STOCK MARKET WATCH, Wednesday 7 January (#1)

[ozymandius]

Wednesday January 7, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 383
REICH-WING RUBBERSTAMP-Congress = DAY 000
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 26 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 78 DAYS
WHERE ARE SADDAM'S WMD? - DAY 290
DAYS SINCE ENRON COLLAPSE = 774
Number of Enron Execs in handcuffs = 17
ENRON EXECS CONVICTED = 1
Other Arrests of Execs = 53

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL ON January 6, 2004

Dow... 10,538.66 -5.41 (-0.05%)
Nasdaq... 2,057.37 +10.01 (+0.49%)
S&P 500... 1,123.67 +1.45 (+0.13%)
10-Yr Bond... 4.28% -0.11 (-2.51%)
Gold future... 423.20 -1.60 (-0.38%)

DOW..........................NASDAQ.......................S&P

||


GOLD, EURO, YEN and Dollars


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [e-mail]

For information on protests and other actions Citizens For Legitimate Government

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

[ozymandius]

1. Did you see this Enron news?

Both Fastows trying to obtain plea deals

Former Enron Chief Financial Officer Andrew Fastow and his wife, Lea, are negotiating plea bargains that could send the once high-flying couple to federal prison.

Federal prosecutors are discussing a 10-year sentence for Andrew Fastow, and the plea bargain offered to Lea Fastow in November for a five-month term is back on the table, sources close to the case told the Houston Chronicle.

But the deals could still collapse, as Lea Fastow's did in November. Two federal judges, prosecutors and the defendants all must agree on the details for a plea to be finalized.

<cut>
Defense lawyers involved in the case have long assumed prosecutors consider Andrew Fastow the prize witness in their effort to charge former Enron CEO Jeff Skilling and possibly even former Chairman Ken Lay.

story

[Timefortruth]

25. Maybe the arrests will be timed for later in the election season.

Doesn't do them much good now really.

[ozymandius]

2. The Savvy Macrowave Investor - by Peter Navarro & David Aloyan

Peter’s Broad Market Outlook: Small Cap Bull

The first day of trading for the New Year did not augur particularly well. We will find out this week whether it was merely an unwelcome blip or a trend. In the meantime, it's pretty clear that the economy is now cranking on every cylinder and, like an aircraft carrier moving full steam ahead, it now has a momentum that will be difficult to stop at least in the short run.

Whether this aircraft carrier will pull the stock market along in its wake is, of course, the big question with the turn of the calendar page. Perhaps now we will finally get into some legitimate sector rotation. As housing and perhaps autos begin to fade, perhaps the capital equipment stocks will begin to make a move as the business sector finally awakens from its non-investing slumber.

Aloyan's Technical Take: Perma-Bear

All three major indices finished the week in the green. Friday's trading to start the New Year, brought a bearish "outside reversal day down" day to the "Dow," S&P, and Nasdaq 100. The S&P and "Dow" were the relative strength performers in December '03 to finish the year, as money began to rotate out of the hot Retail and "Tech" sectors, and into such sectors as Energy, Aerospace/Defense, Chemicals, Telecom, and Drugs.

Overall sentiment remains very bullish, as pundits point to the election year as a positive, forgetting that the year 2000 was an election year that provided plenty of bloodshed. There is no denying that the current administration, with cooperation from the "Fed," has manufactured an astounding rebound in the U.S. equity market driven by massive Government Expenditures, Tax Cuts/Rebates, which have bolstered consumer and business spending, (most of which will conveniently "sunset" at the end of this election year in 2004), and a massive flood of liquidity.

more...

[ozymandius]

3. Doomerang - by Alex Wallenwein, Editor & Publisher

<excerpt>
Since 1945, the US has hurled unprecedented amounts of paper-money at the world. At first the money was still backed by gold for central bank settlement purposes, but since 1971, this paper-hurling has started to become serious business.

The world (deprived of any alternative by the mere fact that dollar creation had already gone past sustainable limits even while the gold exchange standard was still alive) no longer had any real choice - or so it thought. It was thought then that gold could no longer be used as a currency - or the world would hit a severe recession due to the fact that gold reserves were limited and the demand for "money" was unlimited.

So the nations of the world took the US powers’ promise to make and keep the dollar "as good as gold" at face value - and gobbled down whatever the US Fed dished up for them. Naturally, they knew they were deceiving themselves; it’s just that short-term pain avoidance always outweighs more prudent long-term considerations. I know that from my own decision-making processes.

<cut>
Ever increasing injections of the ever-plentiful paper-drug were needed to keep the economic "high" going - and those injections were readily supplied by the US, the money-machine of the world. Now the world economy is so huge, the US worldwide debt is so enormous, the politicians’ profligacy is of such legendary character, and the common sense of the people is in such short supply that "going cold turkey" (i.e., putting the world economy back on a secure, gold and silver-based footing), is widely considered nothing short of "insane."

more...

[ozymandius]

4. G7 finance chiefs to meet in Florida on February 6

WASHINGTON (AFP) - Finance chiefs and central bank governors from the world's seven richest nations will meet in Florida for a two day summit from February 6, the US Treasury announced.

The Treasury said in a statement the meeting will be hosted by US Treasury Secretary John Snow, it comes on the heels of a September G7 meeting in Dubai.

A communique from the September meeting said more flexibility in international exchange rates was "desirable."

more about the six richest nations and the world's biggest debtor pariah

[ozymandius]

5. Wall Street Set to Dip; Monsanto Eyed

LONDON (Reuters) - U.S. shares are set to open lower on Wednesday as technology stocks pause after driving the Nasdaq Composite Index (^IXIC - news) to a two-year high and investors brace for key company earnings and economic data later in the week.

By 5:46 a.m. EST, U.S. stock futures were pointing to declines of 0.1 to 0.3 percent for the benchmark indexes.

<cut>
"If you look at the trend in markets over the last six weeks, they've really rocketed away and whenever something is moving at that kind of pace, you have to have to think it's not sustainable," said Peter Dixon, an economist at Commerzbank.

"The problem, and it's a nice problem to have, is that investors are seeing a flow of continued good economic news and are piling in. That makes sense in the near-term...but it's questionable how sustainable the current rate of growth is going to be in the second half of the year."

story

[ozymandius]

7. U.S. Investors Wary of Stock Dip After Long Rally

NEW YORK (Reuters) - Stocks have been going nearly straight up for almost a year, leaving jittery investors saying the only sure thing in the stock market is that nothing's a sure thing forever.

<cut>
"We are overdue for a pullback," said Norman Duncan, a retail broker at Vancouver, British Columbia-based Canaccord.com. "People are expecting a lot from their stocks with the anticipation for not just good, but exceptional, earnings priced into shares."

Market analysts usually see a correction after a long period of rising prices as healthy -- allowing stocks to consolidate before beginning another up-leg. The next market pullback may also give investors sitting on the sidelines with cash the impetus to jump in, they said.

<cut>
With stocks already off to a strong start in 2004, the most likely point for a correction is when companies begin to report fourth-quarter earnings, according to Canaccord's Duncan and others. Earnings season is slated to kick off next week.

story

[La_Serpiente]

10. Good Grief

my uncle is a researcher for Monsato. He is going to be talking about this all night at my upcoming dinner.

[nadinbrzezinski]

6. I noticed one thing

regardless of all the "good news" the futures trend DOWN.

Not good

[ozymandius]

8. Not good in the long run at all.

I believe that this is all the markets care about anymore - how to make a quick buck. So futures have become a reflection of the day's hot news topics. In a sense, this is Enron style economic forecasting. Whatever holds the public's gaze at any moment builds and melts markets.

The buy-and-hold philosophy has been outpaced by traders selling short. In my mind, this is dangerous over the long haul because equities are traded quickly like baseball cards. This does not encourage any spirit of long-term growth and development. Only short-term grabs at money flourish in this kind of environment.

Keep your eye on the ball. There is new kind of rhythm on Wall Street. Short and choppy.

[nadinbrzezinski]

11. my fear is a crash

quite honestly, this reminds me of 1929, actually late '28 leading to Black tuesday, more and more

And the fundamentals are NOT there

[ozymandius]

13. A crash is much harder to pull off these days.

Technical reasons: if the market average numbers move more than 2% in any direction, then automated systems shut down. All trading must be done the old fashioned way: by hand and shouting. If the indeces move an even greater amount (forget the percentage) then the markets halt trading for thirty minutes to cool down. If the averages continue to move dramatically, then trading is halted for the day.

There are many built-in defense mechanisms put in place after October 1997. I believe that a crash would culminate in a sharp, extended decline. Just my opinion, of course.

[nadinbrzezinski]

14. The way I foresee it is not the Black Tuesday of 1929

but as you said, over many days, even possibly, they could spread it over weeks

But the fundamentals are not there

And where it will come hard is with the US Dollar and its contninued decline

If the landinig is somewhat soft we should be fine, but a hard landing, watch out...

In fact if you start hearing Currenty Controls, batten down the hatches

[trogdor]

24. The weak dollar is propping up Wall St.

Wait until somebody decides the greenback has slid far enough. That, my friends, is when the bears will wake up.

[ozymandius]

9. Why do I even bother going to CBSMarketwatch?

It's the same damn script.

Setting the stage for another leg higher?

CHICAGO (CBS.MW) -- Stocks were flat to lower off Tuesday's open ahead of data on factory orders and the non-manufacturing ISM Index.

The lack of commitment follows a Monday rally carrying potentially bullish intermediate- to longer-term implications. Specifically, the Nasdaq posted its first convincing break above the 2,000 level in nearly two years.

story

Ashbaugh equates the markets pushing past the resistance points as harbingers of better times to come. Nothing more than that. What about profits? Profit warnings? Patterns that determine profits? Looks like this guy just throws some charts at us and he's done for the day.

[ozymandius]

12. Marketeers, I must be going.

:donut: :donut: :donut: :donut: :donut:

Some small projects need to be completed. Thursday brings me face-to-face with people who are in the position to offer me a job in audio engineering, should I impress them as much. I also recently got some voiceover work. Woohoo!

Otherwise, it's pay-as-I-go with this furniture making gig. Believe me, the front lines of the economy looks like the surface of Mars - wide open spaces, few people waiting in line.

I will try as always to get back here later today. Please have a wonderful day at the casino.

Ozy

[mrsteve]

32. Ozy - good luck with the new opportunities

Hope things go well with the audition.

Your are right about the surface of Mars analogy - just about the only thing keeping me from getting a new job right now is that Job-loss recovery.

[JNelson6563]

15. Good Wednesday morning Marketeers!

Look at gold go! And the British pound--Zowie!! &1.81!

16 billion in 5 yr notes out at 1 pm today. Right after a chat from Snow-job. Should be interesting.

I agree with the commentary I have seen here this morning. Never mind the markets, let's talk fundamentals. OTOH if you don't have anything nice to say....haha

I think things are going to get real ugly but not all at once.

Batton down the hatches Mareketeers, casino opens in one hour!

Julie

[54anickel]

16. An "Opposing" view

Good Morning Everyone :hi:

I came across this one last night. When searching for articles on the dollar's demise, they all seem to be singing the same tune, so when I hit this little gem I just had to bookmark it to share with you.

When you find an article that brings up Mercedes and Infiniti as examples of auto purchases, you just feel the need to share. This guy is definitely marching to a different drummer.

http://washingtontimes.com/op-ed/20040104-102913-3796r.htm

Some snippets for those who do not care to read such dribble:

Though these advocates of negativism are sadly mistaken, it is appropriate to review the key effects of dollar value changes together with an outlook of likely developments in 2004.

When the currency under comparison is less than five years old (the euro was introduced in 1999) everything tends to be a "historic" first. The euro was introduced at an exchange rate of 1 to $1.18 and is now traded at $1.25. The historical shift in value amounts to 6 percent.
This decline has not been uniform against all currencies. It has been highly selective against the yen, the pound and the euro. Against most other currencies in Asia, Africa or South America, there has been little change.

Most important are the decisions of customers. Buyers decide when and why they want a product, and price may only be a minor issue in making the selection. In the United States, continued strong consumer demand, which is not particularly driven by any "made in the USA" designation, accounts for strong sales of global products. In addition, significant brand preferences keep customers focused on products with only limited sensitivity to their prices. If people would really make their purchases based mainly on price, we would see a major switch of car purchases from Mercedes and Infiniti to brands made in Argentina and Malaysia, reflecting the changes in exchange rates.

There always is a supply and demand side to all these flow equations. Central banks and other reserve institutions still prefer holding two-thirds of their currency reserves in dollars, rather than in yen or euro. The U.S. economy is growing fast. Stocks are rising rather sharply, business returns are comparatively solid — and, most importantly, the expectation and the vision are — uniquely — optimistically American.
When it comes right down to it — money is just paper.

[ze_dscherman]

19. A different drummer, indeed

Oh, another unvaluable gem from the Washington Times :evilgrin: Reverend Moon, drumming again.

[punpirate]

38. Ah, the Washington Times...

... what fun they are. First, Argentinian auto production in 2002 was 12,500 units, many commercial trucks, and that production, due to Argentina's economic troubles, was down 41% from the prior year. Second, none, to my knowledge are importable into the US. Argentina's exports are mostly in South America.

Second, Malaysia has two indigenous auto producers, Proton and Perodua. Perodua is hardly indigenous in construction--it depends highly upon Daihatsu parts. Proton's principal product is essentially a rebadged Mitsubishi Lancer, for almost exclusively domestic use. Neither, to my knowledge, can be imported to the US.

None of these approach either the importability or quality of a Mercedes or of the Infiniti. None have any service or support structure in the US.

Nor is the guy much stronger on currency. "Central banks... still prefer ....", etc., is mostly due to the fact that many countries still trade oil in dollars--and that's changing. Not quickly, but it is. If the dollar continues to weaken and the Euro remains strong, that could change the rate of conversion, as well. The key word in that sentence is "prefer." That's the spin word.

What this bozo entirely forgets in his dismissive "money is just paper" routine is the stability of the currency. The yen isn't gaining faster against the dollar because the Japanese are buying boatloads of dollars to maintain value of exports, but that can't last forever. The Euro floated downwards almost immediately after issuance and stayed in 85-95 cent range for a considerable period of time. This recent swing in the value of the Euro is a direct result of the dollar's weakness. Same with the British pound--it's been in the $1.42-1.52 range for the better part of a decade.

Wonder if Rev. Moon is buying dollars these days?

[Maeve]

17. And at the opening...nada

Dow 10,522.74 -15.92 (-0.15%)
Nasdaq 2,058.69 +1.32 (+0.06%)
S&P 500 1,121.68 -2.00 (-0.18%)
10-Yr Bond 4.302% +0.025

[Maeve]

20. 9:53 and they went <<<>>>that way!

Dow 10,513.33 -25.33 (-0.24%)
Nasdaq 2,059.56 +2.19 (+0.11%)
S&P 500 1,121.48 -2.20 (-0.20%)
10-Yr Bond 4.295% +0.018

[Maeve]

21. 10:02 and the market finally agreed on a direction--down

Dow 10,483.11 -55.55 (-0.53%)
Nasdaq 2,051.94 -5.43 (-0.26%)
S&P 500 1,118.56 -5.12 (-0.46%)
10-Yr Bond 4.293% +0.016

[54anickel]

18. Dollar Watch

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=s

Last trade 86.02 Change -0.05 (-0.06%)

Settle 85.63 Settle Time 08:36

Open 85.86 Previous Close 86.07

High 86.23 Low 85.73

Bit of a rally going on. Some blather to go with it (Snow must feel like the big Kahuna with Forex waiting on his every word):

http://www.reuters.com/newsArticle.jhtml?type=usDollarRpt&storyID=4085616&pageNumber=0

FOREX-Dollar rebounds in wait for ECB, US policymakers

The dollar clawed back ground after the previous day's record low against the euro on Wednesday as the market waited to see if European and U.S. policymakers would signal any concern over exchange rates.
The dollar also kept its balance against the yen, holding above the key 106 yen (JPY=: Quote, Profile, Research) mark amid wariness of a repeat of the previous day's suspected yen-selling intervention by Japanese authorities.

U.S. and European Central Bank policymakers have so far not signalled any concern about the dollar's steep fall against the euro, which the market has taken as a green light to continue selling.

U.S. Treasury Secretary John Snow is due to speak later on Wednesday and ECB President Jean-Claude Trichet holds a news conference after the bank's monetary policy meeting on Thursday.

"Will Trichet change his tone on the euro? The question he is also likely to be asked is at what level will they intervene," said Peter Fontaine, currency strategist at KBC in Brussels.

"Comments will be more important than economic data in the next few days. Snow a few weeks ago saw no problem with the dollar, so maybe he'll give a hint."

"No one is expecting a rate move from the ECB tomorrow but people are wondering if Trichet makes a comment about the euro which signals European policymakers are not as relaxed about its rise as they had been thinking," said Shahab Jalinoos, senior currency strategist at ABN Amro in London.
"But all this could change rapidly with Snow speaking later."

If Snow repeated his recent stance that the dollar's fall was orderly and not undervalued, the market would take that as a dollar sell-signal but a comment suggesting he was more concerned would be a catalyst for a dollar correction, Jalinoos said.


JAPAN CLEAR

There was no such ambiguity regarding the yen.

Traders in Tokyo suspected the Bank of Japan had continued to intervene to sell yen in the Asian session after it was detected in the market on Monday and Tuesday, but there was no confirmation of any action.

[54anickel]

23. The Fundementals of a Falling Dollar (Mises paper)

http://www.mises.org/fullarticle.asp?control=1394&id=63

One of the more confused propositions in the realm of currencies and exchange rates is the belief that the value of a currency is measured or determined by the exchange rate. For example, the dollar has fallen about 13 percent against the euro in this year and has lost about a third of its value against the euro since mid-2001. This makes some people believe that the value of the dollar has fallen and the value of the euro has risen. From observing the exchange rate, people do make inferences about the value of each currency.

I respectfully challenge that view. The exchange rate is a measure of the relative value of these two currencies, not the value of the dollar or the euro per se. We cannot a priori rule out either that both the value of dollar and the euro has risen lately but the euro a bit more, or that both has lost in value but the euro less, or that one of them has kept its value and only the other changed. I believe both have lost value since mid-2001, as we shall see below, only the euro has lost less.

It is not possible to determine the change in the value of a currency between two dates by looking at the change in the exchange rate. Similarly, it is not possible to infer the future value of a currency from an estimate of the future exchange rate, indeed, not even if one knew what the future exchange rate was. Instead, it runs the other way around. It is the value of one currency in relation to another currency that is the fundamental determinant of the exchange rate. One has to start by assessing the future value of the currencies that one wants to estimate the future exchange rate of.

more....

[JNelson6563]

22. 10:00 and getting dark

Dow 10,488.07 -50.59 (-0.48%)
Nasdaq 2,053.58 -3.79 (-0.18%)
S&P 500 1,118.85 -4.82 (-0.43%)
10-Yr Bond 4.289% +0.012


We could all feel better with a new Mercedes. What do you mean you "don't have the $$"?? It's only paper, afterall. ;-)

I'm out to trade some paper for food and car insurance. Ah the glamour!

Julie

[Maeve]

26. 11:52 and back to mixed

Dow 10,505.70 -32.96 (-0.31%)
Nasdaq 2,062.17 +4.80 (+0.23%)
S&P 500 1,121.42 -2.25 (-0.20%)
10-Yr Bond 4.256% -0.021

[54anickel]

27. Snow job....Playing politics as usual

Some snippets:

http://www.sfgate.com/cgi-bin/article.cgi?f=/news/archive/2004/01/07/national1117EST0542.DTL

Snow: rebounding economy expected to help cut federal deficit in half by 2005

Snow rejected calls by many of the Democratic presidential candidates to roll back some or all of the president's massive tax cuts, which they blame as a major factor in the exploding federal deficits.

Snow said that instead of rolling back the tax reductions, which Democrats contend have gone overwhelmingly to the wealthy, they should be made permanent. He said if the 2001 and 2003 tax cut bills had not been passed, 109 million taxpayers would face tax bills this April 15 that would be on average $1,544 higher.

Commentary: Big deal, my property taxes went up $1,300 this year. Meanwhile my weekly pay increased a whopping 6.50 thanks to those tax cuts. Oh, ya he's using that average savings again!

Snow said that the federal government does face a deficit "in the $500 billion range" in the current fiscal year, which would be a record in dollar terms. However, Snow said this deficit will represent roughly 4.5 percent of the total economy, as measured by the gross domestic product, compared with a modern-day peak of 6 percent set in the 1980s when Ronald Reagan was president.

Commentary: Oh, thanks for those fond memories of Raygun. Like suddenly the 80's were the good old days?

But he also conceded that the deficits are a "matter of concern" that the administration intends to deal with by working with Congress to impose spending restraint on government programs.

"With adoption of the president's policies, our projections show a solid path toward cutting the deficit in half, toward a size that is below 2 percent of GDP, within the next five years," Snow said.

While Bush has emphasized repeatedly the need to rein in spending, overall federal expenditures have grown to an estimated $2.31 trillion for the current budget year that started Oct. 1. That is up 23.7 percent from the $1.86 trillion spent in President Clinton's final year, a rate of growth not seen for any three-year period since 1989 to 1991.

Much of the increase stems from the fight against terrorism and wars in Afghanistan and Iraq. Also expanding relentlessly have been huge programs such as Social Security, Medicare and Medicaid, which grow automatically with inflation, higher medical costs and more beneficiaries.

Starve the Beast

But conservatives have complained about the 31.5 percent growth in discretionary spending since Bush took office. That is the one-third of the budget lawmakers approve annually for defense, domestic security, school aid and everything else except Social Security and other benefits. Such spending grew by an annual average of 3.4 percent during the Clinton administration's eight years in office.

[Robbien]

28. A very interesting article from GovExec Mag

entitled Half the Deficit is All Spin

snip

For a large number of reasons, this talk should be discounted completely.


First, the White House is not promising to cut the deficit in half from current levels but only after its tax and spending policies have increased it to $500 billion or more. That means that cutting the deficit "in half" could leave it at about $250 billion. Not only is this not a 50 percent reduction from the $374 billion deficit recorded in 2003, but compared to the $236 billion surplus recorded the year before the administration took office, a $250 billion deficit would still be a serious deterioration in the budget outlook regardless of how rosy the administration tries to make it sound.
. . .

Second, the White House has refused to explain whether it means the deficit will be cut in half in nominal terms or as a percentage of the economy. This distinction is quite important. Unless revenues start to flow to the Treasury much faster than they are currently expected to do, cutting the deficit in half in nominal terms -- from $500 billion to $250 billion, for example -- will require actual spending reductions or revenue increases. That, of course, would have a significant impact on federal policies and be politically painful.

But cutting the deficit in half as a percentage of GDP could be accomplished without significant changes if the economy is assumed to grow substantially over this same period.
. . .

Third, cutting the deficit in half by 2008 really means that the administration will merely be projecting what will happen four years from now based on the continuation of current policies. But in many cases, the current policies have already been abandoned. At the same time that it has been touting the deficit-reduction powers of the assumptions in place, the White House has been considering additional tax cuts and making the already-enacted tax cuts permanent. Then there are the near-certain additional expenditures for activities in Iraq, which have not been factored into the cutting-the-deficit-in-half calculation.

and the list in the article goes on and on

http://www.govexec.com/dailyfed/0104/010704bb.htm

[54anickel]

30. Great article, thanks for posting. A couple of notes

Unless revenues start to flow to the Treasury much faster than they are currently expected to do, cutting the deficit in half in nominal terms -- from $500 billion to $250 billion, for example -- will require actual spending reductions or revenue increases. That, of course, would have a significant impact on federal policies and be politically painful.

But cutting the deficit in half as a percentage of GDP could be accomplished without significant changes if the economy is assumed to grow substantially over this same period.

Snow: "With adoption of the president's policies, our projections show a solid path toward cutting the deficit in half, toward a size that is below 2 percent of GDP, within the next five years," Snow said.
Snow said this effort would "dramatically" improve the budget situation.

This has been tried before. In the early years of the Reagan administration, Office of Management and Budget Director David Stockman and Council of Economic Advisors Chairman Murray Weidenbaum came up with an economic forecast that was very optimistic, widely derided and ultimately inaccurate. In the interim, however, it allowed the administration to project smaller deficits.

Snow: Snow said that the federal government does face a deficit "in the $500 billion range" in the current fiscal year, which would be a record in dollar terms. However, Snow said this deficit will represent roughly 4.5 percent of the total economy, as measured by the gross domestic product, compared with a modern-day peak of 6 percent set in the 1980s when Ronald Reagan was president.

Finally, and most important, the pledge to cut the red ink in half by 2008 doesn't say anything about whether a $250 billion deficit will be the appropriate fiscal policy at that time. If the administration gets the continuous economic growth it is promising over the next four years, it is possible and perhaps even likely that a $250 billion deficit will be far too high. The converse is also true; a $250 billion deficit in 2008 could be too low if the economy is not growing.

That is why simply saying the deficit will be cut in half by 2008 makes no sense from an economic perspective. The fact that the administration is saying it under these circumstances should make everyone realize that it is doing so for a completely different reason

Snow: MEANINGLESS DRIBBLE

[punpirate]

41. As with the Ronald McDonald administration...

... these guys are banking on revenues pulling their butts out of the fire. Two things will interfere with that--they're, in concert with Congress, helping to reduce corporate tax loads to all-time lows, which reduces revenues, even though the economy, per se, may be improving.

The second fly in this ointment is the "jobless" nature of the recovery. The country continues to lose jobs, either to closures or moving jobs offshore (a trend that seems to be accelerating), and job growth is effectively negative. Those people finding jobs after layoffs are doing so for less money, and those keeping their jobs are not seeing big increases in wages. That means overall revenues from the workforce are going down, as well.

Add in another tax cut for the Lamborghini crowd and this becomes just more trickle-down fiction. The end result of the Reagan years was a massive increase in total debt. The end result of the Bush years will likely be penury.

[Robbien]

29. There are also warning signs that China may stop buying dollars

The NYT article today states that China is announcing today that it will be bailing out two of its four government-owned banks (going bad due to executive fraud).

http://www.nytimes.com/2004/01/07/business/worldbusiness/07bank.html?pagewanted=print&position=

Buried further in the article are these two statements:

But a financial expert who insisted on anonymity said the two big banks were required to keep the money in dollars, which would make it easier for the central bank to continue preventing traders from bidding up the value of the yuan. The central bank has been printing yuan on a vast scale to buy dollars and prevent its appreciation. It has then taken some of the extra yuan out of the financial system by selling bonds and withdrawing from circulation the money used to pay for them.
. . .

The central bank now keeps the yuan in a tight range around 8.28 to the dollar. The financial expert said government officials had promised the two banks that they could exchange the dollars for yuan later if necessary at a rate of 8 to the dollar. This would act as a hedge against losses if the yuan does appreciate. It could also suggest an acknowledgement by Beijing of an eventual appreciation of the yuan.

Yikes.

[Frodo]

34. Are you sure you're reading that right?

China has tied it's wagon to the dollar partly because of the voulume of business we do with them, but also in this case because it help them boost their exports.

They've got a couple HUNDRED million people they need to employ over the next couple decades and probably WANT the currency to be tied to a weak dollar. Their exports become more affordable for the rest of the world BUT not more expensive to the US.

[54anickel]

35. I had posted something to that effect a while ago. China has decreased

buying our dollars (face it they get more than their fair share of bucks just in trade).

They have been working feverishly on building up both their oil and gold reserves. Can't find the article right off the bat, but I know it's out here. China has the lowest gold reserves around and feel threatened by that. They have recently allowed the public to hold gold as well, so that's a change. The oil reserves take top priority now, but they are working on both.

[mrsteve]

31. 1:08 - after a morning rise, moving sideways

Looks like a little post-lunch lull, after a late morning move off the lows.

Dow 10,518.96 -19.70 (-0.19%)
Nasdaq 2,067.18 +9.81 (+0.48%)
S&P 500 1,123.34 -0.34 (-0.03%)
10-Yr Bond 4.271% -0.006

[54anickel]

33. A glimpse at the trade deficit re: US Exports it ain't pretty

http://www.upi.com/view.cfm?StoryID=20040102-032245-7065r

The Bear's Lair: Where are the exports?

snip>
However, this will be very difficult. Total exports of goods and services in 2002 were $982.8 billion, compared with imports of $1,401.4 billion, a deficit of $417.6 billion, which has widened to around $500 billion in 2003, as imports have increased by around the same percentage as exports, but from a much higher base. With exports around $1,000 billion, and the trade deficit around $500 billion, the problem is clear: the deficit needs to narrow by a figure which is fully 50 percent of current export volume.

The decline in the dollar we have seen so far will have some effect, not yet apparent because of the delays involved. However, even at $1.26 to the euro, the dollar is only at its 1997 level, so it's worth looking at U.S. export sectors, to determine where the 50 percent increase in exports will come from, that will be necessary to balance trade without a sharp decrease in imports and consequently in living standards.

The most important single 3-digit SIC code for U.S. exports in 2002 was not aircraft, as you might have guessed, but code 776, "thermionic, cold cathode and photo cathode valves" with $47.6 billion of exports. Presumably these are not being used for radio equipment, as would have been the case in 1925, but for medical imaging equipment. A good business, but probably not one capable of growing exponentially (exports from the 77 sector as a whole grew by only 5 percent in the five years 1997-2002.)

Second is indeed code 792 -- aircraft and associated equipment, at $44.9 billion. The passenger aircraft business is close to a world duopoly, between Boeing and Airbus. Boeing could normally be expected to gain market share as the dollar declined, making its costs more competitive against Airbus. However, the company has spent too little on innovation in the last 30 years, and is now losing world market share rapidly to the newer product range of Airbus. Exports in this sector are likely to decline going forward, and imports to increase.

Third is code 784, parts and accessories of motor vehicles, with exports of $29.2 billion. This is part of an enormous 2-way trade in the motor vehicle sector, in which the U.S. is in huge overall deficit (motor vehicle and parts exports were $60.3 billion, imports $168.7 billion.) It would be nice to think that the parts exports were ending up in China, and benefiting from that country's excitingly rapid growth. In the long run, I doubt it; the Chinese do not appear to be driving Buicks, and parts manufacture for China is generally cheaper and more efficient either locally in China or in South East Asia.

Fourth is code 752, "automatic data process machines" (don't you love the 50s terminology?) at $27.4 billion. Ah, at last, you think, a sector with some real chances for export growth! Wrong. Exports for the office machinery sector as a whole have declined from $51.6 billion to $39.7 billion in 1997-2002, and the United States is now in large deficit, with sector imports of $77.0 billion.

Fifth is sector 764, telecommunications equipment, with exports of $26.1 billion. However, that too was down on 1997, with the bursting of the telecom bubble, and the sector's trade deficit was $41.4 billion, quadrupling since 1997. Again, not an apparent growth area.

You get the general idea. With the possible exception of the valves, there are few big sectors in which the U.S. is both competitive and likely to expand its exports rapidly. Of course, if the dollar declines enough, exports will rise purely on a price basis, and imports decline. But exchange rates will have to move a very long way to make this happen.

Expect a bumpy road on the U.S. balance of payments front going forward, a further severe decline in the dollar, and substantial upward pressure on import prices to consumers. The long vaunted superiority of U.S. living standards over those in Western Europe and Japan may now be about to disappear.

[mrsteve]

48. This is what I am curious about

We have have a huge trade deficit right now. Thus, we are importing a lot of foreign made consumer products.

Due to the fact that the dollar has dropped 30% against the Euro in the last year, and also dropped 10 - 20% against many other currencies, shouldn't these imported product in the US be significantly more expensive? And wouldn't this show up as inflation, (unless * and company are cooking the books)?

Obviously, this is somewhat counteracted by the actions of one of our biggest trading partners, China, that has held their currency pegged against the dollar, but what about the other 80% of US imports that don't come from China?

And note that as the price of imports rise, domestic producers use this as an excuse to raise their prices also, thus even domestic product prices creep upward as the dollar drops.

The dollar has been dropping for 12 months.

Yet the Fed tells us that there is almost no inflation right now.

What gives?

[54anickel]

36. Dollar update - more rallying

Last trade 86.21 Change +0.58 (+0.68%)

Settle 85.63 Settle Time 13:37

Open 85.86 Previous Close 85.63

High 86.23 Low 85.73


Pretty much an upward trend since 11:00 am. I have a hard time believing it is based on the Snow job.

[Maeve]

37. 2:53

Okay, the Dow gets E-ticket status today :crazy:

Dow 10,494.66 -44.00 (-0.42%)
Nasdaq 2,068.45 +11.08 (+0.54%)
S&P 500 1,121.82 -1.85 (-0.17%)
10-Yr Bond 4.228% -0.049

[JNelson6563]

39. 3:12 pandemonium!

haha Just kiddin'. Wanted to see if anyone's payin' attention. ;-)

Dow 10,493.55 -45.11 (-0.43%)
Nasdaq 2,069.98 +12.61 (+0.61%)
S&P 500 1,122.59 -1.08 (-0.10%)
10-Yr Bond 4.242% -0.035


Looks like things have settled down in Treasuries. It was quite a rally after the 5yrs hit but the excitement has died down.

So DOW bad. Nasdaq good. S&P flat.

How's that for summary?

Julie

[Frodo]

40. Ahhhh!

Sky is falling!

Sky is falling!

edit. Oh wait. You got me. (How do I cancel "sell" orders?)

[Maeve]

43. 3:46 summary (Julie mode)

Dow mediocre, Nasdaq very good, S&P eh!
:P
Dow 10,519.26 -19.40 (-0.18%)
Nasdaq 2,075.79 +18.42 (+0.90%)
S&P 500 1,124.88 +1.20 (+0.11%)
10-Yr Bond 4.246% -0.031

[mrsteve]

44. Parallel posting...

:crazy:

[Frodo]

45. Is that like calling "Jinx"??

[mrsteve]

47. Sort of...

More like it's annoyance that my brilliant prose comentary on the same market numbers is overshadowed by someone else who just happens to have an entry higher on the web page than I do. :evilgrin:

You know I love ya Maeve!

[Maeve]

49. I prefer to call it "synchronized posting"

radfringe and I used to get on the same wavelength and do that ALL the time!
Catch ya on the flip side!

[mrsteve]

42. 15 minutes to go

A little profit taking on the Dow, a somewhat steady rise in the Nasdaq

Dow 10,515.18 -23.48 (-0.22%)
Nasdaq 2,074.75 +17.38 (+0.84%)
S&P 500 1,124.43 +0.76 (+0.07%)
10-Yr Bond 4.246% -0.031

[mrsteve]

46. Closing numbers

Little changed from 3:30.

Dow 10,529.03 -9.63 (-0.09%)
Nasdaq 2,077.68 +20.31 (+0.99%)
S&P 500 1,126.33 +2.66 (+0.24%)
10-Yr Bond 4.246% -0.031

Overall for day, Dow OK, S&P better, Nasdaq best.

How's that for brevity? See everybody tomorrow...