In today's volatile and confusing stock markets everyone is searching for a guru who knows which way the market is going and when. Ask any economist and he will have an answer. Ask 2 economists and you will have 2 answers. Ask 3 economists - ad infinitum.
At the Federal Reserve Board we have Mr. Greenspan and all his economist Governors talking at each other about how to best micromanage the U.S. economy. Notice I said talking at and not talking with. Each one of them thinks he has the Holy Grail and knows exactly what to do. It has not occurred to any of them that doing nothing might be the best for everyone.
On April 27 there was an important economic statistic released. The Employment Cost Index gain was 1.4% which was more than expected by the investment community. This was considered to be negative for the stock market because the Fed is considered to be "anti-prosperity". This number shows more people are being paid more money. Mr. G. thinks this is inflationary. It is a theory he has dreamed up. Going back in history there is no actual correlation showing wage increases cause inflation. This is one of his own pet theories.
When you consider the fact that worker productivity has increased 4 times more than wages have risen it means more to the bottom line profits of corporations. The logic here is very simple. The companies are making more money even though they are paying higher wages and therefore do not have to raise prices on their merchandise. Maybe this is too simple for an economist. If I could make up a really complex formula I might be able to get his attention. Probably not.
This is just one statistic and I know Mr. G. and his money puppets look at hundreds of statistics, but please do not lay inflation on the justifiable wage increases of the workingman.
The base cause of inflation is too much money chasing too few goods. Today we have so much so much competition (goods) it is extremely difficult for almost any company to raise prices. Since profits are increasing 4 times faster than wages most companies will shave profits before they raise prices to their consumers because they do not want to lose their market share.
Large corporations usually have debt. In almost all cases this was money borrowed for plant and equipment. When interest rates rise there is nowhere to offset this cost as there is with wage productivity. This is a cost that ultimately must be passed along. As long as the company has room at the bottom line it can do so. Right now money is expensive, not tight. The Fed wants to slow the economy and it can do it this way because companies will cut back their borrowing for expansion. The economy will slow, but if they keep on doing it they stop everything and that means recession. Their thinking is backwards.
If you want advice on the stock market do not ask an economist.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
Mercedes Benz s500 rentals Salem ..Mutual funds by definition are a mixed bag of stocks,... Read More
As an investor you will want to check out any... Read More
One of the big advertising kicks today from mutual funds... Read More
As GuruFocus updates the stock buys and sells of gurus,... Read More
Much like the middle child, mid-cap stocks have long struggled... Read More
There are many important things you need to know to... Read More
It is finally catching up with them. The brokerage companies... Read More
Carefully thinking through your goal as a trader is of... Read More
Success in small cap & micro cap stock trading like... Read More
Who are the successful investors?There are those who follow the... Read More
As the man said, "I've got some good news and... Read More
I often play a little game with myself when I... Read More
The thinking process of the brain relating to the... Read More
As a novice trader, you'll often feel the need to... Read More
You should ignore analysts on TV, the radio, the newspaper... Read More
The date October 13, 2000 will forever be embedded in... Read More
Before you embark upon a journey of trading stocks or... Read More
Let's hope you did not have any of the Enron... Read More
What are you thinking when it comes to your no... Read More
Since I can remember, and that's a long time ago,... Read More
If you have talked to a stock broker or financial... Read More
According to Investopedia Inc. the penny stock market has seen... Read More
If there is one term over-used when talking about making... Read More
I have a 2-car garage. There are nice shelves on... Read More
If you're like many investors who squander those small dividend... Read More
Dowagiac cheap limo service ..As the man said, "I've got some good news and... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
Two weeks ago I wrote about what the Securities and... Read More
Are hedge funds a suitable investment for you? Hedge funds... Read More
Are you attracted to the idea of being in control... Read More
You must take the time once a month to review... Read More
Among the largest forces that affect stock prices are inflation,... Read More
Just 30 years ago the stock market was a shadow... Read More
This is a rather simple strategy with which I am... Read More
∙ Make every investment in the stock market a long-term... Read More
Inverted interest rates? What's that? Who cares? Even if you... Read More
What is leverage?Here is a definition of leverage from an... Read More
Picking a beaten-down stock requires a different kind of selection... Read More
If you are a baby boomer, time is not on... Read More
It has been said that low cost or even free... Read More
Invest in the stock market for the RIGHT reason, using... Read More
Reach in your pocket and take out that big roll... Read More
"If you don't know where you are going, any road... Read More
Exchange Traded Funds (ETFs) are a group of passive index... Read More
For the last few weeks we have seen the stock... Read More
During the month of January the Dow Jones Industrial Average,... Read More
For years investors have been taught to look into the... Read More
This is the continuing story of our two imaginary traders,... Read More
Recently I watched my favorite football team lose a vital... Read More
The stock market has been going up for more than... Read More
Stocks & Mutual Fund |