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First Peak Oil, Now we have Peak Earnings Theory

Discussion in 'Political Discussion' started by PatriotsReign, Nov 17, 2008.

  1. PatriotsReign

    PatriotsReign Rookie

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    Pretty interesting theory from a fairly conservative investment advisor. I think anyone interested in the possible future of our economy or the investment world will find this interesting as hell.

    Mish's Global Economic Trend Analysis: Peak Earnings

    "One of the implications of Peak Credit is that financial earnings have peaked. And because of reduced leverage, earnings in the financial sector are not coming back for decades. Those earnings were all a mirage in the first place.

    Next consider homebuilders given that lending standards have dramatically tightened at banks. Those profits are never coming back. What happenes to profits at major pharmaceuticals if and when the Obama administration allows drug imports from Canada and other places?

    One must also factor into the earnings equation boomers facing retirement in the wake of falling home prices and retirement accounts taking a cliff dive. Trillions in potential spending power has been wiped off the books.

    Expect boomers to travel less than expected, buy fewer toys (boats, cars etc) than expected, gamble less than expected, and downsize much more than expected in every aspect. This in turn will reduce the earnings potential of non-financial corporations for decades to come. Thus expectations that a new rip roaring bull market will commence once the market bottoms is sadly misplaced."
  2. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    Ah, but also expect the boomers to work later than expected, and therefore retire later than expected. The first boomer retirements at 65 would have happened at 2010. I say "would have" because quite a few simply will not, not with their 401K suddenly turned to 101Ks, with debt against their home "value", and therefore a new mortgage on the same old house. Those who can afford to stay in the workforce are likely to do so quite a bit longer than we would have thought.

    If we can create or hold onto enough jobs, that is not only a good thing, it is a great thing. Demographically generation X simply cannot handle the flip-flopped generational roles of their elders. Gen. Y can, but will not yet be in their peak earning years.

    I can just hear some gen. Xers saying "Awww CRAP not THEM again..." It basically means a "place in the sun" is still going to be blocked out by the widened behind of a baby boomer for a few more years.

    Of course, jobs are going to be at a premium.
  3. Patsfanin Philly

    Patsfanin Philly Rookie

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    #95 Jersey

    I think ( and it may be a contrarian view) that Canadians will start paying more for drugs. Relative to the US market they are 1/10 the size and if the gov't says that they have to charge US customers what they charge their Canadian ones, how long do you think it would take before the north of the border folks start paying more.. so not to jeopardize profits of the industry....
  4. BelichickFan

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    #24 Jersey

    Yeah, "buying drugs from Canada" is a B.S. shell game. The U.S. needs to re-open drugs sales treaties (or agreeements or whatever they're written on) to charge other countries more. The only reason they're cheaper is we have agreed to sell them cheap overseas but then we need to pay more to keep profits and incentive for drug creation up. Canada doesn't make the drugs cheaper, they import the same drugs from the U.S. then get to sell them cheaper than pharmacies here can.
  5. PatriotsReign

    PatriotsReign Rookie

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    Meanwhile, Citibank announced they are laying of

    50,000 Americans

    When you read between the lines at what is going on worldwide and here in the US, we can see a downsizing of our economy....thus "Peak Earnings".

    This all means the American NEEDS to drive our prices down so we can be more competitive on the world market. That means wages will come down as will home prices and all other goods & services.

    The only way our products can be sold cheaper is for us to have less expensive labor costs. The only way to reduce labor costs on a massive scale is to reduce the cost of living on a massive scale.

    The last alternative would be the devaluation of our currency. If that were to happen without a huge deflationary trend, then we would have hyper-inflation...that is the worst case scenario.
    Last edited: Nov 17, 2008

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