Financial topics

[Marc]

In regards to the prison-industrial complex, I do remember reading recently (sorry, I don't remember the source) that a company that was manufacturing electronic parts decided to move production from overseas to a prison in Texas, since the prison scheme cost-wise beat what the Chinese and others could offer. It does make you think.... —Best regards, Marc

[Trevor]

I haven't heard anything about that, to be honest. Most of my focus is on the economic situation in Europe and to a lesser extent in the United States. Reminds me of a chinese curse: "May you live in interesting times."

[OLD1953]

Business will move from China to the US for two reasons, because the unit cost of production is now comparable, and because the US now has improving supplies of many raw materials.

I remember hearing about the China to prison story, but I don't remember the details. I'm not surprised, a fairly large percentage of prisoners are working now, mostly minimum security prisons of course.

If you've never visited this website, it's worth a look. If you've never been there before, it's an eyeopener. A hidden industry with 100's of thousands of employees, that makes or works on almost anything you can imagine, all part of the federal government.

http://www.unicor.gov/

[Trevor]

Maybe, but I think there's another reason as well. China doesn't look nearly as stable as it did a decade or two ago. In 2011, their number of "mass incidents" were close to 200,000 and I imagine it will go up even more this year, assuming war doesn't break out. Seeing that kind of risk, fewer companies are going to set up shop over there.

[aedens]

Business will move from China to the US for two reasons, because the unit cost of production is now comparable, and because the US now has improving supplies of many raw materials.

I remember hearing about the China to prison story, but I don't remember the details. I'm not surprised, a fairly large percentage of prisoners are working now, mostly minimum security prisons of course.

If you've never visited this website, it's worth a look. If you've never been there before, it's an eyeopener. A hidden industry with 100's of thousands of employees, that makes or works on almost anything you can imagine, all part of the federal government.

http://www.unicor.gov/

Note: By law, UNICOR may only sell its products to Federal departments, agencies, government institutions, and their authorized contractors or representatives.

Except the taxpayer who must support it or is incarcerated. I could compile a list that would astound the public to sticken disbelief
but internal business strictures cannot be conveyed to sectorial realities coped with.

[Higgenbotham]

"On the morning of August 24, 1857, the financial community of New York was horrified by the announcement of president Charles Stetson that his city branch of the Ohio Life Insurance & Trust Company had suspended payments. Men quickly learned that the house, which did a heavy business in western investments, had liabilities of from five to seven millions - and that its assets had been largely embezzled by the cashier. The economic situation had been uneasy. A panic now struck, sudden and devastating as a tornado. Stocks fell to incredible levels; commodity prices sank; bankruptcy followed bankruptcy."

"During the spring and summer of 1857, talk of an imminent financial crash had spread throughout the country. Bankers and tradesmen discussed it; the press was full of it. "A Coming Crash" - such was the title of an editorial in the New York Tribune of June 25. The London Economist echoed the dark prognostications of the New York Shipping List.

Yet to most Americans, confident in their resources and energy and encouraged by favorable crop reports, the blow that fell in August was stunning. Till the middle of the month the stock market remained fairly vigorous. At home, hopes of peace in Kansas remained high; abroad, the only serious trouble was the Sepoy revolt. On August 11, one of the oldest flour and grain houses of New York, NH Wolfe & Co., failed. Then came the Ohio Life & Trust crash, and alarm became universal."

I last posted this on July 23. This morning's conditions reminded me of this again. The Presidential race is now in turmoil but nobody seems concerned. Ardent market pessimists around the web are saying, yes, stocks are going lower but not quite yet. They have various reasons for saying this and the reasoning is solid, technically speaking.

At the same time, I would have to suggest that the above quote seems even more applicable than it did on July 23. Panic conditions arise from the mindset that, yes, an "imminent financial crash" is ever so close, but just not quite yet.

[Trevor]

What I'm noticing is that more and more people are becoming pessimistic. A couple of years ago, many were saying that this is a temporary blip, that we'd soon be roaring back to recovery. Now that our economy has been in the tank for three years, we're not seeing too much of that anymore.

Within the first weeks of 2012, S&P downgraded European countries. Now one rating agency or another has been doing this every 2-3 weeks all through 2011, but this time around, 9 countries were downgraded, with France and Austria losing their precious AAA rating. By the end of this month, Fitch intends to follow, with plans to downgrade 6 countries, some by one notch, others by two. I haven't heard what Moody's is going to do, but I'm sure they'll follow.

Now I think people are really starting to realize what we're going to face. If downgrades are coming in large waves now, instead of in trickles, we're in enormous trouble. At this point, it's not so much trying to fix the problem as it is trying to contain the damage.

[Higgenbotham]

In thinking about that quote about the conditions leading up to the 1857 panic a bit more, "favorable crop reports" at that time in history would translate to "favorable employment reports" in our current economy. America has recently become more confident in its ability to produce, as vast natural gas reserves have been discovered, slightly more oil is being pumped, and some manufacturing jobs are coming to the US. Yet, on the other hand, the conservative whites have just "announced" via the primary results in South Carolina yesterday that Newt Gingrich may be their candidate of choice, which would lead to a very divisive election and I think set up conditions where violence may break out in the US following the election, no matter who wins. The US is a country with a real problem in that it is unable to honestly discuss its racial problem and there is in fact a lot of latent racial hatred in the country that is going to come to the surface once the economy deteriorates. The only thing holding this fetid Tower of Babel together for the past 40-45 years has been world reserve currency status, waves of debt and so-called prosperity, or, in the case of those who didn't partake of the prosperity, free money from the government. That can all change in the blink of an eye, regardless of what the VIX is doing.

[John]

One thing that I've heard several times on TV recently is that
"bearish sentiment" is at a historic low. Only 17.2% expect the
market to decline, down from 50% in August.

This is being interpreted as a sign that the "rally" is over, since
"optimistic investors have already purchased shares, leaving less
money to help drive prices higher."

http://www.bloomberg.com/news/2012-01-1 ... lysis.html

P.S.: As I'm typing this, I'm hearing a Democratic party person who
says that the Tea Party is dying because all indicators are that the
economy is improving.

[Trevor]

I haven't seen much indication of economic growth. The reason unemployment's gone down is simply because people have given up on looking for a job. There's little, if not nothing, out there.