1/8 newsletter
*** Market
General market has been doing very well in the first week of 2006. Major indexes rose more than 3% to another new high, continuing its bull march, with international funds advancing most. The reason? FED is loosening up its language of further rate increase in light of a potential inversion of yield curve. This cap of short-term rate gave bulls new weapon to march on (although not all stocks participated in it). Enjoy the wonderful January effect.
IBM will terminate its defined pension plan in 2008. I guess Merck and other blue chips will follow very soon... One reason that I joined Merck is diminished, too bad. Henry told me this is because of the new accounting rule on pension and stock option. These items historically are off-balance sheet, and now they are required to show up in balance sheet. These areas have been abused by many companies and severely criticized by sensible investors. I think in the future labor market, the employee compensation will be "mark-to-the-market" and compared dollar-to-dollar. Therefore, this is one step further in Greenspan's vision of creating a "very flexible" labor market (Does it sound aweful?). He thinks this is critical to the competitive advantage of this captial economy. The economic structure, in his view, should allow employer to allocate (meaning add and remove) labor dynamically just as the capitalist adjusts positions among different stocks. You can not create a liquid market unless you can compare apple-to-apple (labor) on a mark-to-market basis. Once all the perks are removed, labor will be transferred "easily" between companies ( from employer's point of view first, please).
There has been a debate on the future of dollars if you are a Buffett fan. Buffett and major bankers have bet dollars downfall, but dollar strengthened 14% in 2005. (You need to substract this amount when looking at international funds) They still believe dollar will fall once rate stops increasing because of the extremely weak fiscal discipline of the Administration. We will see if this indeed happens in 2006... (It will affect on how hot money is allocated across the border.)
Steve
General market has been doing very well in the first week of 2006. Major indexes rose more than 3% to another new high, continuing its bull march, with international funds advancing most. The reason? FED is loosening up its language of further rate increase in light of a potential inversion of yield curve. This cap of short-term rate gave bulls new weapon to march on (although not all stocks participated in it). Enjoy the wonderful January effect.
IBM will terminate its defined pension plan in 2008. I guess Merck and other blue chips will follow very soon... One reason that I joined Merck is diminished, too bad. Henry told me this is because of the new accounting rule on pension and stock option. These items historically are off-balance sheet, and now they are required to show up in balance sheet. These areas have been abused by many companies and severely criticized by sensible investors. I think in the future labor market, the employee compensation will be "mark-to-the-market" and compared dollar-to-dollar. Therefore, this is one step further in Greenspan's vision of creating a "very flexible" labor market (Does it sound aweful?). He thinks this is critical to the competitive advantage of this captial economy. The economic structure, in his view, should allow employer to allocate (meaning add and remove) labor dynamically just as the capitalist adjusts positions among different stocks. You can not create a liquid market unless you can compare apple-to-apple (labor) on a mark-to-market basis. Once all the perks are removed, labor will be transferred "easily" between companies ( from employer's point of view first, please).
There has been a debate on the future of dollars if you are a Buffett fan. Buffett and major bankers have bet dollars downfall, but dollar strengthened 14% in 2005. (You need to substract this amount when looking at international funds) They still believe dollar will fall once rate stops increasing because of the extremely weak fiscal discipline of the Administration. We will see if this indeed happens in 2006... (It will affect on how hot money is allocated across the border.)
Steve
posted by Steve at 10:34 AM
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