Windbreaker Posted August 13, 2004 Report Share Posted August 13, 2004 Then someone told me that the RUT futures were getting huge Boner Bids AH.... Can anybody confirm???? I wouldn't say "huge bids"; they traded up to 518.10, after a cash close of 517.39; the futures are now closed for the weekend. CME ( Russell futures ) quote W Link to comment Share on other sites More sharing options...
lenygold Posted August 13, 2004 Report Share Posted August 13, 2004 Why does Joe Sixpack keep on buying tech stocks, even though their death dive is producing margin calls? Modern science has an answer: Among the ways to know when a rat's hooked: It keeps trying to get cocaine even when each hit comes with an electric shock. It Ain't 1999 No More, Joe Hello (privet) gays from Russia. We are ready USA depression. Bying gold, goldstoks and pumping OIL to europe and China. Author: Mikhail Khazin The study of intersectoral balance in the US clearly shows a serious structural slant in the US economy NEW ECONOMY FABLE ENDS Correction of the structural slants in the US economy will be very painful The last decade of the 20th century in the US was marked with extremely high rates of economical growth vastly exceeding the average statistical figures without any visible inflation. There was only one period in the US history, when a comparable growth rate was observed without any inflation processes ? it was the end of 1920s (unfortunately, it ended up in the Great Depression). These achievements produced numerous theoretical views on their causes and effects. In the end, there appeared a rather solid and clear opinion that (not going into the details) the main reason for the economical success of the US was in the Information Technologies (IT). However, from an impersonal and independent point of view these judgments seem quite disputable. By now the situation in the economy has changed drastically. The notorious ?Internet-spree? has finished. The stock market has crashed, and came into dependence from global economy factors, which clearly are of non-monetary nature. But, judging by the flow of statements, the necessary conclusions have not been drawn, and the theories mentioned above have not been revised. Many still regard the situation as a minor and short cyclical decline. To justify my disagreement with the common point of view and my commitment to the pessimistic development scenario, I need to present the analysis of the phenomenon of unprecedented economical growth of 1990s, otherwise known as the ?new economy?. THE TYPICAL PATTERN First of all, I would like you to note the following fact: Virtually all the new technologies that changed the global economy had a number of general regularities in their development. Here are the ones that are most important in our study: The output of a new product, which is in high demand on the consumer or industrial market, at the introduction and expansion phase grows faster than the economy in general, and the rate of return in manufacturing of this product is higher than the average rate. This is a crucial factor, since the growing sector inevitably draws in all the economical resources it can reach. This means, that the other branches of economy lack the opportunity to get cheaper resources. A rapidly growing sector of economy may sell its products either to the end consumer, or to the manufacturer. In the latter case it must ensure growth of the buyer?s sales and profits, i.e. either increase his productivity, or add new consumer qualities to his goods. THE MUTANT The first and the fundamental difference between the current situation and the previous experience of explosive growth of the innovative branches of economy is the enormous disproportion between the share of the ?new economy? and its actual contribution to the economy and the wealth. This alone, contrary to the accepted opinion, not just hampered, but suppressed other branches of economy that tried in vain to compete for resources. All the US economy growth is actually concentrated in six branches, and in the remaining 53 branches the rate of growth is very low. It is rather difficult to assess the scale of the ?new economy? at all. It can be divided into two parts. The first one is the companies of the ?new economy? proper having no other businesses, like Internet companies. The second one includes divisions and subsidiaries to large corporations, specializing in the ?new economy? branches. This is the part that is hard to assess. Transfer prices and internal cross-subsidies, redistribution of cash flows and many other conditions make the assessment of the share of the ?new economy? in the ?classical? companies tentative only. One thing is for sure: at the time when the ?new economy? was in its prime, its share in the US GNP exceeded 20%. LABOR PRODUCTIVITY The second peculiarity of the ?new economy? is the legend that its introduction into the traditional business activity will sharply increase productivity. Indeed, according to the official statistics for the last few years of the 20th century, the labor productivity growth rate increased significantly. (see image 1) image 1 The rate of growth of investments into IT also increased during the same period of time. (see image 2) image 2 Many observers collated these two trends and came to a conclusion that IT causes labor productivity increase in the economy in general. However, a conclusion on interdependence of the two processes would be ill-posed when based only on their timing. It is quite possible that labor productivity increased due to other reasons. In this context it would be appropriate to cite the results of ?US Labor Productivity Growth in 1995 ? 2000? study conducted by McKinsey & Company, a US-based audit and consulting company. The report was issued in October 2001 after a year of study conducted by a board of experts headed by Robert Solow, a Nobel Prize winner. The objects of this study were: - reasons for the increased growth of labor productivity in the US after 1995, and the nature of factors that contributed to this growth (structural or cyclic). The effects of these factors differ in quality: the first group of factors produces long-term changes, and the second group produces temporary alterations; - the role of IT in the increased labor productivity growth. The results of this study were not quite as expected. Calculations of productivity growth by branches show that, in fact, almost all the productivity growth in the US economy is concentrated in six branches: retail trade, wholesale trade, securities trading, production of semiconductors, computers and telecommunication systems. The remaining 53 branches show only slight increase or even decrease in productivity, generally balancing each other. (see image 3) image 3 The six branches above produce 31% of the GNP, contribute 38% to the total IT-saturation of the economy, and provide 29.5% of the total employment. Each of these six branches was studied thoroughly to discover the driving force for the growth. Particular attention was paid to investments into IT and their effect on the productivity. PRODUCTIVITY FACTORS Thus, the structural factors are: innovation, competition and changes in the governmental control. In each branch these factors manifested themselves in different ways. The cyclical growth factors were: the shift in consumer demand towards more expensive products and the booming stock market. In the retail trade the productivity growth was achieved mostly due to Wall-Mart, one of the largest companies in this market. The success of Wall-Mart encouraged its competitors to improve their businesses. As for e-commerce, though it was developing rapidly, the scale of it (in 2000 the share of electronic sales was 0.9% of the total sales) was too small to produce any significant effect on the productivity in general. Total Internet sales development contributed less than 0.01% to the productivity growth in the economy as a whole. Similar changes occurred during 1990s in the wholesale trade. Storing, marshalling and handling commodities was once a difficult task. Then comparatively simple hardware and software allowed the wholesalers to partially automate their commodity flows and to significantly increase their productivity. In the semiconductor branch the growth rate increased from 43% pa to 66% pa due to increased capacity of the chips and processing power of CPUs. In computer production industry the growth rate increased largely due to innovations outside the branch itself. Technological advancements in microprocessors and other devices contributed to the increased computer performance. At the same time, the emerging Internet and the increased hardware requirements from the operating systems caused an unusually high demand for more powerful PCs. Securities trading was the only one of the six leading branches, where the Internet really contributed to the productivity growth. By the end of 1999 about 40% of all the securities trading was performed via Internet, while in 1995 this figure was close to zero. And competition with the traditional brokers caused rapid spread of technological innovations. Changes in state control caused the increase in competition, consumption and productivity in two sectors: securities trading and telecommunications. It is only natural, that the crucial factor for productivity growth in the securities trading was the formation of a ?bubble? in the stock market. In the six branches that indicated explosive growth in productivity, most of the phenomenon after 1995 can be explained by the fundamental changes in production of commodities and provision of services. In some cases these changes were caused by technology innovations, in others ? not. In all the cases the level of competition had a direct impact on the spreading of innovations, and in two branches the changes in governmental control played a major part in increasing competition. The cyclic demand factors had a significant influence on productivity growth in retail and wholesale trade, and in securities trading. THE ROLE OF IT A study of the role of IT in the total productivity growth reveals two major aspects: Of the six branches reviewed above, where virtually all the productivity growth was concentrated, three are IT-related (semiconductors, computers, telecommunications). Together they produce only 5% of the GNP and 4% of employment, yet their share in the total productivity growth is 29%. The use of IT was only one of a series of factors causing the productivity growth in the six branches (see above). The problem of interrelation between introduction of IT and productivity growth is complemented by the two features discovered during the study conducted by McKinsey: The six sectors discussed above contributed 38% in the total IT growth. The remaining 62% were contributed by the 53 other sectors that produced virtually no increase in the productivity growth rate. The attempts to discover interdependence between productivity growth and IT growth produced no results of statistical significance. The correlation ratio for productivity growth rate vs. IT growth rate is only 0.007, which means that there is no statistical significance. A vast amount of investments made in 1990s turned out to be ineffective. Inability to repay the loans by improving productivity became a heavy burden on the traditional economy. THE VERDICT To sum up the discussion above, the study conducted by McKinsey indicates that the productivity growth rate improvement after 1995 can be explained without any reference to IT. Various innovations, increased competition (sometimes due to changing regulations), and cyclic demand changes are the main reasons for growth. Moreover, in most cases IT has no major effect on productivity. One may say that IT produced major effect on productivity growth only when it provided new production tools. The review of the remaining 53 branches of industry shows that for the past 20 years the productivity growth rates there were very low. In fact, the study cited above shows that for most of the US economy, for industry in particular, the investments made in 1990s turned out to be ineffective. Inability to repay the loans by improving productivity became a heavy burden on the traditional economy. This structural imbalance would inevitably cause structural rearrangement in the US economy accompanied by a significant decrease in GNP. THE PROFITS The third peculiarity is due to the myth of supernatural profitability of the ?new economy?. The reports of industry anal cysts and the imagination of the investors produced huge profit expectations, though the current profitability figures provided not a slightest indication of that. Judging by the stock quotes of some of the companies at the time of the ?Internet boom?, it was expected that the profits from the ?new economy? would be growing for decades at the rate exceeding the average economy growth rates, which would ensure both return on the invested capital and incredible profits. But these expectations were wrong. As a result, a great number of businesses ceased to exist while still remaining loss-making. And the recent scandals regarding the corporate financial reports of many giants of the ?new economy? (that seemed prospering and even successful) blight the remaining illusions. THE STRUCTURAL IMBALANCES All the effects described above could not but cause significant structural imbalance in the US economy. Since the flow of investments and loans was quite substantial, and the profits turned out to be much lower (in some branches of the new economy there were no profits at all), we face the issue of how the sector created in the past 15 years will survive not in the hothouse, but under the real market conditions. Since the overestimation of the new economy became one of the imbalances that caused the recess, it would be appropriate to provide a comparative study of the input and output flows of this sector. We can regard IT sector contribution to GNP and gross production as the output, and its share in capital investments ? as the input. In this study we will rely upon the intersectoral balance of the US economy in 1987, 1992. 1997, and 1998. This data reflects the information of interest most adequately, since it shows exactly what resources were invested in each type of products of the ?new economy?, and what is its GNP and gross production share. The analysis of intersectoral balance produced rather peculiar results. (see image 4)During 1987 - 1998 the share of investments in the ?new economy? products increased by the factor of 1.68 ? from 15% to 25% of the total capital investments. During the same period the share of these products in the GNP increased insignificantly, from 17% in 1987 to 19% in 1998 (i.e. 1.11 times as much), and their share in the gross production ? from 16% to 18% (by the factor of 1.13). image 4 A more detailed review shows that the increase of the total investments in the ?new economy? products was caused mostly by the increase in investments in ?computer services and data processing?. The share of this type of products increased by 10.577 percentage points ? from 0.001% in 1987 to 10.578% in 1998 (for other ?new economy? products this change did not exceed ?0.4 percentage points). At the same time, its share in GNP increased by 2.25 percentage points ? from 0.24% in 1987 to 2.49% in 1998, and the share in the gross production increased by 1.56 percentage points ? from 0.79% in 1987 to 2.35 in 1998. It should be noted, that in 1998 the investment share of such products exceeded 10%, while the GNP and the gross production shares were at the level of 2%. We can see the similar situation in ?PCs and Office Equipment? segment: in 1998 the investment share for these products was 4.16%, and their share in the GNP ? 0.60%. The calculations above clearly show the disproportion between the input and the output of the ?new economy?. In fact, the investment growth rate 1.5 times exceeds the GNP share growth rate. It should be borne in mind, that introduction of the new information technologies requires large capital investments that would be repaid over a long period of time, as the sales increase. However, judging by the results of this study, by the time of development of the crisis processes in the US economy the investment growth rate exceeded the production output growth rate. These structural disproportions shall inevitably lead to structural rearrangement of the US economy accompanied by a significant decrease in the GNP. At the current disproportion rate, considering the US GNP (about $10 trillion), the total decrease in GNP shall be about $200 billion - $250 billion per month! It is clear that no country in the world possesses such resources. THE BALLAST For the first time in the history the huge investments were made in a sector of economy that could not increase its end consumer sales significantly and provided its corporate buyers with no possibility to change the consumer properties and the output of their products. Third generation mobile networks still have not been deployed, though European companies spent tens billion dollars to buy licenses for them ? there is simply no demand for them. Fiber-optic networks in the US operate at 5% capacity, and there are no grounds to suppose that the workload is going to increase significantly. Corporations increasingly reject the products of the ?new economy? and dump their own departments in this area, since they only make losses. It does not mean that all the ?new economy? must die. The difference between the input and the output in 1998 was only 10% of the GNP share. Since the output decreases, it would be reasonable to increase this difference to 15%. And, considering the service industry that emerged around the ?new economy? for the past 15 years, it should be brought up to 25% of the GNP. This is the share of the US economy that sells nothing at all, but only consumes. This layer (a parasitic swelling, in fact) can only exist feeding either on the cash flows at the expense of end consumer sales (which does not exist and is not going to emerge in the nearest future, as it was said above), or on an inexhaustible flow of investments ? but it has already been exhausted, since the investors begin to realize that they were fooled and will no longer invest their money in empty promises of the increase in sales. To support this assertion, let?s give a discrete example. Elite country clubs (fitness centers, restaurants, etc.) appeared in the US to satisfy the rich clients, including the top managers of numerous Internet companies. These managers got money for their ?dolce vita? from trusting investors, to whom they promised a boom of the Internet trade and other inventions of the ?new economy?. But there are no sales, the flow of investments ran dry, the companies go bankrupt? So, who is going to buy the services from these clubs now? URGENT SURGERY! The period between the beginning of the acute phase of a structural crisis and the end of a crisis lasts about 12 - 18 months ? nearly one financial cycle. It seems that now the US will face a structural crisis of unprecedented proportions. In fact, this crisis should have started naturally five years earlier. The disproportions, in particular ? the size of the parasitic economy, were less then. But so far the crisis has been artificially delayed by supporting the phony part of the ?new economy?, by low interest rates, by delusive statistics of productivity growth, by various verbal abracadabras, and even by plain deception. At the current disproportion rate, considering the US GNP (about $10 trillion), the total decrease in GNP shall be about $200 billion - $250 billion per month. If the financial authorities of the US are not ready to admit the structural crisis and to allow some structural changes, they must divert these amounts of money to support the sectors in decline each month! There are grounds to believe that the change from budget surplus to budget deficit we can observe now was caused by exactly such policy. Most likely, this policy is self-defeating, since the US do not possess such resources, and the resources they are able to mobilize (according to the most optimistic opinions) will cover only 30 ? 40% of the required amount. But even with the best luck these shock-absorbing measures will not replace the painful structural rearrangement, but will only expand it in time. And this general crisis of the US economy will continue until the structural rearrangement is complete. Mikhail Khazin The study of the US intersectoral balance was contributed to by V. Khodachnik Published by: ?Russky Predprinimatel? (The Russian Entrepreneur), September 2002 (Written on 19.01.2002, first published on 19.04.2003) Link to comment Share on other sites More sharing options...
The End Posted August 13, 2004 Report Share Posted August 13, 2004 leny, I hope you pasted and plastered here. That long at the keyboard and I would get carple tunnel. Welcome. Link to comment Share on other sites More sharing options...
The End Posted August 13, 2004 Report Share Posted August 13, 2004 Julia Child Dead at 91. http://story.news.yahoo.com/news?tmpl=stor...4_2004aug13&e=3 Link to comment Share on other sites More sharing options...
traderfromhell Posted August 13, 2004 Report Share Posted August 13, 2004 Somebody has it out for GSS, the gold stock. Only one red on my screen today (although it was green for much). Everytime it seems to be picking up I see a small order bid accepted at below the current ask and then a nice volume cap immediately moves in on top of it. I call shennanigans. Shenannigans on GSS! Takeover target or insiders bailing? GSS runs big on a move over 4.15. Link to comment Share on other sites More sharing options...
The End Posted August 13, 2004 Report Share Posted August 13, 2004 checked my email and found the current prechter/Hochberg count. It was free so I figure I could post it. Edit- i should add that this was from two days ago and the altenate a-b-c ain't happenen in that we made a new low today below the alt. b wave. If this is still a wave four of one than we are looking at something other than an a-b-c. Link to comment Share on other sites More sharing options...
Guest yobob1 Posted August 13, 2004 Report Share Posted August 13, 2004 Looks like they J-Lo'd the SOX today, but unconfirmed by the RUT. Then someone told me that the RUT futures were getting huge Boner Bids AH.... Can anybody confirm???? yes oil is plunging as we speak. Sheik Iamaliar released the secret information that Saudi would begin pumping an extra 10 million bpd on Monday. Silmutaneously Texas oil man B. F. Joke announced a major discovery of oil, estimated to be at least 6 kazillion barrels of oil, located directly under the vacant Enron building. UAL said they would fully fund their pensions and they are not going to file BK while Delta announced that fabulous profits would allow them to buy up to 1,000 new Boeing 777s in the next six months while also doubling all employee's pay. Link to comment Share on other sites More sharing options...
brian4 Posted August 13, 2004 Report Share Posted August 13, 2004 I do hope Leny meant "Guys" or Doc is maybe running another site we don't know about! Link to comment Share on other sites More sharing options...
The End Posted August 13, 2004 Report Share Posted August 13, 2004 Looks like they J-Lo'd the SOX today, but unconfirmed by the RUT. Then someone told me that the RUT futures were getting huge Boner Bids AH.... Can anybody confirm???? yes oil is plunging as we speak. Sheik Iamaliar released the secret information that Saudi would begin pumping an extra 10 million bpd on Monday. Silmutaneously Texas oil man B. F. Joke announced a major discovery of oil, estimated to be at least 6 kazillion barrels of oil, located directly under the vacant Enron building. UAL said they would fully fund their pensions and they are not going to file BK while Delta announced that fabulous profits would allow them to buy up to 1,000 new Boeing 777s in the next six months while also doubling all employee's pay. :wink2: Link to comment Share on other sites More sharing options...
Guest Posted August 13, 2004 Report Share Posted August 13, 2004 If you're interested to see Charley hit Disney World - the time lapse camera here may provide quite a show: http://home.disney.com/DisneyWorld/cgi-bin/allCameras.cgi Link to comment Share on other sites More sharing options...
Guest Posted August 13, 2004 Report Share Posted August 13, 2004 The irony is that the least affected area is probably the beach at Tampa. Link to comment Share on other sites More sharing options...
The End Posted August 13, 2004 Report Share Posted August 13, 2004 New poll. Which will occur first 1010 or 1110 spx. http://www.capitalstool.com/forums/index.p...t=ST&f=2&t=6093 Link to comment Share on other sites More sharing options...
Guest Posted August 13, 2004 Report Share Posted August 13, 2004 Julia Child Dead at 91. http://story.news.yahoo.com/news?tmpl=stor...4_2004aug13&e=3 Yes and a 2-days short of 92. I really enjoyed her solo cooking 'events'. She was a large woman physically (6'2") and in stature. OSS with Alan Dulles in Bern during WWII. She enjoyed life! :cry: Link to comment Share on other sites More sharing options...
DrStool Posted August 14, 2004 Report Share Posted August 14, 2004 Stock Proctologist Examines Bottom Doesn't Get Excited Your Anals are loaded. Take a subscribatory and download RIGHT NOW! 30 Day Intro Subscribatory. Just $16.99! Get In RIGHT NOW! The Fed Releases and Long Term Updates will be posted Saturday and Sunday. Link to comment Share on other sites More sharing options...
DrStool Posted August 14, 2004 Report Share Posted August 14, 2004 Hiya Leny from Russia! When you have a long post like that, it's better to post it on the Look Out Below Forum. Also, if the material is from someone other than yourself, you should not repost the entire article, just a parapraph or two then a link to the article. That way we don't violate any copyrights. If you have the publisher's permission, or if the article is in the public domain, then it is ok to repost the whole thing. The same applies to any proprietary material or graphics. The legal concept of fair use would allow us to use portions of a work if we are commenting on it or using it to illustrate a point, such as the way The End critiqued the work of Prechter. Then it's ok, in my view. Link to comment Share on other sites More sharing options...
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