Sunday, February 27, 2011

Rich get Richer

"Americans" are increasingly irrelevant in terms of work. Most are just spending their inheritances and benefits built up in the past and are borrowing from China to buy more from China. Many are addicts, porn stars, ball players, game players, TV, Radio, ipod listeners who cannot function in school or the workplace and have negative net worth. Businesses have for decades been hiring Mexicans to cook, clean, grow and do most manual labor. And they have hired Chinamen and Europeans to do the highly paid thinking work (attend professional and academic conferences to verify this fact in person). "Americans" have never owned America. Most wealth is concentrated in a few hands, mostly Europeans who have financed the continent from the beginning and some have immigrated here. It is exceedingly difficult to get data on ownership and family links and inheritance so this is not easy to track. Corporation ownership and operations are also global and data are hard to track. Private companies and individuals are huge and even harder to track. Some studies such as the below mine public data and get a few results but cannot uncover the extent of concentration. Corporations are an important form of wealth and help keep private companies, private wealth and governmental systems running to perpetuate the system. Corporations try to understate income to lower their taxes so actually earnings are greater than they appear. So the P/E ratio is actually lower than it appears and is falling. So stocks are good buys because of what you are buying into -- a big part of the global "empire" that can make more income than ever before and evade income taxes better than ever before. China and India may be buying lots of gold to hedge inflation (or jewelry) but they may buy even more stocks (maybe their own). The success of this "empire" or "new world order" depends on the accuracy of the economic theories they are using. Unfortunately economics is poorly understood by everybody including economists. So caution is advisable. However, it looks like the rich are getting richer and solidifying their ownership position globally. Obama may not like this but he is owned by them too. I just heard on TV today that he has a staff of 40 to go over everything he says in public. I don't think many of the politicians and talking heads know much about anything they are talking about. They are just actors reading scripts written by staffers. Like Keyes said: "Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back." Lets hope Obama learned enough at his home next to the University of Chicago, the world capital of libertarian economics and conservative Milton Friedman Monetarism. Professor Austan Goolsbee is his chief economic advisor is from U Chicago. If we cannot get tight money and smaller government out of this scenario then there are other forces at work we should pay attention to.

Friday, February 25, 2011

Stocks vs Gold

Stocks are becoming reasonably priced as earnings catch up to high stock prices. P/E ratios are not much above long term averages. Companies are making lots of money after firing a lot of workers and paying workers less. Many companies have big operations overseas where the economies are doing better than the USA. Interest rates are low and the cost of many imported parts are low. Taxes are under pressure to be lowered in many states to become more competitive. USA tax rates need to be lowered too to become more competitive. State workers are being fired, adding to unemployment. High unemployment rates drive down wages.

So profits are high. The stock market has come back since the crash but stock prices are still far below their peak. Gold and silver may be getting ahead of themselves. Foreigners may prefer a cheap fast McDonalds hamburger to gold jewelry. Stocks reflect essentials while gold jewelry is a luxury. Stocks pay dividends while gold does not. Stock prices will probably go up more than gold prices in the long run.