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mlk_man's account talk
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mlk_man
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Ben Stein sees potential. :^
How Not to Ruin Your Lifeby Ben Stein
Finance Home > How Not to Ruin Your Life > Cement, Steel, and Stocks
Cement, Steel, and Stocks
by Ben Stein
Utility Links
If you are an inveterate reader of financial publications as I am, occasionally certain recurring themes pop up that tell a tale. The one I have been noticing lately is about two oddly basic materials: Cement and steel.
Let's go back a few months or a year ago or even a few weeks ago. The story was that because of immense building in China and India, because of the stunning U.S. housing boom, because of the need to rebuild in the Louisiana-Mississippi region after Katrina, building supplies were going to be in very short supply. This was going to drive up costs and inflation and harm the recovery. There were stories about builders in the Southeast simply being unable to get steel for building or cement for laying foundations even before the hurricane.
Now, Chinese and Indian steel mills are cutting prices dramatically to sell their products. Cement is not exactly being given away, but shortage conditions have eased very considerably. China's output of cement is growing so rapidly that it is forecast to become a net cement exporter soon (if it isn't already). This will have a huge effect on cement availability everywhere.
Inflation or Economic Slowdown?
All of this goes to a set of fundamental questions and answers about the world economy.
If building commodity prices, or at least some of them, are falling and if the supply coming from China is beginning to exceed the demand from China, what effect will this have on world prices? And if oil is collapsing in price (at least in the short run) as consumers show far more ability to conserve than had been expected, what effect will this have on the domestic inflation rate? To put it another way, if major commodity prices are falling on world markets, does this portend an explosion of demand or a world slowdown?
One of the few advantages of being 60 years old, as I am, is that I have lived through many business cycles. If memory serves, collapsing steel prices are often a harbinger of a world slowdown. If memory serves -- and here I know I am right -- collapsing prices of gasoline at the pump are a hint that the next inflation headline numbers will not be cause for alarm -- at least not for alarm in an upwards direction.
Let's step back. We have rising hotel room prices, rising air fare prices (but not for long), and rising wages for energy workers. Balanced against that is gasoline that's about 80 cents a gallon cheaper at the pump than it was a few weeks ago, steel off 30 percent from its high in the spring, and plentiful cement -- at least more plentiful than it was. The weight certainly seems to be in favor of less drama about inflation and more concern about growth.
What It Means for Investors
Surely, this means that the incoming Federal Reserve chairman, the brilliant Dr. Benjamin Shalom Bernanke, will not need to raise interest rates any further. This, in turn, means less pressure on long-term bond prices and a possible lowering of long term rates, including mortgage rates (which might breathe more life into the housing market ... this bubble may not be dead yet by a long shot). And above all for us stock market investors, a lower interest rate (or a halt in steadily rising rates) means that earnings are worth more because they are discounted back to the present value at a lower rate. This may sound complex, but what it basically means is that a dollar of earnings in 2010 is worth a lot more if interest rates are low than if they are high. This variable is one of the absolute basics of the stock market's valuations.
If the main factor working to keep stock prices in check has been inflationary fears and the interest rate fears that go along with inflationary fears, those factors may soon be gone. Alas, there is always an "on the other hand" and in this case, the "other hand" may well be forecasting an economic slowdown and a slowdown in corporate profits. But the signs of that are still few. What we are seeing is solid economic growth, a rapid return to a non-inflationary environment, and an interest rate that is friendly to stock holders.
Of course, there will be fluctuations, and there could be terrorism or a natural disaster. And a housing debacle (which I do not expect) could wreck consumer confidence. But the tea leaves about inflation are distinctly encouraging. There will always be peaks and valleys, but today looks like an awfully good time for the long term investor in broad indexes to jump in. Stocks are still trading at reasonable price-earnings ratios and price-book ratios by the most recent 15-year standards and with the inflationary haze lifting, we could see a happy moment for the man or woman building for retirement.
Ben Stein sees potential. :^
How Not to Ruin Your Lifeby Ben Stein
Finance Home > How Not to Ruin Your Life > Cement, Steel, and Stocks
Cement, Steel, and Stocks
by Ben Stein
Utility Links
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- ]http://mtf.news.yahoo.com/mailto?url=http://finance.yahoo.com/columnist/article/yourlife/1464&title=Cement,%20Steel,%20and%20Stocks&prop=finance&locale=us]Email this Page[/url]
If you are an inveterate reader of financial publications as I am, occasionally certain recurring themes pop up that tell a tale. The one I have been noticing lately is about two oddly basic materials: Cement and steel.Let's go back a few months or a year ago or even a few weeks ago. The story was that because of immense building in China and India, because of the stunning U.S. housing boom, because of the need to rebuild in the Louisiana-Mississippi region after Katrina, building supplies were going to be in very short supply. This was going to drive up costs and inflation and harm the recovery. There were stories about builders in the Southeast simply being unable to get steel for building or cement for laying foundations even before the hurricane.
Now, Chinese and Indian steel mills are cutting prices dramatically to sell their products. Cement is not exactly being given away, but shortage conditions have eased very considerably. China's output of cement is growing so rapidly that it is forecast to become a net cement exporter soon (if it isn't already). This will have a huge effect on cement availability everywhere.
Inflation or Economic Slowdown?
All of this goes to a set of fundamental questions and answers about the world economy.
If building commodity prices, or at least some of them, are falling and if the supply coming from China is beginning to exceed the demand from China, what effect will this have on world prices? And if oil is collapsing in price (at least in the short run) as consumers show far more ability to conserve than had been expected, what effect will this have on the domestic inflation rate? To put it another way, if major commodity prices are falling on world markets, does this portend an explosion of demand or a world slowdown?
One of the few advantages of being 60 years old, as I am, is that I have lived through many business cycles. If memory serves, collapsing steel prices are often a harbinger of a world slowdown. If memory serves -- and here I know I am right -- collapsing prices of gasoline at the pump are a hint that the next inflation headline numbers will not be cause for alarm -- at least not for alarm in an upwards direction.
Let's step back. We have rising hotel room prices, rising air fare prices (but not for long), and rising wages for energy workers. Balanced against that is gasoline that's about 80 cents a gallon cheaper at the pump than it was a few weeks ago, steel off 30 percent from its high in the spring, and plentiful cement -- at least more plentiful than it was. The weight certainly seems to be in favor of less drama about inflation and more concern about growth.
What It Means for Investors
Surely, this means that the incoming Federal Reserve chairman, the brilliant Dr. Benjamin Shalom Bernanke, will not need to raise interest rates any further. This, in turn, means less pressure on long-term bond prices and a possible lowering of long term rates, including mortgage rates (which might breathe more life into the housing market ... this bubble may not be dead yet by a long shot). And above all for us stock market investors, a lower interest rate (or a halt in steadily rising rates) means that earnings are worth more because they are discounted back to the present value at a lower rate. This may sound complex, but what it basically means is that a dollar of earnings in 2010 is worth a lot more if interest rates are low than if they are high. This variable is one of the absolute basics of the stock market's valuations.
If the main factor working to keep stock prices in check has been inflationary fears and the interest rate fears that go along with inflationary fears, those factors may soon be gone. Alas, there is always an "on the other hand" and in this case, the "other hand" may well be forecasting an economic slowdown and a slowdown in corporate profits. But the signs of that are still few. What we are seeing is solid economic growth, a rapid return to a non-inflationary environment, and an interest rate that is friendly to stock holders.
Of course, there will be fluctuations, and there could be terrorism or a natural disaster. And a housing debacle (which I do not expect) could wreck consumer confidence. But the tea leaves about inflation are distinctly encouraging. There will always be peaks and valleys, but today looks like an awfully good time for the long term investor in broad indexes to jump in. Stocks are still trading at reasonable price-earnings ratios and price-book ratios by the most recent 15-year standards and with the inflationary haze lifting, we could see a happy moment for the man or woman building for retirement.
mlk_man
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I'll be going out of town for awhile and although I'll be taking my laptop and wireless connection, I don't know if I'll be able to connect where I'm going.
For this reason I'll be diversifying my allocations until I'm able to get back online.
After noon today, I'll be going 20% G, 20%, F, 15% C, 30% S, and 15% I fund.
Good luck all and have a Happy Thanksgiving!
M_M
I'll be going out of town for awhile and although I'll be taking my laptop and wireless connection, I don't know if I'll be able to connect where I'm going.
For this reason I'll be diversifying my allocations until I'm able to get back online.
After noon today, I'll be going 20% G, 20%, F, 15% C, 30% S, and 15% I fund.
Good luck all and have a Happy Thanksgiving!
M_M
mlk_man
Banned
imported post
Hi all! Glad to see the market has been up since I left. I've been in Texas and the weather has been great! Wish it was under different circumstances though. For those few people that I've told, they have given my brother less than a month now instead of 3. :X
I haven't been on because I've been staying in a mobile home on my folks property and took me awhile to figure out the metal on the top and sides was blocking my wireless connectionl. DUH!
So what does everyone see as the next resistance level in the S & P? 1275? I'll most likely stay with my current allocations for nowbecause I never know when I'll be able to get on with everything that's going on. I'm now considering giving up my 15 years govt. service and moving back here to take some of the load off my mother. .......don't everyone celebrate at once!
Keep going up market, might need ya!!
Good luck all,
M_M
Hi all! Glad to see the market has been up since I left. I've been in Texas and the weather has been great! Wish it was under different circumstances though. For those few people that I've told, they have given my brother less than a month now instead of 3. :X
I haven't been on because I've been staying in a mobile home on my folks property and took me awhile to figure out the metal on the top and sides was blocking my wireless connectionl. DUH!
So what does everyone see as the next resistance level in the S & P? 1275? I'll most likely stay with my current allocations for nowbecause I never know when I'll be able to get on with everything that's going on. I'm now considering giving up my 15 years govt. service and moving back here to take some of the load off my mother. .......don't everyone celebrate at once!
Keep going up market, might need ya!!
Good luck all,
M_M
grandma
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imported post
M_M, I am sorry to hear the change in prognosis. Our prayers for Kenneth, your mom and you continue. ...for healing physically, mentally & spiritually. Do you have Hospice for Kenneth? Don't wait until the last minute to take advantage of what they have to offer in all three areas mentioned above.
Is there a way you can take a short LoA w/o endangering your job, to check out other possiblities down there? Is there any transfer you can make, or another Fed job available there? ...because I have been there, I ask you to move cautiously toward your goal before severing lines. There may be other avenues.... But I know one month doesn't give you much leeway for decisions.
While you are deliberating, praying, read The Message- the book of Romans in there is good. Our prayers are with you and yours. :! (picture arms up instead of thumbs.) !!
M_M, I am sorry to hear the change in prognosis. Our prayers for Kenneth, your mom and you continue. ...for healing physically, mentally & spiritually. Do you have Hospice for Kenneth? Don't wait until the last minute to take advantage of what they have to offer in all three areas mentioned above.
Is there a way you can take a short LoA w/o endangering your job, to check out other possiblities down there? Is there any transfer you can make, or another Fed job available there? ...because I have been there, I ask you to move cautiously toward your goal before severing lines. There may be other avenues.... But I know one month doesn't give you much leeway for decisions.
While you are deliberating, praying, read The Message- the book of Romans in there is good. Our prayers are with you and yours. :! (picture arms up instead of thumbs.) !!
mlk_man
Banned
imported post
Thank you Spaf, nnuut, Grandma, Skypilot, Tom and everyone else who has PM'd or e-mailed me. My motherappreciates the kind remarks and gestures also. I was showing her how a computer and the internet works and came here and let her read some of the postings on the market and such. (I didn't let her read too much of my account talk thread.) I think she wants a computer now. It's amazing how much a computer can help with things that one doesn't have to deal with often.
Grandma, yes Hospice is currently taking care of Buzz (that's the nickname we gave Kenneth as kids). All arrangements have been made. His birthday is Dec. 24th so we arehoping he can make it through the end of the year. He only weighs about 95 lbs now so I don't know. He told me yesterday he was concerned about what lays in wait for him because of his past and the fact that he never went to church. (I was the only one in my family that ever did) I read him the book of Matthew chapter 6 verses 5,6,and 7 and that eased his mind.
My main reason for returning to Texas is because my mother turns 70 this Friday and with this happening to Buzz, she will have lost a father and two sons in a little over 3 years and has a mother in the nursing home with Alzheimers who doesn't even know who she is. She's a strong woman, she raised 5 boys pretty much by herself, and I get on her case once in awhile about her nutrition so I'm sure she'll be fine. I'd just like to be there more to support her.
As far as work, my stepfather owns an automobile repair shop and he would like to retire next year. My youngest brother works for him now and they would like for me to partner up with him because he doesn't really have the book smarts to go it alone. So there are several reasons to move back but really only one not to. That's the life I have made for myself elsewhere. Decisions decisions................:*
Anyway, everyone has their own problems and I apologize for burdening anyone with mine. Kind of nice to be able to get things off one's chest with someone that you don't know personally though. Hey Tom, how about a psychology thread?
Have a Happy Thanksgiving all, be sure to give your loved ones an extra big hug this year. I know I will.............
Mike
PS, I'll be posting some remarks in the health section concerning Chlorella.
Thank you Spaf, nnuut, Grandma, Skypilot, Tom and everyone else who has PM'd or e-mailed me. My motherappreciates the kind remarks and gestures also. I was showing her how a computer and the internet works and came here and let her read some of the postings on the market and such. (I didn't let her read too much of my account talk thread.) I think she wants a computer now. It's amazing how much a computer can help with things that one doesn't have to deal with often.
Grandma, yes Hospice is currently taking care of Buzz (that's the nickname we gave Kenneth as kids). All arrangements have been made. His birthday is Dec. 24th so we arehoping he can make it through the end of the year. He only weighs about 95 lbs now so I don't know. He told me yesterday he was concerned about what lays in wait for him because of his past and the fact that he never went to church. (I was the only one in my family that ever did) I read him the book of Matthew chapter 6 verses 5,6,and 7 and that eased his mind.
My main reason for returning to Texas is because my mother turns 70 this Friday and with this happening to Buzz, she will have lost a father and two sons in a little over 3 years and has a mother in the nursing home with Alzheimers who doesn't even know who she is. She's a strong woman, she raised 5 boys pretty much by herself, and I get on her case once in awhile about her nutrition so I'm sure she'll be fine. I'd just like to be there more to support her.
As far as work, my stepfather owns an automobile repair shop and he would like to retire next year. My youngest brother works for him now and they would like for me to partner up with him because he doesn't really have the book smarts to go it alone. So there are several reasons to move back but really only one not to. That's the life I have made for myself elsewhere. Decisions decisions................:*
Anyway, everyone has their own problems and I apologize for burdening anyone with mine. Kind of nice to be able to get things off one's chest with someone that you don't know personally though. Hey Tom, how about a psychology thread?
Have a Happy Thanksgiving all, be sure to give your loved ones an extra big hug this year. I know I will.............
Mike
PS, I'll be posting some remarks in the health section concerning Chlorella.
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