Economists

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

al@mutualfundstrategy.com; 1-888-345-7870

---

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Investing in the Stock Market

From the book 'The Stockopoly Plan' by the author Charles... Read More

Precision Money Management

This article describes the model of a natural relationship between... Read More

What Does it Take to be a Stock Trader?

It takes a total mental commitment to the task. It... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the... Read More

A Triple Dipper: How to Make 3 Profits on 1 Stock Trade

This is a rather simple strategy with which I am... Read More

Municipal Bonds

Because there are so many stocks that are NOT paying... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Financial Crime

Congress recently passed another new law that is supposed to... Read More

Size Counts!

What the heck am I talking about?It is often said... Read More

Psychology ? How to Reduce Negative Thoughts Relating to Trading?

The thinking process of the brain relating to the... Read More

Forces that Move Stock Prices

Among the largest forces that affect stock prices are inflation,... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

Living Trust Investing: Income Considerations when the Grantor Dies

A common problem I often see when working with living... Read More

The 1% Solution

You probably know the story of Sherlock Holmes and the... Read More

Are You A Stockaholic?

Today's society gives special recognition to alcoholics, sexaholics, binge-aholics, shopaholics,... Read More

The Inside Scoop on Mutual Fund Rip Offs

The bear market that showed up at the end of... Read More

Which Way The Market

I am hearing predictions by brokers, financial planners, talk show... Read More

Making Outsized Returns in the Stock Market - Using the Dow Theory

The Dow TheoryCharles H. Dow... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend... Read More

Gurgle Gurgle

Caught in a whirlpool and being sucked under. No life... Read More

The Stock Market - Part 1: Believe It Or Not, Its Always Been Your Best Friend And Always Will Be

Regardless of the fact that the world's stock markets have... Read More

The Skinny on Mutual Fund Investing

Mutual fund investing is a lot like Thai cooking. Everyone... Read More

The 10 Commandments

Wall Street has been preaching for years and years to... Read More

A Penny for Your Stocks

According to Investopedia Inc. the penny stock market has seen... Read More

Overvalued & Underbought

With all the bad news that has been dumped upon... Read More

Seecrets on Investment: Tired of Making Huge Losses in the Stock Market ? Part 2

Fundamental analysis.Fundamentals analysis says the best way to predict the... Read More

Inertia Syndrome

When it comes to buying a stock or mutual fund... Read More

How To Buy And Hold

One of the most believed bits of conventional wisdom from... Read More

How To Pick A Mutual Fund

Mutual funds by definition are a mixed bag of stocks,... Read More

The 401(K): How The Insider Has Stolen Your Retirement!

Mutual funds were moderately successful in creating a presence in... Read More

Structured Settlement; Lawyers in NY and Mutual Funds

Minority Report the movie may not be far off if... Read More

Enronization

Even if you don't own any of their stock or... Read More