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

---

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

Invest, Be Wrong, and Make Money in the Stock Market

I have been trading for several decades and was an... Read More

NASDAQ 800?

In November of 2000 when the NASDAQ was trading at... Read More

The Inside Scoop on Mutual Fund Rip Offs

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

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

?Fears Only Enemy Is Action?

What a great statement!I just heard someone use it in... Read More

Perfect Storm

Having lived aboard a sailboat for 2 years I was... Read More

Low Tide

When you stand on the ocean shore and watch the... Read More

The Right Mutual Funds For Baby Boomers

If you are a baby boomer, time is not on... Read More

Adding Funds

Someday you may want to retire and continue to live... Read More

Do You Know What is the Single MOST Critical Mistake in Trading the Stock Market??

Well maybe that's overstating it a little, but it's certainly... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

Buying Stocks and the Importance of Correct Timing

An investor can find and research the best stock on... Read More

Mutual Funds: The Modern Den of Thieves!

Mutual funds were created with the idea that one person... Read More

Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke

Are you attracted to the idea of being in control... Read More

Traders, Defend Against the Dreaded Death Spiral.

It has often been said that there is only two... Read More

Dont Ask Your Broker

Unfortunately, most of you who are reading my column are... Read More

Alfred E. Newman

What! Me worry?Many of you remember the cover of MAD... Read More

You Don?t HAVE To Be Trading

As a novice trader, you'll often feel the need to... Read More

Never Lose Money

Never lose money in the stock market again. Yeah, I... Read More

Understanding a Stocks PEG Ratio

A PEG ratio cannot be used alone but is a... Read More

I Love You, Warren Buffet

Sometime around 1980, can't remember exactly, there was a flight... Read More

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the... Read More

Dont Lose All Your Money

That sounds like good advice doesn't it? Don't lose all... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor.... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and... Read More

Protectionism

First let's see what protectionism is. According to Mr. Webster... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Making a Stock Watch List

I am taking the time to help others learn the... Read More

Successful Trading ? Taking Profits - Part 1

So you're started trading, you bought some positions with your... Read More