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Five Things You Need to Know: Labor of Love, More China "Restraint", Onion Rings, General Malaysian, Softball


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. It's About the Union, Jack

It's a renewed boom time for labor unions, according to the USA Today.

  • Between Jan. 1, 2005, and June 30, 2006, federal reports show, major unions in both groups raised more money than they did for the last non-presidential campaign in 2002, the USA Today reported.
  • The main Service Employees International Union (SEIU) political action committee and five local SEIU PACs raised about $15 million, a 62% increase.
  • The main PAC for the American Federation of State, County and Municipal Employees (AFSCME), part of the AFL-CIO, has raised $9.1 million, a 39% increase.
  • AFSCME President Gerald McEntee says workers are highly motivated for this year's campaigns, in part because the GOP-controlled Congress has not raised the minimum wage, the newspaper said.
  • But we think something else may be going on. Over a year ago in "The Bear Market's Labor of Love," we noted that "Labor unions are nothing if not a bear market phenomenon. They thrive under bear markets and dark social mood conditions, they wane under bull markets and bright social mood conditions."
  • As the structural bear market reasserts itself we should expect to see labor unions thrive and wield new power after more than two decades of hibernation.

2. China Exercises More "Restraint"

China moved Friday to "rein in" the nation's runaway credit growth by "raising" bank reserve requirements, according to XFN-Asia.

  • The People's Bank of China said it was lifting the reserve requirement for all commercial banks by 50 basis points effective August 15.
  • This will bring the reserve ratio for commercial banks, the central bank's capital adequacy requirements, to 8.5 pct.
  • On Tuesday, the government announced that the economy grew 11.3% in the second quarter compared to a year earlier. It was the largest GDP jump in six quarters.
  • And on Wednesday it was revealed that China's urban fixed asset investment in the first half rose 31.3 pct year-on-year to 3.64 trln yuan.
  • Meanwhile, year-to-date the yuan has risen a whopping 1.3% and China's lending rates have jumped 27 basis points.
  • While the magnitude of the reduction in liquidity by the People's Bank is cursory, barely a nudge toward a serious attack on credit growth, the most important point is that it occurs WITH other attacks on liquidity:
    - Year-to-date 100 basis points in rate hikes by the Federal Reserve
    - The ending of quantitative easing by the Bank of Japan
    - European Central Bank tightening
    - Additional forthcoming tightening measures by the Bank of England
  • Add it up and you have a global reduction in liquidity. So this piece by China, barely a whisper by itself, carries far more weight in the overall puzzle.

3. Onion Rings Bell at Market Top

As Americans there is nothing we are more passionate about than fake news.

  • Recent media reports rumors that the satirical news site The Onion may be up for grabs by Viacom caused quite a stir earlier this week.
  • We noticed a story Wednesday afternoon about a potential Viacom acquisition of The Onion on the New York times blog Dealbook.
  • But that's not all we noticed. The Onion/Vicaom story was the most commented on post of the day on Dealbook by a 30-1 margin!
  • As well, only five of the 51 posts on Dealbook that day had any comments at all.
  • What else were Dealbook commenters only fractionally as passionate about as a potential Onion/Viacom deal?
  • Counting comments on the other posts:
    * J.P. Morgan Reports Record 2nd-Quarter Profit received one comment
    * YouTube Hit With Copyright Suit received three comments
    * Alwaleed Calls for Drastic Measures at Citigroup received one comment
    * Why Didn't Microsoft Just Buy Nortel? received two comments
  • Pete Kendall of Elliott Wave International, who also writes the excellent Socio Times blog, notes that the last time The Onion considered selling to Viacom was 2000.
  • In early May, related to a separate issue, Kendall noted that "Satire appears to be one of the ways in which society pops the bubble of mass delusion at the end of a Grand Supercycle degree bull market."

4. Malaysians Eat Too Much Sugar Anyway, Government Official Says. (Seriously)

Malaysian food manufacturers are suffering from a shortage as smugglers evade government price controls amid a soaring market for sugar, according to Bloomberg.

  • Exports of sugar have given Malaysia's $131 billion economy a trade surplus for almost nine years, Bloomberg said.
  • Refiners and wholesalers have cut supplies by as much as 30 percent since February.
  • Malaysia, which imports 90 percent of its sugar, has kept the retail price of refined sweetener at 38 cents a kilogram since March 2002.
  • The price of refined sugar has surged 57 percent in London in the past 12 months, meaning Malaysians pay 20 percent less than traders, according to Bloomberg.
  • As a result a black market has developed in sugar and hoarding is rampant.
  • Customs officers confiscated 60,892 kilograms (134,244 pounds) of sugar from would-be smugglers in the first seven months of 2006.
  • Deputy Minister Veerasingam is unconcerned, according to the article. Malaysians eat too much sugar anyway, he said.

5. Minyan Michael Gat Lobs a Softball

With Minyans in the Mountains III just around the corner, the time for Minyan Softball trash talking is upon us. Last year there was significant controversy when Toddo's team defeated John Succo's team in the final inning on a (some say botched) home plate call of safe by Billy the kid Meehan. To head off any possibility of similar controversy this year, Minyan Michael Gat, who has dutifully chronicled past Minyans in the Mountains with his photography, submitted the following shopping list for MIMIII softball.

Minyan Michael Gat's Shopping List for MIMIII Softball Rematch

No positions in stocks mentioned.

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