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Are Stocks cheap? August 3, 2013

Posted by hslu in Congress, Economics, jobs, Obama, Obamacare.
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You decide. Here is just one of its metrics.

P/E ratio of S&P 500; 1960 to August 2013

P/E ratio of S&P 500; 1960 to August 2013

Keep in mind that stocks do not have to be justified by what’s going on in the economy right now.

We also have QE3 by the Fed which has been manipulating the economy, the equity market and the Bond market. It also artificially lowered the savings rate at banks. of course, you already knew this when you opened your bank statements years ago. Bernanke justified his action by saying that inflation is low and people are more than compensated by the growth in the stock market and the equities of their houses. Besides Bernanke can hide behind his dual mandates from the Congress. But we have no where to hide but to chase yields at our own risk though.

The Fed has forced everyone to riskier assets. By doing so Bernanke has popped up the bubbles in equity market and the real estate market. By keeping the rate low, the biggest bubble is in the long bonds and not m=very many people knew it.

What if these bubbles are eventually popped by Fed’s own action? Will we get a bailout like the too-big-to-fail and too-big-to-jail banks? 

It appears that Fed’s money printing action will continue but September is a critical time. The stock market is probably betting on tapering starting in September.

Why? Isn’t the economy lousy?

Yes, the economy is very lousy. But:

About 69% of Fed’s money is not in the economy. Velocity of money is declining and the Fed knew it. The question you want to ask yourselves is this:

“Where is the growth in GDP?” and

“Where are the jobs?”

The trend doesn't lie

The trend doesn’t lie

All the Fed has managed to accomplish is a GDP growth rate of 1.7% in Q2 which is saying that the GDP has grown by the amount that roughly matches inflation. In other word, the economy didn’t grow at all in real terms. Despite all the QEs the Fed has done in the past.

And 162K new jobs created in July were not even enough to accommodate new entrants in the job market. The White House and liberal media hailed the new jobless number but they have stopped mentioning the fact that US economy has about 250K people entering the job market every month. In other words, the United States is falling behind very seriously.

Pretty amazing, isn’t it.

It is also very sad too.

In case you don’t know or you have been fooled by the 7.4% jobless rate headline number:

There are currently 90 million people who are not working in the richest nation in the world: The all mighty United States.

About 47 million of that 90 million people are on food stamps. No question that more than 47 million of that 90 million people are on other forms of government hand outs too.

That is about all Bernanke has been able to do.

Yeah, 7.4% unemployment rate! Great achievement by the Fed, Obama, and the Congress.

I have no doubt that Obamacare has something to do with the fact that part time worker has grown in the past several quarters.

More part time jobs created due to Obamacare

More part time jobs created due to Obamacare

Every where you see, you see the foot print by Obama’s failed policy which hinder job growth and business investments. The so-called middle class in the United States is disappearing and the United States has become a nation of hamburger flippers, hotel maids and night time stock persons at local Wal-Mart and maybe K-Mart as well.

This is the hallmark of the Democrat Party and the hall market of one of the most liberal president of the United  States: Obama.

Well, in conclusion, the Fed is very nervous of the unintended consequences of all the QEs they did in the past but they also knew  that they have no control of the Bond market.

To put it in simple terms:

The Fed has put itself between a rock and a hard place. Bernanke will probably do everything he can to taper. The economy may not let him to though.

We’ll have to watch the drama but we are actually one of the players in the drama as well whether we like it or not. Bernanke will retire and the “烂摊子” will be someone else’s problem by February, 2014.

He has had enough. I can tell.

But not to be too harsh on Bernanke on the eve of his retirement, he has to learn a lesson from Mario Draghi because Draghi has single-handedly calmed the European sovereign market without printing a single Euro.

History will be the judge on Bernanke. Not me. But his action will no doubt affecting my and your lives. We have no choices.

Well, I had enough QEs too.

But heck, no one listens to me. Not even my wife. LOL.

Krugman is at it again. January 21, 2011

Posted by hslu in China, Economics, Global Affair, jobs, Nursing, Politics.
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1 comment so far

Paul Krugman has been saying the same thing about the Renminbi for a long time. A bad economic theory from Krugman’s mouth can sound like true after he tirelessly say it a thousand times.If you ask 11 economists for their opinions, you get 12 answers. Krugman’s rant is the 12th answer here.
http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y
I am not sure that a stronger Renminbi is good for the US unemployment picture. The US may get a few thousand jobs here and there in the exporting industries but everyone in the US will pay more at Wal-Mart for goods coming from China. Is that good for the US economy? I am not so sure.
As of now, there is no other country in the world can replace China’s manufacture capacities. No one. In 10 years maybe. But not now.
No other country has the infrastructure to produce the amount of goods that China is exporting to the rest of the world now. If the US wants to blame someone, I am telling you that it was all Bill Clinton’s fault. His pro-Chinese policy triggered a tsunami of foreign direct investments rushing into China to build plants after plants. These American companies did it not because they don’t like American union workers. It was because they liked the Chinese worker much more. They don’t take 10 days of sick leaves a year. They don’t take 30 minute coffee breaks once every a few hours. They don’t read newspapers on company time. They don’t ask for double digit raises every few years. They don’t have fat pensions. They don’t have unsustainable health insurance benefits. They don’t come late and they don’t leave early. And they got paid at 1/5 or even 1/10 of the union wage doing similar work.
Who is the guilty party here? Americans, look into the mirror. That’s who. I haven’t mention that all these Amercian companies wnat to sell something to all these Chinese workers too.
The US promotes free trade. This is free trade. Live with it, Krugman.
The US has no one to blame but itself. Krugman, wake up and face the reality. It is not Renminbi problem. the problem lies with the costs of American workers. It is structural. It is system wide. There is no use to blame the Chinese currency. The America’s workers are not as competitive as you might believe. Period.
Hmm, did I mention other American problems such as QE2, The TARP, the first Obama stimulus and second smaller stimulus disguised as pay roll tax relief? The world will face a bigger inflation problem thanks to the Fed and US Congress. Is that what the world needs? Krugman?
So, shut up! Krugman!
Don’t talk up the Renminbi to hide the real problem of the United States. You can’t use a stronger Renminbi to compensate for a less competitive American worker force. If it ain’t so, the American companies will not move their capitals to China. They would more than happy to stay in the US. No one put a gun to the heads of these companies’ CEOs. They did it willingly. They did it with the support of their board members.

China is looking after its own interest just like the US does. What Krugman is not aware of or his sheer inability to think clearly is that China is not a pure capitalism country. The central government in China can direct significant power to where the problem is  that no US agency or Obama can match its effectiveness.What Chinese government is doing now is take a moderate, step-wise approach just like Chinese have been doing for hundreds of years.
What didn’t work in the Nixon era may be the right medicine in China if it is done judicially. Everyone predicted a 6+% inflation rate in December for China. It came in at 4.8%. Did you check your numbers, Krugman?
If the Chinese government wanted to, their actions can be swift and focused. As for the US, they have to weigh the pros and cons of every policy and each one of these policies is subject to attacks whether the government like it or not. As a Democracy, by default, many policies are moderate in nature at best because special interest groups will make sure it is so.
Except the ObamaCare which Democrats got it done behind closed doors, lie to the public, phony math and illegal bribes using public money. Well, that a topic for another day.


http://www.nytimes.com/2011/01/21/opinion/21krugman.html?_r=1&emc=tnt&tntemail1=y

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