Let's take a break from Chindia and read some interesting stuff on the US.

Hats off to Ronald Raygun-Zap!

How Reaganomics unleashed the Dow
Neil Reynolds


Wednesday, August 22, 2007

Ottawa — Supply-side economist Arthur Laffer, two-term adviser to president Ronald Reagan (1981-1989), tells this story of Mr. Reagan's first cabinet meeting.

Cabinet members and presidential advisers had assembled in the West Wing of the White House. Mr. Reagan entered the room and sat down. Ever the actor, he waited for silence, finally stood and said: "Gentlemen and ladies. I hate inflation. I hate taxes and I hate Communism. Do something about it." Then he walked from the room.

They did, indeed, do something. They cut tax rates across the board by 25 per cent and launched the longest and most powerful bull market in U.S. history.

As noted last week by New York Times financial journalist Floyd Norris, the Dow Jones industrial average had hit bottom at 776.9 on Aug. 12, 1982 - 25 years ago. In its quarter century bull run, the Dow reached its peak close - 14,000.41 - only six weeks ago before giving up more than a thousand points in a precisely timed silver anniversary correction.

The Dow average made its inaugural appearance at the New York Stock Exchange on May 26, 1896. It closed the day's trading at 40.94. Within two months, it had fallen 30 per cent and closed at its all-time low, 28.48.

The Roaring Twenties took it ever upward to 381.17 (Sept. 3, 1929), a 13-fold increase - and the Great Depression then took it almost all the way back (July 8, 1932) to where it started: 41.22. From inception, it took the Dow more than 75 years to reach 1,000; it took only another 25 years to reach 14,000, an 18-fold increase from its 1982 low.

Could this bull market run for another 25 years at the same pace as the last 25? If it did, the Dow would reach 250,000 by 2030.

This staggers the imagination - by the same degree that a Dow at 14,000 would have staggered the imagination back in 1982. When Mr. Reagan assumed office, the U.S. was in its 15th year of bear market stagflation and widely regarded as a world power in mortal decline. The U.S. Misery Index (inflation rate plus unemployment rate) routinely exceeded 20. (It's 6.5 now.) Three consecutive presidents - Democrat Lyndon Johnson and Republicans Richard Nixon and Gerry Ford - had tried all the fashionable Keynesian things (easy money, wage and price controls, frenzied exhortations, government "pump priming"; the Dow refused to hold above 1,000 (though it repeatedly tried).

The fourth of the bear market presidents, Democrat Jimmy Carter, had plaintively mused that it was game over for America.

There was more to the economic renaissance in the U.S. than the Economic Recovery Tax Act, of course, which Congress officially enacted Aug. 13, 1981, and which Mr. Reagan signed into law three days later, seven months after he took office and one year before the long bear market ended. Reaganomics combined lower tax rates, reduced regulation, free trade and sound money. At the Federal Reserve, chairman Paul Volcker tightened the money supply - and sent the country into a short, sharp recession. Reagan had wanted a 30-per-cent cut in tax rates immediately; Congress gave him a 25-per-cent cut across three years.

He was compelled to wait.

It was a close thing. Which force would prevail - recession or Reaganomics?

The old-school Republicans who counselled retreat? Or the radical young economists (mostly Arthur Laffer at the University of Southern California and Canada's Robert Mundell at Columbia University) who counselled advance? Widely ridiculed as an amiable dunce, Mr. Reagan refused to cave. Within two years, Reaganomics was turning the U.S. into the world's No. 1 tax haven, and the world's most productive economy.

In the remaining six years of his presidency, the Dow tripled. From its breakout in 1982 through the second quarter of 2007, it delivered a compound annual rate of return (notwithstanding all the corrections along the way) of 11.8 per cent. Silenced by the economic transformation around them, Mr. Reagan's opponents - all of them great advocates of deficit spending - accused him of profligate spending. The nation's debt did indeed increase by $2-trillion in the Reagan years; the nation's wealth, however, increased by $8-trillion.

Whatever the Dow Jones industrial average does in the next 25 years, Reaganomics will continue to shape history, perhaps at an accelerating pace.

It's rich in irony, isn't it? As a freshman at tiny Eureka College in Illinois - enrolment in 2007: 536 - Mr. Reagan witnessed the Dow at its Roaring Twenties peak. As a senior (Class of '32), he witnessed it at its Depression low. In this environment, he graduated with a major in economics from a humble institution that still (unlike, for example, Harvard) revered the classic liberal economists - Adam Smith, David Ricardo - and a laissez-faire approach.



© The Globe and Mail

Like the Hang Seng takes a nother quantum leap to close just below 23000!

And China is ever the bull cracking 5000!

SHANGHAI, China: China's benchmark Shanghai Composite Index surpassed the 5,000-level for the first time Thursday, as bullish investors snapped up blue chips on a strong outlook for corporate earnings.

The Shanghai Composite Index gained 1 percent, or 52.41 points, to 5,032.49. The Shenzhen Composite Index of China's smaller, second market added 1.2 percent, or 16.81 points, to 1,415.18.

Chinese stocks have shrugged off an interest rate hike earlier this week and last week's market turmoil, buoyed by strong demand from both institutional and individual investors.

Prices tracked gains elsewhere in the region Thursday following an overnight surge on Wall Street in response to a pullback in 3-month Treasury bills and an increase in borrowing by banks. Investors viewed both as indications the U.S. Federal Reserve is succeeding in loosening up the credit market.

http://www.iht.com/articles/ap/2007/08/23/business/AS-FIN-MKT-China-Markets.php

BSE as a a famous stockbroker in India I spoke to this morning is a "sust l... ka paidaash"- down 85 points

INDICES Points +-Pt +-%
SENSEX ê 14,163.98 -84.68 -0.59
MIDCAP ê 6,105.11 -54.51 -0.88
SMLCAP ê 7,424.39 -94.31 -1.25
BSE-100 ê 7,248.90 -48.93 -0.67
BSE-200 ê 1,713.19 -12.00 -0.70
BSE-500 ê 5,491.14 -41.18 -0.74


Europe up.

Yeah I know Ron Wood and Keith Richards were busted for smoking cigarettes in a non-smoking zone in England, but this is a different kind of smoking!


A-shares closed at a record for the fifth straight day led by banks, as newly-established mutual funds continued to accumulate blue chips amid optimism over corporate earnings.

The benchmark Shanghai Composite Index closed up 75.17 points or 1.5 pct at a record 5,107.67. It also hit an all-time intraday high at 5,125.36, surpassing the previous record of 5,050.38 set yesterday.

The Shanghai A-share Index was up 79.27 points or 1.5 pct to 5,363.20 and the Shenzhen A-share Index was up 16.77 points or 1.1 pct at 1,502.91.

The Shanghai B-share Index rose 1.72 points or 0.5 pct to 318.19 and the Shenzhen B-share Index ended up 10.93 points or 1.5 pct at 736.58.

http://www.forbes.com/markets/feeds/afx/2007/08/24/afx4050882.html

BSE up 261 points

INDICES Points +-Pt +-%
SENSEX é 14,424.87 260.89 1.84
MIDCAP é 6,190.45 85.34 1.40
SMLCAP é 7,522.25 97.86 1.32
BSE-100 é 7,371.37 122.47 1.69
BSE-200 é 1,741.56 28.37 1.66
BSE-500 é 5,579.52 88.38 1.61

In the new jargon of today, due to the wild swings of HK and Nikkei, they were flat in the red.

Europe also flat.

China

The Chinese mainland stock markets closed up on Monday.

The benchmark Shanghai Composite Index gained 42.45 points, or 0.83 pct to close at 5150.12, While the Shenzhen Stock Index climbed 20.16 points, or 0.11 pct, to end the day at 17884.84.

The benchmark Hang Seng Index rose 655.84 points, or 2.86 percent, to close at 23,577.73, a record close.


http://english.cri.cn/3130/2007/08/27/1601@266789.htm

BSE jumps 400+ points!

INDICES Points +-Pt +-%
SENSEX é 14,842.38 417.51 2.89
MIDCAP é 6,360.66 170.21 2.75
SMLCAP é 7,725.52 203.27 2.70
BSE-100 é 7,598.51 227.14 3.08
BSE-200 é 1,794.81 53.25 3.06
BSE-500 é 5,746.73 167.21 3.00


Europe up. TSX and Dow down.

http://www.globeinvestor.com/servlet/story/RTGAM.20070827.windiasubprime0827/GIStory/


Subprime crisis hits call centres in India
Associated Press


Monday, August 27, 2007

BANGALORE — Indian outsourcing companies that process mortgages are seeing a decline in work orders and loss of revenue because of the U.S. subprime crisis.

Several companies have started redeploying their staff, moving some of those assigned to mortgage documentation and related services to other areas. Some company officials fear there could be layoffs if the crisis in the United States deepens further.

As U.S. lenders tighten credit, and some — such as GreenPoint Mortgage — close down, the volume of paper work done by Indian outsourcing companies declines because of fewer applicants and fewer people getting loans.

“There are likely to be staff cuts, but companies will first try and redeploy them toward other services,” said Rishi Maheshwari, an analyst at Networth Stock Broking.

Mumbai-based WNS Holdings is in the process of redeploying 500 of its staff after one of its top 10 clients — First Magnus Financial Corp. — filed for bankruptcy in the U.S.

Bangalore-based Infosys Technologies Ltd. and iGate Global Solutions Ltd. have also redeployed about 50 and 100 staff respectively due to the winding up of their business with GreenPoint.

iGate said the share of mortgage processing in its total revenue fell from 10 per cent to about 7 per cent over the past two quarters because of “negligible contribution from GreenPoint.”

Bigger companies such as Infosys Technologies Ltd. say they do not face much downside as mortgage processing forms a very small part of their business.

“There will be some impact on us, though minimal, maybe less than a million dollars,” said Amitabh Chaudhury, who heads the company's business processing unit.

Although no firm number is immediately available for the industry, analysts say the crisis in the United States could wipe off 3-4 4 per cent of revenue earned from companies engaged in outsourcing business processes such as mortgage documentation.

The full impact will be “clearer in the next two to three months” once U.S. companies complete their year-end budget evaluations, Mr. Maheshwari said.

Some companies feel redeploying staff would be difficult as it would involve additional spending on training.

Chief Financial Officer Alok Misra at Mphasis Ltd. indicated his company might be forced to cut some jobs. “Redeploying staff ... is costly as it involves retraining,” Mr. Misra said.

Mphasis, based in the western Indian city of Pune, is majority owned by EDS Corp. of the United States.

© The Globe and Mail

The Shanghai Composite Index bucks world trend and rises!

China

The Chinese mainland stock markets closed mixed on Tuesday.

The benchmark Shanghai Composite Index gained 44.57 points, or 0.87 pct to close at 5194.69, While the Shenzhen Stock Index dropped 66.91 points, or 0.37 pct, to end the day at 17817.93.

The benchmark Hang Seng Index dropped 213.97 points, or 0.91 pct, to close at 23,363.76.

BSE kissing 15000 at 14919.19

Europe down and TSX currently down 95 points and Dow down 65 points.

Looks like it's a bear day.

CHINA
Data as of Wed 29 Aug 2007 | 14:30 BST. All quotes delayed by at least 15 minutes.
Symb Index Mkt Report Time (BST) Last Chg Chg %
Shanghai Composite Index Shanghai Composite Index 08:15 AM 5,109.43 -85.26 -1.64%
Shenzhen Composite Sub Index Shenzhen Composite Sub Index 08:00 AM 17,443.19 -374.74 -2.10%
Shanghai Shenzhen 300 Index Shanghai Shenzhen 300 Index 08:00 AM 5,171.82 -79.95 -1.52%


Shanghai Composite down 85 points to 5109.43

http://today.reuters.co.uk/investing/marketindices.aspx

Hk down, Nikkei down, Europe up and TSX and Dow up

BSE up 74 points


INDICES Points +-Pt +-%
SENSEX é 14,993.04 73.85 0.50
MIDCAP é 6,450.39 40.75 0.64
SMLCAP é 7,874.22 65.78 0.84
BSE-100 é 7,687.17 42.82 0.56
BSE-200 é 1,816.61 10.21 0.57
BSE-500 é 5,818.23 34.37 0.59