China Factory Suicides Signal End of Cheap Labor

Ten workers (mostly young women) have committed suicide at Foxconn factories in China - the same places that make iPhones and iPads. At least 13 have tried, and some reports are of 11 suicides out of over 20 attempts.  Foxconn may not be running sweatshops as Upton Sinclair exposed in The Jungle, but the impact may be similar: the Chinese government is demanding changes. 

This may signal the end of the cheap labor era. A recent strike at a Honda plant shows workers resisting exploitation. The inflationary forces surging inside China is also putting pressure for increased wages. 

Honda workers on strike in China factory (LA Times photo)

The Beijing Youth Daily dissects the problem and finds conditions are a modern version of hellish: long hours, trapped at night in dull dormitories, severed from the social constructs of the farm villages, precluded from overtime pay, and regimented to minute details in the tasks they perform. They call themselves "pubic hairs", an exemplar of their low self-esteem. 

Foxconn workers (Bloomberg photo)

Bloomberg adds additional color. Perhaps most striking are these factoids:

• 80% of assembly line workers work standing up, sometimes 12 hours a day, 6 days a week
• 86% of workers live in dormitories with 8-10 per room
• Making friends is hard since they are not allowed to chat on the line

Apple is caught up in this mess and will add to the pressure put on these factories for change. Apple's initial response was to say they were not "sweatshops", but this missed the forest for the trees:

The word "factory" is something of a misnomer: It would be more accurate to describe Foxconn's facility as a manufacturing city, according to the AP. Large-scale industrial production is booming in China on a mind-boggling scale. Imagine a gated industrial complex that sprawls across five square miles and employs hundreds of thousands of people on assembly lines running 24 hours per day. The workers live there, eat there and shop there. And they make your iPhones and other electronic devices.

Steve Jobs comments at D8 conference still seem an effort in spin not resolution:

On the matter of the recent spate of suicides at Foxconn, the Chinese company that manufactures electronic devices for Apple and several other major consumer electronics brands, Jobs said the company was very concerned about the issue. “We are on top of this. We look at everything at these companies. I can tell you a few things that we know. Foxconn is not a sweatshop. It’s a factory — but my gosh, they have restaurants and movie theaters. But they’ve had some suicides and attempted suicides, and they have 400,000 people there. The rate is under what the U.S. rate is, but it’s still troubling. We’re trying to understand right now before we try to go in with a solution.”

This all may be a blessing in disguise. The US went through this at around the time of The Jungle, and greatly improved working conditions - plus found it came with improved productivity. At the time the US had two huge advantages over China: innovation (think: Edison) and efficiency (think: Carnegie in steel, Rockefeller in oil, Ford in manufacturing). When Japan went through this, they innovated in process (think: the Toyota manufacturing system). China now needs to step up their game, and move beyond cheap labor in virtual slave camps to push for innovation in products and process. 

The Chinese story sounds an awful lot like the immigration story that has been replayed across the world: off the farms, into the cities, exploited ruthlessly, struggle in sweatshops, and slowly pull themselves out of the bottom and into the middle class. The Chinese government has been acting like a modern-day Midas, hoarding the gold (foreign reserves) and keeping their citizens relatively impoverished as they chase the mercantilist dream. Their citizens are now clamoring that the powers-that-be spread the wealth around, and let them in on a little bit of it. It is time. 

Comments

[DG]

I am looking for the conditions that "forecast" the likelihood of wave 3 extending.

At what level of certainty are you looking? Nothing will ever be able to forecast whether or not a wave will extend 100%.

As I mentioned the other day, the best signal to look at is probably the amount of retracement by wave 2 of wave 1. If it is more than 61.8%, wave 1 was not extended. That means either wave 3 will extend or wave 5 will extend. Regardless of which extends, you know to stay in the trade.

I'm not seeing the issue.

[Steven_737]

profile traders try to buy here thus a hick-up
if they surrender next target is 1046

price either in iv or in minor wave 1 of v

[Steven_737]

will this be an ending diagonal??

[Steven_737]

three little Indians to a bottom is more likely

NQ shows the 2 Indians already
(2 min chart)

[Steven_737]

ES back testing the pivot

second Indian not well formed

[Steven_737]

Will they surrender ES 1052 ??

if so,

NQ is looking at 1772

and ES is looking to go to 1050

[Steven_737]

At what level of certainty are you looking?

Good question :)
Thank you, DG.

I look at it differently:

If I "know" the probability that it will extend,
then
I can adjust the percentage of the position that I will lighten up at the first target (the minimum expected length of wave 3, say at the 100% of wave 1 Fibonacci projection, that is also close to a pivot level)
and keep the rest as the runner.

example:
suppose that the target under the assumption that wave 3 will extend if x1 points away from the current level (where I consider taking off part pf the position) and the stop is x2 points (trailing stop - say a tight chandelier); both x1 and x2 known values.

if p is the probability that the wave will extend

the expected outcome E is
E = p * x1 - (1-p) * x2

If that expected outcome is meaningful
then one can keep a percentage of position as runner.

Depending on the expected outcome one can lighten up on the position by say 50% or 75% (or whatever is appropriate).

If the expected outcome does not exceed a threshold value, then the position will be exited 100% - no runner at all.

cheers

[Steven_737]

ES at 1050 (16:40 EDT)

1052 level surrendered

I wonder if this is the development of the second of the 3 little Indians.

I think that this is the ending diagonal that will complete wave 3

cheers :)

[Roger D.]

"Dow 10070 area reversal. Everything has reset and the stage is being set for a move down."

"Yelnick, we need to resurrect the old "Wolf! Wolf!" series of posts and throw Roger's charts into there. Maybe if they all get collected in one place he will realize that he's been saying the same thing for months. Kind of like if you line up the cans of beer emptied by an alcoholic the night before, he realizes just how much damage he did."

ROTFLMAO

Not only are you ignorant, but you contribute absolutely dog shit.

Big Dog continues to piss in the tall weeds and the pups watch in envy.

Roger D. aka "Big Dog"

What

[Pup]

Roger,

Remember to stay out of the Elephant Grass -remember what happened last time...

[Roger D.]

Pup,

Let's be friends.

Roger D.

[DG]

Not only are you ignorant, but you contribute absolutely dog shit.

Roger, I've concluded that any e-wave knowledge I try to impart to you is pearls before swine. You want to know how I know your e-wave is terrible? Because it's as bad as mine used to be, when I first started using it as a trading tool and would get most counts completely wrong. I was the person on the other side of this discussion years ago, thinking I knew all there was to know about waves, only I didn't know jack squat, just like you don't know jack squat now.

But, as the saying about advice goes, "Wise men don't need it and fools don't heed it". Come back to talk to me after you've learned the difference between an Impulse wave and a Corrective wave. Since you say you've been trading for 30 years, the fact that you haven't even learned that yet tells me that you've had some other income source feeding your account for those 30 years or you inherited money. So, yeah, I do "watch with envy" that someone so completely and utterly clueless about the meanings of the words he uses to describe his wave counts can somehow have the financial means to sit around online talking about trading rather than doing whatever it is someone like you is qualified to do. I'm always a little envious of someone who appears to have advanced socially beyond what their intelligence level would indicate is merited. Either way, good luck finding that "3 of 3". I'm sure it'll roll on into town "very soon". "Perhaps tomorrow" or, if not tomorrow, then "a few hours later". "Everything's reset" for it now.

[DG]

he expected outcome E is
E = p * x1 - (1-p) * x2

Isn't one of the problems with using this formula the fact that the probability that the market reaches x1 is actually almost infinitely small because the market can reach almost any number of prices before reaching x1. Let's use the ES as an example and say that your entry is 1000 and x1 is 1020 and your threshold that you would need p to be above is 50%. Given that there are 20 ES points in between 1000 and 1020 and that each ES point has itself 4 sub-points, that means that price can reach a maximum of anywhere between 1000.25 and 1019.75 and not fulfill your criteria. If your x1 is any more than a couple of points away, I don't see how p wouldn't always be so small as to make the "default" option to be to exit the position. If you're trading something like the SPY, with 100 sub-points for each 1 point, it becomes even more improbable that this kind of formula would work.

[Pup]

OK Roger; we can be friends but looks like DG just took you into the elephant grass anyways.

Hey, I didn't do anything. I'm just the observer. I don't even know if he's right or not.

I'll see what yous gots to say about DGs comments and look the other way.

[Pup]

P.S.

What the hell is ROTFLMAO ?

[Roger D.]

DG I looked at your chart you sent me and it was meaningless. I agree my EW charts are not perfect but I have yet to find anybody that is consistent enough with counts. Your argument is lame and you sir are a phony.

Go ahead post your wave counts, I dare you, if you don't have the guts STFU.

Roger D.

[DG]

Roger,

I have recently posted some wave counts, but you've missed my larger point, which has been less that I have the right wave count and more that your wave count is wrong. I have been telling basically anyone who will listen that Neely is right that we are in a wave-(B) correction up, which may or may not be complete, and that there are no Impulse waves, up or down, in sight.

http://yfrog.com/mvspxdailyjune3px

Here is what I wrote regarding these three shorter-term counts (I would say that the "wave-.B as a Flat" option is pretty much dead, at this point, but wasn't at the end of Friday's session):

"Three alternate short-term Daily counts. Friday's intraday action exactly encapsulated what I think is so difficult about calling any of these patterns Impulsive. The reason being that the "largest and fastest" portion of the decline came right away, in what would have to be the "wave-1" position. Since wave-3 is the most commonly extended wave, labeling wave-1 as the extended wave is lower-probability, so I try to avoid it.

That's a longer explanation of why I'm not in favor of the "wave-.B as a Flat" option. Wave-.c of that Flat would have been from Thursday's close to Friday's low, but the intraday waves just don't really justify a :5, as of now. It's possible that the decline continues on Monday and forms a :5, but that would require that the decline following the gap down on Friday be part of a Running Correction to the downside, implying a much weaker market than I think is likely following a "strong" wave-.b of the Flat.

The "x-wave" option is a bit tough to believe in because the structure of the x-wave is 3 :3s, which doesn't really make a whole lot of sense. I would point out that the x-wave DOES conform to the Diametric rules (A>C so E>G), so it's possible that it's not 3 :3s, but one :3. It would be a little odd that the most Complex wave in the pattern was wave-.d, which would be the 3-segment decline from May 27th to June 1st.

Of course, that same point would apply to the "wave-.A" option.

So, x-wave or wave-.A seem more likely with x-wave implying that we'd decline to meet the price target for the "waterfall effect", which would be just a bit under 1000 SPX and the wave-.A implying that we probably won't go much below the low that's already in place.

The "wave-.B as a Flat" option would imply a rally soon."

If you find these options "meaningless", I would argue it's because you are trying to fit a complex market into the extremely limited amount of Elliott Wave you seem to know. Even Neely, who was bearish when he should have been bullish for many months, had the good sense not to come out every single day and say that every 5-point reversal in the ES was the start of the next wave down. It's your constant "jumping that gun" that, frankly, is so ridiculous and so reminiscent of the "Wolf, Wolf" series of posts I mentioned.

Note, also, that I am not trying to dissuade you from shorting the market (not that I labor under the illusion of having that influence, anyway), I'm just trying to decrease the amount of noise you bring with your hyperventilating about wave-3, as well as to warn you that if you plan on taking profits down around SPX 500 or lower, you will be disappointed. There isn't a wave-3 because there was never a damn wave-1 or wave-2. Period.

[Pup]

And with that, they both agreed to disagree and went their separate ways...

...to be continued in another thread I'm sure