out there now are useful in comparison with the performance of the US economy before 1999.' Why this sudden switch?

Subject: Re: Con Job Redux
From: Pete Weis
To: El Gringo
Date Posted: Thurs, Oct 28, 2004 at 01:00:54 (EDT)
Email Address: Not Provided

Message:
No switch. I completely agree with Bill Gross. I just wonder how many economists out there trust the CPI and GDP numbers being reported. How can they use these numbers to estimate negative effects on consumption? Are they agreeing with Greenspan that we are just experiencing a temporary 'soft patch'? How have economic models been adjusted since 1999 to account for this change?

Subject: CPI & TIPS
From: David E...
To: Pete Weis
Date Posted: Thurs, Oct 28, 2004 at 14:02:54 (EDT)
Email Address: Not Provided

Message:
I hate to sound naive, but one of the big reasons I bought mostly TIPS for my portfolio in 2000 was my impression that they contained a promise not to change the calculation of CPI-U. Now when I go to the treasury site I can't find those words anywhere. Maybe I misread - government language is hard reading, but I feel like a promise has been broken. Health insurance is up a lot, especially the way I measure it. My wife's share of premiums has gone from $50/mo to over $200 in 4 years. Employers are passing increases along rather than paying them. Does anybody have a record of the promise I thought was made in 2000? David E...

Subject: Individual Bonds or Funds
From: Terri
To: David E...
Date Posted: Thurs, Oct 28, 2004 at 15:30:06 (EDT)
Email Address: Not Provided

Message:
Would you buy individual TIPS for your portfolio, or the Vanguard TIPS Fund? I always lean to funds for bonds. The bond fund cost is quite low at Vanguard, while there is much flexibility from the funds that is limited in owning individual bonds.

Subject: Re: CPI & TIPS
From: Terri
To: David E...
Date Posted: Thurs, Oct 28, 2004 at 14:21:12 (EDT)
Email Address: Not Provided

Message:
The calculation of the Consumer Price Index is continually being refined by government statisticians. I can not imagine such a promise, but I sympathize with your concern.

Subject: Re: CPI & TIPS
From: David E.,..
To: Terri
Date Posted: Thurs, Oct 28, 2004 at 19:21:45 (EDT)
Email Address: Not Provided

Message:
I have been told that I was naive. But why buy TIPS if the government can change the way it is calculated? I wanted to know that and read something on the treasury site that sounded like a promise to me. I didnt realize that 2000 was the first year with hedonics. ps. I like Vanguard and have my TIPS there--talking about promises Vanguard has promised that they will manage the TIPS to protect my position. I am naive again, and am taking them at their word. I bought my TIPS in 2000 when the yield was twice what it is now. I was concerned they might sell the high yield bonds and keep the low yield bonds. A reason for buying and holding bonds yourself is that you will always get the original deal. You get the interest agreed to and you get the principal agreed to. That is not necessarily true when owning mutual funds.

Subject: Brazilian Infrastructure
From: Emma
To: All
Date Posted: Wed, Oct 27, 2004 at 13:16:28 (EDT)
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http://www.nytimes.com/2004/10/27/business/worldbusiness/27infrastructure.html? Drive for Global Markets Strains Brazil's Infrastructure By TODD BENSON SÃO PAULO, Brazil - Every year, as the soybean harvest kicks into high gear, Brazilians are given a stark reminder of the infrastructure obstacles their country must overcome if it is to establish itself as a major trader in the global marketplace. Hundreds of old trucks packed with soybeans and grain line up for more than 50 miles along the highway leading into Paranaguá, a port in the southern state of Paraná that desperately needs investment to keep up with Brazil's ever expanding agricultural exports. At the peak of the Southern Hemisphere's harvest season every March, truck drivers wait at the side of the road for up to 20 days before unloading their cargoes, putting buyers from China to Europe on edge for fear of costly delays. Similar bottlenecks and weak infrastructure can be found across the country, posing a daunting challenge for the government of President Luiz Inácio Lula da Silva. Thanks to a boom in exports, the economy is expanding at its fastest clip since 1996 and is on course to grow more than 4 percent this year, rebounding from a brief recession in 2003. But many economists and business leaders warn that the recovery could start losing steam as early as next year if the government does not find ways to attract billions of dollars in investment to remedy Brazil's infrastructure. 'Unfortunately, if something isn't done urgently, by 2005, we run the risk of selling products and not being able to deliver them on time,' said José Augusto de Castro, the vice president of the Brazilian Foreign Trade Association. 'The economy simply can't keep growing at this pace with the infrastructure this country has.' Brazil has made significant strides in recent years in establishing its trade credentials, first under former President Fernando Henrique Cardoso, and now under Mr. da Silva, who took office in January 2003. Though Brazil, which is South America's largest economy, still accounts for less than 1 percent of global commerce, exports have risen to 17 percent of gross domestic product from just 6.5 percent in 1998. So far this year, foreign sales have already surpassed the amount reached in 2003, reaching $76.9 billion, and the country is on track to finish 2004 with a record $94 billion in exports, according to the trade ministry's most recent forecast. Most of the growth has come since 1999, when Brazil's decision to devalue its currency, the real, made the country's exports more competitive on world markets. More recently, China's voracious appetite for commodities like soybeans and iron ore has helped fuel Brazil's export bonanza. In addition, Mr. da Silva, who has made increased exports a priority of his administration, has traveled extensively to seek new markets for Brazilian goods. But Brazil's ascendancy on the global stage has also exposed deep fault lines at home. Like Paranaguá, almost all of the country's ports are struggling to accommodate the growing flow of goods. With some rare exceptions in more developed states like São Paulo, roads everywhere are worn and riddled with potholes, making the journey from the farm belt to the coast costly and slow. In addition, Brazil's railway network has barely expanded since 1970, when it transported only 50 million tons of cargo a year. This year, some 300 million tons of goods are expected to be shipped by train. 'The railway network hasn't advanced one kilometer in more than 30 years, and yet it is handling five times the cargo it was built for,' said Paulo Godoy, the president of the Brazilian Infrastructure Association. 'There's only so much more it can take.' The association estimates that for the Brazilian economy to keep growing at an annual rate of 3.5 percent to 4 percent, the country needs to invest at least $20 billion a year in infrastructure, especially in energy and logistics. But because the federal government has to run a large budget surplus to reduce its huge debt load, it can come up with only a fraction of that amount. This year, Mr. da Silva's administration set aside just 10.4 billion reais, or about $3.5 billion, for infrastructure spending. In its budget proposal for 2005, the government earmarked 11.4 billion reais for infrastructure. Congress is expected to raise the amount to closer to 15 billion reais, or just over $5 billion. That leaves the private sector to fill the gap of $15 billion. But some investors have been reluctant to step in, choosing to wait until Mr. da Silva's left-leaning administration - which includes several high-ranking officials who railed against capitalism and foreign investors in the past - comes up with a regulatory framework that is more friendly to private investment. In August, for instance, Mickey Peters, a senior vice president for the Duke Energy Corporation in South America, told a trade conference in São Paulo that his company, which is based in Charlotte, N.C., had put off any new investments in Brazil, saying that the government's plans to regulate the energy sector discouraged investment. Government officials say they have no intention of meddling in the energy market, and insist that Brazil is a safe place to do business. One way the government is trying to woo investment is through legislation it has introduced to lay the groundwork for public-private partnerships to invest in infrastructure projects together.

Subject: The Economist - 'Parable of the Cats'
From: Pete Weis
To: All
Date Posted: Wed, Oct 27, 2004 at 10:17:46 (EDT)
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Buttonwood The parable of the cats Oct 26th 2004 From The Economist Global Agenda The financial markets are fretting about a record oil price, the prospect of slower growth, a wobbly dollar and much more BUTTONWOOD’S cats are normally the very picture of somnolent peacefulness. Last night, however, the purrs turned into deep growls, and the growls, all of a sudden, into a whirr of fur and fury. Listen carefully and you can hear the growls from financial markets too. Can the fur and fury be far off? The growls come in many forms. The first and most obvious is the rising price of oil. The US benchmark, light, sweet crude—it sounds a bit like the stuff you have with a burger, doesn’t it?—rose this week to over $55, a new record, at least in nominal terms. Oil for future delivery has also been rising, suggesting that not only do consumers think it very unlikely the price of oil will fall sharply but that it may indeed rise further. The price of petrol and other oil derivatives is also going up, in part because the price of crude is rising, but also because there isn’t enough refining capacity. That these increases will have a bad effect on the world economy is not in doubt; the questions are what sort of bad effect and how big. The bad effects come in two varieties: inflation and slower growth. Having worried briefly about the first of these earlier in the year, financial markets are becoming more vexed about the second, especially since central banks, and the Federal Reserve in particular, have been removing some of the extreme looseness of monetary policy in recent months by hiking interest rates, albeit by tiny amounts. Thus have inflation expectations dropped. The combination of lower expected inflation and slower growth has caused the yield on ten-year Treasuries to fall by almost a percentage point since reaching a high earlier this year. Not that this is solely an American concern. An index of rich-country government bonds compiled by Citigroup has gone up by an extraordinary 10% since May. Worries about the effects of slower growth and higher oil prices on corporate profits have started to spook stockmarkets. The Eurotop 300 index of European shares is now down by some 4.5% from its high this year; America’s S&P 500 is down around 5.5%; and Japan’s Topix has fallen by almost 12%. Given how expensive these markets are by any reasonable metric, however, these falls can be seen as slight. Growls aplenty there are elsewhere, too. The cost of insuring against bad outcomes in equity markets, at least as measured by the Chicago Board Options Exchange’s VIX index of volatility, has been rising in recent days. It is, however, still extraordinarily low—a third of its level in October 2002—given the myriad uncertainties in the world. So, too, are the interest rates demanded by holders of corporate bonds over those on Treasuries, even though these spreads have climbed a bit over the past couple of weeks. In America, spreads of bonds rated BBB are about 1.2 percentage points, four points less than they yielded in October 2002. Most of the doubts about creditworthiness have centred on car companies and, of late (thank you, Mr Spitzer), on insurers. For how long will concerns be so narrow, and rewards so meagre, if growth really falters? Spreads on junk bonds have actually fallen lately. They now yield about four percentage points or so over Treasuries. In October 2002 the spread was over ten points, not that the numbers meant much, given the panic in the markets at that time. Perhaps all the issuers of such bonds are indeed much healthier now than they were then. Perhaps, on the other hand, they are simply the beneficiaries of ultra-loose monetary policy and a huge appetite for risk among investors. After a panic in May, emerging-market debt recouped most of its losses. In recent days this market, too, has wobbled but it still looks horribly expensive by historical standards.