Daily Thought 08-06-10

  • Bernanke: Increase in unemployment hasn’t materially affected the economy, but raise in  oil and energy price has added upside risk and now number 1  concern at FOMC.   http://online.wsj.com/article/SB121305516121159161.html?mod=hps_us_whats_news
  • JPMorgan: Current increase jump in unemployment might misinterpret current economy, not because there are fewer jobs, but more are looking for jobs, as result of increase in living expenses. so what happens when more troops coming home?
  • In 2001 after 9-11, consumer spending carried economy through the slow down by invest in housing, is consumer spending going to carry us through this slow down through increase in energy spending? Housing in 2001 is an investing act, the current energy spending can be a thrift act and cutting corner and cost else where. 
  • How money is flowing? 2001, end of dot-com bubble -> fear drove people away from stock -> low mortgage rate of 6% -> cause people to move money toward housing -> new purchase create more far spending due to furniture’s and etc. -> Stimulate economy + large speculative play -> housing bubble today. Today: Housing bubble -> fear in housing -> stock correction + economy correction -> fear in stock -> where will money go?  -> holding money -> recession -> but high energy cost and living expense + technology boom -> lead to some circulation. -> with war end, soldiers returning home yield more unemployment and decrease in Gov defense spending.
  • Economists like the Chairman of FOMC are smart, Bush is economically ignorant, is Bernanke concern been carried out by congress?
  • Central banker adjust interest rate several times a year and accordingly with the economic cycles and trends, so shouldn’t your portfolio do the same?
  • Trust is an important requirement to free capitalism, when is China going to catch up to US with so little of personal trusts and overwhelming amount of deceive? “Reputation and the trust it fosters have always appeared to me to be the core required attributes of market capitalism.” -Greenspan
  • Another point on the China economic growth, the general China public seems to have aspire for the security of goverment job, seems to be especially true in the current market force, but risk taking is essential for economic growth. Like the bullet above, the general China mentality is not there on par with US, yet.  
  • Some of the problems in China include the banking system, monetary and exchange issues, all possibly signals to inflation ahead. As the current China policy tighten its credits, can it effectively contain the inflation or is it already destined to burst and lead to the “china bubble?” Many problems as result of the last decade economic reform formlated with Deng Xiaopen will finally sureface?  ref: pg300 Greenspan,
  • “The natural effort of every individual to better his own condition … is so powerful a principle … capable of carrying on the society to wealth and prosperity.” – Adam Smith. Thus we must do or work on what we love to do. “free to pursue his own interest his own way” creates motiviation, which generate greater productivity which leads to prosperity. Individual who compete for private gain as if “lead by an invisible hand.” This, at management level, leads to the importance of incentives for growth.
  • Growth = productivity + quality of product.