G'day Penners,
Just been reading my *Bulletin*.
Else I'd have to mark.
Anyway:
1929 1998
Price-earnings = 20 PEs = 27
25% of US wealth was in stocks s/w = 50%
Savings ratio lower
Debt levels higher
Corporate earnings/GDP falling off
highest ever
So stocks are way over-priced, a fall would hit the economy harder, and
corporate earnings look unlikely to come to the rescue.
I see also that, just as bond yields are falling in the US, they've gone
from 9% in early '96 to a 30-year low of under 5% now. A year ago, funds
were exposed to shares to the tune of 37%; now it's 33%. Funds are slowly
opting to protect rather than accumulate.
Oz banks are charging more for corporate bank loans than they were a few
months ago. You'd want secure profit projections to invest under such a
regime, and we'd have to anticipate investment strategies are being
reviewed accordingly.
A very small number of very big secretive institutions constitiute most of
a multi-trillion-dollar derivatives market. We don't know how much they've
'unwound', because if they're as exposed as LTCM were (which competition
theory would indicate is possible), they might not be able to.
The culprits are the only fixers under our 'system'.
Finance ministers have bravely thrown one or two infinitesimal rate drops
('squashed bugs on the windscreen of the world's runaway deflationary
train,' as *The International Bank Credit Analyst called it*). Japan has
thrown a sum of rescue money at its banking system that probably represents
about 3% of the problem. The Euro is destined for a difficult birth (have
they considered abortion?) into a continent just beginning to punish its
workers for stalled investment and the considerable exposure Eurobankers
have all points south of San Diego.
The IMF is preaching Keynesian pumps all of a sudden - well, pumplets,
really (enough, as Arno's friend suggests to take a little pressure off the
US current account) - and India is going to build some roads. And the G7
have resolved not to do anything too brash - well, not to do anything,
period.
And the finance sector itself - well, its brave contribution has been to
say nothing, reconsider that rather retro notion 'risk', and downgrade
Latin American economies, thus blithely squashing investment options there.
Well, that's the papers for this week - but what if the finance sector is
but the apparent culprit on the surface? Do we dare presume there's
something underneath? Are we talking terminal OCC in the core here? We'd
be looking for hints like the following, wouldn't we?
- declining corporate profits (it's in 250 out of 500 Fortune annual reports);
- falling prices for capital equipment (check);
- increases in money spent on marketing (now 7 cents in every dollar);
- mad rush to invest money in as-yet uncommodified areas - via
privatisation (eg. public telecommunications infrastructure, public
service broadcasting, as is happening now);
- mad rush to avoid investing in manufacturing (and produce digitally
enhanced anarcho-liberal chaos instead);
- lots of takeovers/mergers ('nuff said);
- mad desire to hasten destruction of effectively excess capitals
everywhere but 'here' (aka 'Asian Crisis' etc);
- mad rush to weaken the power of the workers to exact a decent price for
their labour power (happening, both on the shop floor and by way of
a few prods at 'the reserve army');
- mad rush to cut the cost of the state's services (ie. chop tax
obligations ('nuff said);
- growth in investment in the arms sector (towards destroying contending
capitals with, er, more of that certainty business is always on about).
1998 gets 10/10 on that report card. What else should I be looking for?
Cheers,
Rob.
