Are we in an economic recovery, stuck in a period of below average growth, or headed for a double-dip recession? Let’s look at some more of the traditional and non-traditional economic indicators to find out.
Kicking the Bucket
There is a business district close to where I live that has been devastated during this recession. The only company in this area making any money is the one making the “For Lease” signs. Right in the middle of the district is a coin car wash. For around $4 worth of quarters you can soap, rinse, and wax your car. There were always prominent signs at the car wash that said “Bucket Washing Strictly Prohibited”. If people use buckets to “hand wash” their cars before rinsing, they take up space without spending more money and increase the waiting time of other customers. So recently I was shocked to see a large sign beside the car wash proclaiming “Bucket Washing Welcomed”. This is an act of desperation. This is the equivalent of a Baptist church advertising “Bring Your Own Bottle”on Sunday morning. If people don’t have enough quarters to wash their cars, things can’t be good.
Bottoms Up
Speaking of bottles, Ohio just announced that hard liquor sales were up strongly in 2009 and still steady in 2010. A spokesperson claimed that this is in no way related to people drinking more due to the state’s double digit unemployment rate. Of course this is a contributing factor, they just won’t admit it. But a bigger reason is that more people are saving money by drinking at home instead of in bars.
Eating In
Not only are people “drinking in”, they are also eating in. The latest data from the restaurant industry show that sales are up some from the bottom in 2009, but still weak. Discretionary income is still tight and people are not increasing outside meals. It is speculated that many restaurants are losing money, but are holding on and hoping business picks up soon.
Basket Case
Charitable giving continues to suffer. Reports from several churches show that giving is actually down from 2009. Unemployment remains high and people with jobs are being very conservative with their money.
Still Cutting
Companies continue to cut workers. My daughter became a victim recently when the call-center where she worked reduced manpower. Even in good times companies reduce workers, but in a recovery there should be plenty of new jobs for these people. Now they just join the 14 million other job seekers competing for the few new jobs available. One local job seeker group has actually grown in membership the past few months.
Temporary Workers
Temporary workers are increasing. This is good news and is usually the first sign of an economic recovery. The way it is supposed to work is that companies hire temporary workers until they are confident business is increasing. They then hire these people as standard workers and hire more “temps”. This time they are hiring temporary workers, but are not making these workers “permanent”. I do not believe that businesses have confidence in the government to effectively manage this economy. A friend of mine says he gets more nervous every time he hears Timothy Geithner speak.
The Sound of Silence
There is a landscaping material business close to my house. The sound of the digging equipment is audible from my house and it always been very busy in the spring and summer months, 6 days a week. But this year, there has been no work on Saturdays and it has also been quiet sometimes during the week. People are spending less money on their homes as property values continue to suffer.
The Rest of the Best
It is interesting that a multitude of economic indicators show an increase of only 1-2% versus a year ago. That was when the recession was ending. That means we have not moved that far from the bottom, which helps explain the lack of job growth. In addition, the experts expect Q2 GDP to be revised downward (not upward as I anticipated). This means the top economist were totally baffled by the Q2 results which is consistent with my belief that some economic indicators are giving false readings due to the unusual conditions.
So Where Are We?
Most of the indicators previously discussed reflect a very slow economy. There are no reliable trends and few reliable leading indicators at this time. Economists will still be analyzing the last three years of turmoil, twenty years from now.
The Model “T” still says no double-dip recession, but a long, slow, climb up a steep hill. This definitely can’t be called a recovery, but the conditions are unusual and economists are struggling to understand where we are. And if you don’t know where you are, you can’t know where you are going. More on this next time.
Wednesday, August 25, 2010
Wednesday, August 11, 2010
Facing Off With the White House
Was it just a coincidence that less than 24 hours after I declared the “recovery’’ over that Tim Geithner op-ed piece “Welcome to the Recovery” appeared in the New York Times? Is the White House reading this blog? (If so, I may want to review my tax returns). Maybe they are looking at the same data I am and coming to the same conclusions. However while it is safe for me to declare the recovery over, Tim needs to convince us that it is just beginning. It reminds me of the dead parrot skit from Monty Python. (Link at the end of the blog).
Me: “This recovery is dead.”
Tim: “Oh no. The recovery is certainty not dead. It’s just resting a bit.”
So I disagree with Tim Geithner. And many economists also disagree, so Tim you just got faced.
Romer Also Gets Faced
My March 25 blog (Jobs Are Job One) put forth the idea that there is a big problem with structural unemployment. In April, White House economic advisor Christina Romer declared in a speech that structural unemployment is not a significant factor. In the past few weeks several economists have written articles about the impact of structural employment in this recession (Come on guys, try to keep up. For the love of Maynard Keynes, I don’t even have an economics degree!).
I disagree with Christina Romer as do bunch of real economists, so Christina you also got faced. She was so embarrassed, she resigned.
The Long-Term Unemployment Problem
In my last post I presented the idea that the economy was operating in a traditional manner, except for there were 14.6 million people “officially” unemployed and millions more that were either working part-time or had dropped out of the labor force. The unemployment problem is huge due to the unique economic conditions. This recession is different because of the many professional, white-collar, workers who lost their jobs. These are engineers, accountants, information technology workers, production support and other “office” workers. Many had been with their companies for over ten years and many are over 50 years of age. In previous recessions, fewer white collar workers were cut and most decisions were based on seniority. This time it was largely based on salary and workers who had been with their companies the longest and therefore made the most money were let go.
These workers are having difficulty finding new jobs. The competition for the few jobs being created is fierce. The number of people unemployed more than 27 weeks was a record 6.75 million in June and still at 6.57 million in July. After factoring out all the noise, a paltry 12,000 jobs were created in July that and available to the 20-million plus job seekers. You don’t need a calculator to do the math. Does this look like a recovery to you? Many economists do not expect the unemployment rate to drop to acceptable levels until 2015. I think if you add in all the potential job seekers it could stretch well into 2016.
The New Structural Unemployment Problem
Structural unemployment is unemployment caused by fundamental changes in the structure and make up of employment markets. It differs from cyclical unemployment which is caused by the business cycles. The recession caused the increase in unemployment, but I contend it is structural unemployment that is keeping the unemployment rate high.
One type of structural unemployment involves geography. If jobs exist in Seattle and the workers to fill those jobs are in Miami, then you have structural unemployment. (Note: You do have some of this now in that many workers cannot move to new jobs because their mortgages are “upside down”. Traditionally we have considered this geographic structural unemployment only within our borders. But if this is a “world economy”, then this model is outdated.
I believe that when we started exporting production jobs to other countries in the 1990’s, we laid the groundwork for the exporting of the professional jobs that were supported by a balanced workforce. The reason why the professional jobs did not exit sooner is that they were being supported by the housing bubble. When the bubble burst, so did the support.
Now the investment capital, innovation, new factories and pure economic growth is in China, India, and other countries. The professional jobs that support this growth are where the factories are. The workers that have the skills to fill these jobs are older workers in the U.S. who do not speak Chinese and are not going to move to China. I questioned my logic until I saw an article on MSN Money titled “Should GM just move to China?”
Who Moved My Job?
Millions of unemployed workers are left to ask, “Who moved my job”? And of course it was your government. This was done by all your government, both parties, for a long time. No matter what the excuses, the U.S. has not played the game well. When you look across the poker table and your opponent has most of your chips and hasn’t been hitting any lucky draws, then son, you have been outplayed.
Our government needs to realize this is mainly structural, not cyclical unemployment. Stimulus programs are useful for cyclical unemployment, but ineffective for structural (that’s why we saw a limited impact to the huge stimulus plans). Unemployment compensation is designed to help workers during cyclical unemployment, but becomes welfare at some point during structural unemployment. I’ve seen this from both sides (having received unemployment benefits during my job search) and I have no good answer to this one.
More Than Just Votes
To get out of this mess it will take more than just voting to change the party in power (although this may help eliminate some of the factors holding the economy back). It will take more government intervention. But just throwing more stimulus money at the problem will not work for the reasons listed previously. What is needed is a strategy to rebuild and restructure the U.S. economy. It will take skilled people with expert knowledge to do this. These people exist, but they are not in the government today.
We desperately need more people with solid, international, business experience in our government. The consequences of not utilizing these skills at this time are dire. In 2008, facing the biggest economic challenge of our lifetime, we were given the choice of the financial Tweedle brothers and we firmly rejected Tweedle Dee.
Dead Parrot Video
Me: “This recovery is dead.”
Tim: “Oh no. The recovery is certainty not dead. It’s just resting a bit.”
So I disagree with Tim Geithner. And many economists also disagree, so Tim you just got faced.
Romer Also Gets Faced
My March 25 blog (Jobs Are Job One) put forth the idea that there is a big problem with structural unemployment. In April, White House economic advisor Christina Romer declared in a speech that structural unemployment is not a significant factor. In the past few weeks several economists have written articles about the impact of structural employment in this recession (Come on guys, try to keep up. For the love of Maynard Keynes, I don’t even have an economics degree!).
I disagree with Christina Romer as do bunch of real economists, so Christina you also got faced. She was so embarrassed, she resigned.
The Long-Term Unemployment Problem
In my last post I presented the idea that the economy was operating in a traditional manner, except for there were 14.6 million people “officially” unemployed and millions more that were either working part-time or had dropped out of the labor force. The unemployment problem is huge due to the unique economic conditions. This recession is different because of the many professional, white-collar, workers who lost their jobs. These are engineers, accountants, information technology workers, production support and other “office” workers. Many had been with their companies for over ten years and many are over 50 years of age. In previous recessions, fewer white collar workers were cut and most decisions were based on seniority. This time it was largely based on salary and workers who had been with their companies the longest and therefore made the most money were let go.
These workers are having difficulty finding new jobs. The competition for the few jobs being created is fierce. The number of people unemployed more than 27 weeks was a record 6.75 million in June and still at 6.57 million in July. After factoring out all the noise, a paltry 12,000 jobs were created in July that and available to the 20-million plus job seekers. You don’t need a calculator to do the math. Does this look like a recovery to you? Many economists do not expect the unemployment rate to drop to acceptable levels until 2015. I think if you add in all the potential job seekers it could stretch well into 2016.
The New Structural Unemployment Problem
Structural unemployment is unemployment caused by fundamental changes in the structure and make up of employment markets. It differs from cyclical unemployment which is caused by the business cycles. The recession caused the increase in unemployment, but I contend it is structural unemployment that is keeping the unemployment rate high.
One type of structural unemployment involves geography. If jobs exist in Seattle and the workers to fill those jobs are in Miami, then you have structural unemployment. (Note: You do have some of this now in that many workers cannot move to new jobs because their mortgages are “upside down”. Traditionally we have considered this geographic structural unemployment only within our borders. But if this is a “world economy”, then this model is outdated.
I believe that when we started exporting production jobs to other countries in the 1990’s, we laid the groundwork for the exporting of the professional jobs that were supported by a balanced workforce. The reason why the professional jobs did not exit sooner is that they were being supported by the housing bubble. When the bubble burst, so did the support.
Now the investment capital, innovation, new factories and pure economic growth is in China, India, and other countries. The professional jobs that support this growth are where the factories are. The workers that have the skills to fill these jobs are older workers in the U.S. who do not speak Chinese and are not going to move to China. I questioned my logic until I saw an article on MSN Money titled “Should GM just move to China?”
Who Moved My Job?
Millions of unemployed workers are left to ask, “Who moved my job”? And of course it was your government. This was done by all your government, both parties, for a long time. No matter what the excuses, the U.S. has not played the game well. When you look across the poker table and your opponent has most of your chips and hasn’t been hitting any lucky draws, then son, you have been outplayed.
Our government needs to realize this is mainly structural, not cyclical unemployment. Stimulus programs are useful for cyclical unemployment, but ineffective for structural (that’s why we saw a limited impact to the huge stimulus plans). Unemployment compensation is designed to help workers during cyclical unemployment, but becomes welfare at some point during structural unemployment. I’ve seen this from both sides (having received unemployment benefits during my job search) and I have no good answer to this one.
More Than Just Votes
To get out of this mess it will take more than just voting to change the party in power (although this may help eliminate some of the factors holding the economy back). It will take more government intervention. But just throwing more stimulus money at the problem will not work for the reasons listed previously. What is needed is a strategy to rebuild and restructure the U.S. economy. It will take skilled people with expert knowledge to do this. These people exist, but they are not in the government today.
We desperately need more people with solid, international, business experience in our government. The consequences of not utilizing these skills at this time are dire. In 2008, facing the biggest economic challenge of our lifetime, we were given the choice of the financial Tweedle brothers and we firmly rejected Tweedle Dee.
Dead Parrot Video
Monday, August 2, 2010
Something Just Ended (But It Wasn’t the Recession)
To review some prior observations:
- The U.S. economy had been growing due to “artificial” factors since 1995. This period ended abruptly with the housing and financial crises in 2008.
- Because the period preceding the crash was far from normal conditions, we cannot expect the economy to ever return to those exact conditions. Instead we should expect a “new normal” at some point, with many conditions similar to those in 1995.
- The economy is being propped up by government stimulus and bailouts. The strategy is to offer support in the short run and buy time until the economy heals and can grow on its own. This has impacted the normal business cycles and has caused some traditional economic indicators to be unreliable.
- Because of the damage done to the financial and housing markets, this will be a long, slow, recovery that is a “UL” in shape. Others have called it a “reverse checkmark”.
I still believe all these things are true, except for the last one.
The economic recovery is over. Did you miss it?
I’m not trying to be funny. And this is far from a laughing matter for the15 million people who are unemployed.
2010 looks like a “reset” rather than a recovery. Many of the graphs of industry sales and economic conditions are now following a normal cyclical pattern. If you look at just the curves, you would have no indication than anything is amiss. It is only when you compare to 2010 data to the peak years in the growth cycle that you realize how weak the economy still is. Recessions and recoveries tend to interfere with the seasonal patterns. This is not happening in 2010. The economy is not recovering, nor is it receding. Therefore, I contend it has “reset”.
Consider the job market for example. When job postings increased in Q1 of this year, people thought that the job market was improving. However, this always happens (unless you are in recession) because companies get their hiring budgets approved for the new year. But job activity cooled in Q2. In a true recovery, the job market growth would have accelerated, not fell back to seasonal patterns.
So this is a reset, not a recovery. With most industries returning to normal business cycles and the government stimulus programs losing impact in other industries, I believe the economic recovery ended sometime in May. This recovery lacked in both duration and strength. Like a disappointed bride on her wedding night, we cry out, “That was it?”
Almost every article on the economy mentions the progress of the recovery. We are expecting a full recovery, because that is what is supposed to happen. We are hoping that things recover to the same conditions as early 2008 before the downturn. But we are like older children who still believe in Santa Claus because it’s good to get the presents. We are like the fair maiden who expects the prince to show up because it’s good to the princess. But Santa Claus has declared bankruptcy and the prince’s castle just got foreclosed on.
If you apply this logic to the economic reports, it does make sense. This is not a “jobless recovery”. It is not a recovery at all, so you don’t expect much job growth. There won’t be a double dip recession because in order to dip, you had to significantly rise. Sure there was a slight recovery, but falling out of the first story window hurts much less than falling off the roof.
I expect the economy to keep following normal cycles at a growth rate consistent with a high unemployment rate and tight credit. This translates to 2% - 3% growth until the housing market begins to grow and the credit markets return to normal (two key markets that have yet to reset). Of course under these conditions, it will not be steady growth. There will be some bumps and jumps along the way.
There is some positive news with the Great Reset of 2010. Many companies are generating profits and operating well with the return of normal business cycles. Looking at the charts you could assume that everything is now fine, except that we have reset with the unemployment rate at 9.5%. That is a problem, a big problem, and will be the subject of my next post.
GDP Update
My panel of economic experts predicted a Q2 GDP (in March) of 2.9% and the first government estimate was 2.4%. The panel ended up nailing Q1 with a forecast of 2.6% versus 2.7% actual.
The forecast for Q3 is 3.0% which looks high at this point. I expect Q3 GDP to be around 2%. There is some type of shift going on because the total Wall Street Journal panel of economists seemed to be fooled by the low Q2 estimate of 2.4%. Only two out of 55 economists forecasted a Q2 GDP of less than 2.5% in the June survey so I would expect the 2.4% estimate to be adjusted upward.
- The U.S. economy had been growing due to “artificial” factors since 1995. This period ended abruptly with the housing and financial crises in 2008.
- Because the period preceding the crash was far from normal conditions, we cannot expect the economy to ever return to those exact conditions. Instead we should expect a “new normal” at some point, with many conditions similar to those in 1995.
- The economy is being propped up by government stimulus and bailouts. The strategy is to offer support in the short run and buy time until the economy heals and can grow on its own. This has impacted the normal business cycles and has caused some traditional economic indicators to be unreliable.
- Because of the damage done to the financial and housing markets, this will be a long, slow, recovery that is a “UL” in shape. Others have called it a “reverse checkmark”.
I still believe all these things are true, except for the last one.
The economic recovery is over. Did you miss it?
I’m not trying to be funny. And this is far from a laughing matter for the15 million people who are unemployed.
2010 looks like a “reset” rather than a recovery. Many of the graphs of industry sales and economic conditions are now following a normal cyclical pattern. If you look at just the curves, you would have no indication than anything is amiss. It is only when you compare to 2010 data to the peak years in the growth cycle that you realize how weak the economy still is. Recessions and recoveries tend to interfere with the seasonal patterns. This is not happening in 2010. The economy is not recovering, nor is it receding. Therefore, I contend it has “reset”.
Consider the job market for example. When job postings increased in Q1 of this year, people thought that the job market was improving. However, this always happens (unless you are in recession) because companies get their hiring budgets approved for the new year. But job activity cooled in Q2. In a true recovery, the job market growth would have accelerated, not fell back to seasonal patterns.
So this is a reset, not a recovery. With most industries returning to normal business cycles and the government stimulus programs losing impact in other industries, I believe the economic recovery ended sometime in May. This recovery lacked in both duration and strength. Like a disappointed bride on her wedding night, we cry out, “That was it?”
Almost every article on the economy mentions the progress of the recovery. We are expecting a full recovery, because that is what is supposed to happen. We are hoping that things recover to the same conditions as early 2008 before the downturn. But we are like older children who still believe in Santa Claus because it’s good to get the presents. We are like the fair maiden who expects the prince to show up because it’s good to the princess. But Santa Claus has declared bankruptcy and the prince’s castle just got foreclosed on.
If you apply this logic to the economic reports, it does make sense. This is not a “jobless recovery”. It is not a recovery at all, so you don’t expect much job growth. There won’t be a double dip recession because in order to dip, you had to significantly rise. Sure there was a slight recovery, but falling out of the first story window hurts much less than falling off the roof.
I expect the economy to keep following normal cycles at a growth rate consistent with a high unemployment rate and tight credit. This translates to 2% - 3% growth until the housing market begins to grow and the credit markets return to normal (two key markets that have yet to reset). Of course under these conditions, it will not be steady growth. There will be some bumps and jumps along the way.
There is some positive news with the Great Reset of 2010. Many companies are generating profits and operating well with the return of normal business cycles. Looking at the charts you could assume that everything is now fine, except that we have reset with the unemployment rate at 9.5%. That is a problem, a big problem, and will be the subject of my next post.
GDP Update
My panel of economic experts predicted a Q2 GDP (in March) of 2.9% and the first government estimate was 2.4%. The panel ended up nailing Q1 with a forecast of 2.6% versus 2.7% actual.
The forecast for Q3 is 3.0% which looks high at this point. I expect Q3 GDP to be around 2%. There is some type of shift going on because the total Wall Street Journal panel of economists seemed to be fooled by the low Q2 estimate of 2.4%. Only two out of 55 economists forecasted a Q2 GDP of less than 2.5% in the June survey so I would expect the 2.4% estimate to be adjusted upward.
Sunday, July 18, 2010
Let’s Hear It for the Mom
My mother Betty Ake passed away on July 9 at the age of 88. While she was alive I would have said she had no connection to this blog. However, you see so many things looking backward that unfortunately you don’t see in the present.
Here are some influences my mother and her father (my grandfather) have had on me (and this blog):
Good Writers are Made, Not Born
Good writers start out as good readers. I grew up in a home that subscribed to two newspapers, seven days a week. The newspapers were read front page to back every day. My mother read books her entire life and read her Akron Beacon Journal to the very end. Therefore, it is no surprise that I developed a love of reading, a thirst for knowledge, and strong writing skills.
The Stock Market Can Be a Source of Great Wealth
Many grandparents buy their grandchildren savings bonds. My maternal grandfather was a superb stock picker. I’m not sure he bought a savings bond in his entire life. When I was born he bought me a small amount of stock in three companies. Two of the three stocks (the lesson of diversification) did very well. The stock growth (including splits) and the dividends invested in a savings account were enough to pay for my college education 18 years later.
However, my father was determined to pay for my college education himself and did so. The stock money was used to assume a very favorable mortgage on my first house. The low interest rate allowed me to both save more money and build more equity in the house. This simple act of giving me stock resulted in a tremendous start to building wealth. In addition because I was already a stock owner, I was motivated to learn about and become interested in the stock market. I am not anywhere near the stock picker my grandfather was, but I think he would be very proud of the Model T.
Money is Important – Manage it With Care
My parents taught me how to manage money. My mother managed her money very well and passed those values down to me. After my mother suffered a heart attack two and one half years ago, I had to manage all her finances. She was never totally comfortable with this situation. What she didn’t realize is her influence and guidance had assured that her money was in very capable hands.
You are Responsible for Your Decisions
My mother was big on personal responsibility. When I failed to achieve something growing up, excuses were not tolerated. So when making financial decisions I try to understand the investment and the risk, because the outcome is my responsibility and I have to live with the results.
Hard Work Is Expected and Enjoyed
My mother began working in her uncle’s grocery store at age seven. She later worked in her father’s grocery store and then took an additional job as a school secretary. So for many years she worked two jobs, until a quick romance turned into to an unexpected marriage and subsequent pregnancy. (See a video clip of the story here). As I write this I realized that my mother gave up a career (two jobs) she loved, to raise me.
Moving Forward
At a time when newspaper readership is down, I subscribe to two newspapers, seven days a week. The newspapers are read front page to back every day. I have always worked two jobs including leading projects at church, my stint as a stand-up comedian and my current work teaching college classes. That doesn’t include my third job of managing my mother’s business affairs, a job that unfortunately I have just recently successfully completed. I doubt that I will ever be able to pick stocks as well as my grandfather, but that doesn’t mean I will quit trying.
Here is another video clip from my eulogy for my mother.
Here are some influences my mother and her father (my grandfather) have had on me (and this blog):
Good Writers are Made, Not Born
Good writers start out as good readers. I grew up in a home that subscribed to two newspapers, seven days a week. The newspapers were read front page to back every day. My mother read books her entire life and read her Akron Beacon Journal to the very end. Therefore, it is no surprise that I developed a love of reading, a thirst for knowledge, and strong writing skills.
The Stock Market Can Be a Source of Great Wealth
Many grandparents buy their grandchildren savings bonds. My maternal grandfather was a superb stock picker. I’m not sure he bought a savings bond in his entire life. When I was born he bought me a small amount of stock in three companies. Two of the three stocks (the lesson of diversification) did very well. The stock growth (including splits) and the dividends invested in a savings account were enough to pay for my college education 18 years later.
However, my father was determined to pay for my college education himself and did so. The stock money was used to assume a very favorable mortgage on my first house. The low interest rate allowed me to both save more money and build more equity in the house. This simple act of giving me stock resulted in a tremendous start to building wealth. In addition because I was already a stock owner, I was motivated to learn about and become interested in the stock market. I am not anywhere near the stock picker my grandfather was, but I think he would be very proud of the Model T.
Money is Important – Manage it With Care
My parents taught me how to manage money. My mother managed her money very well and passed those values down to me. After my mother suffered a heart attack two and one half years ago, I had to manage all her finances. She was never totally comfortable with this situation. What she didn’t realize is her influence and guidance had assured that her money was in very capable hands.
You are Responsible for Your Decisions
My mother was big on personal responsibility. When I failed to achieve something growing up, excuses were not tolerated. So when making financial decisions I try to understand the investment and the risk, because the outcome is my responsibility and I have to live with the results.
Hard Work Is Expected and Enjoyed
My mother began working in her uncle’s grocery store at age seven. She later worked in her father’s grocery store and then took an additional job as a school secretary. So for many years she worked two jobs, until a quick romance turned into to an unexpected marriage and subsequent pregnancy. (See a video clip of the story here). As I write this I realized that my mother gave up a career (two jobs) she loved, to raise me.
Moving Forward
At a time when newspaper readership is down, I subscribe to two newspapers, seven days a week. The newspapers are read front page to back every day. I have always worked two jobs including leading projects at church, my stint as a stand-up comedian and my current work teaching college classes. That doesn’t include my third job of managing my mother’s business affairs, a job that unfortunately I have just recently successfully completed. I doubt that I will ever be able to pick stocks as well as my grandfather, but that doesn’t mean I will quit trying.
Here is another video clip from my eulogy for my mother.
Monday, July 5, 2010
A Tale of the Honey Dippers
Once upon a time there was a land called Nectarinia. It was a land flowing with vast amounts of honey. (Yes, there was also some milk, but this wasn’t the Promised Land.)
The people actually had to work to harvest the honey, but they loved producing great amounts of honey and the freedom to enjoy it as they choose. The people also understood that they needed to contribute some of their hard-earned honey for the common good of Nectarinia. This honey would be used to pay for public goods, such as guards to protect the land from outside honey raiders.
The people’s honey was sent to a special location called the District of Nectar and placed in a big honey pot. The inhabitants of Nectarinia selected certain people to go to D.N. to manage the honey pot and distribute the honey to where best it was needed.
For a while everything was wonderful, but over time things began to change. The selected “honey dippers” were mesmerized by having access to so much delicious honey. Also, they were captivated by the power they gained by deciding who in the land would receive special honey from the honey pot.
So they kept asking the people to provide more and more honey for the honey pot. “We need more honey please. We can do so many wonderful things, if we can just have some more of your sweet honey”, they would say. The people would sometimes object, but the honey dippers did say they would do wonderful things. So the amount of honey flowing into D.N. greatly increased. Bigger and bigger honey pots were built to contain all this delicious honey. The honey dippers relished being able to control more and more honey and found creative ways to enjoy some of the honey themselves.
The honey dippers gained so much power and influence that they gained many friends who just wanted to get close to and have access to the honey pot. Honey making organizations sent gifts of honey to the honey dippers to gain favors and hopefully gain some more scrumptious honey from the honey pot. So called “honey diggers” were also attracted to the honey dippers because of their honey and power; some even were motivated to shake their honey makers to gain their favor. This made being a honey dipper a highly desirous job. They weren’t really working but they were getting honey for nothing (and the chicks for free).
At some point the honey dippers became totally obsessed with honey and power. They craved the honey and became addicted to it. They ate it, they drank it, and they rolled around nude in it. They knew it was the dipping and giving of the honey that created the intoxicating honey power. So they started dipping so much that they soon ran out of honey. They extracted more from the people, but that wasn’t even enough. They began borrowing more honey to dip. That worked great so they borrowed some more. They even started dipping into the large pot that held the honey collected so the older people in the land would have some honey in retirement. They said they would replace it someday, but they were so obsessed with dipping the honey that they never did.
The people of Nectarania tried to replace the obsessed honey dippers with new ones, but this was very difficult to do. Some of the dippers had been dipping so long that people just accepted their honey addiction as normal and were consigned to providing them with greater amounts of honey. In other instances, new dippers were sent to D.N. and were better for a while, but the longer they were there the more they too became enamored with the honey pots.
Just when it looked like things couldn’t get any worse, the people choose a pooh bear as their next leader. They knew pooh bears loved honey, but this pooh bear promised the most wonderful things the people had ever heard. And this pooh bear was so full of it, that sweet honey literally dripped from his lips. Even though the production of honey was temporarily receding in Nectarania, the pooh bear dipped honey like crazy. While some people complained that he was dipping too much honey, the pooh bear reasoned that after this slow time was over that he could come up with many new ways to extract more honey from the people. The people of Nectarania began to fear that this great pooh bear would squeeze them harder than ever before.
The people of Nectarania consulted their history books and read that at one time a king ruled the land and controlled all the honey. This king was deposed when the people decided that they wanted the freedom to control their own honey. But now it seemed that the king had been replaced by many little kings led by a grand pooh bear who at times seemed to want all the honey he could get his paws on.
The people actually had to work to harvest the honey, but they loved producing great amounts of honey and the freedom to enjoy it as they choose. The people also understood that they needed to contribute some of their hard-earned honey for the common good of Nectarinia. This honey would be used to pay for public goods, such as guards to protect the land from outside honey raiders.
The people’s honey was sent to a special location called the District of Nectar and placed in a big honey pot. The inhabitants of Nectarinia selected certain people to go to D.N. to manage the honey pot and distribute the honey to where best it was needed.
For a while everything was wonderful, but over time things began to change. The selected “honey dippers” were mesmerized by having access to so much delicious honey. Also, they were captivated by the power they gained by deciding who in the land would receive special honey from the honey pot.
So they kept asking the people to provide more and more honey for the honey pot. “We need more honey please. We can do so many wonderful things, if we can just have some more of your sweet honey”, they would say. The people would sometimes object, but the honey dippers did say they would do wonderful things. So the amount of honey flowing into D.N. greatly increased. Bigger and bigger honey pots were built to contain all this delicious honey. The honey dippers relished being able to control more and more honey and found creative ways to enjoy some of the honey themselves.
The honey dippers gained so much power and influence that they gained many friends who just wanted to get close to and have access to the honey pot. Honey making organizations sent gifts of honey to the honey dippers to gain favors and hopefully gain some more scrumptious honey from the honey pot. So called “honey diggers” were also attracted to the honey dippers because of their honey and power; some even were motivated to shake their honey makers to gain their favor. This made being a honey dipper a highly desirous job. They weren’t really working but they were getting honey for nothing (and the chicks for free).
At some point the honey dippers became totally obsessed with honey and power. They craved the honey and became addicted to it. They ate it, they drank it, and they rolled around nude in it. They knew it was the dipping and giving of the honey that created the intoxicating honey power. So they started dipping so much that they soon ran out of honey. They extracted more from the people, but that wasn’t even enough. They began borrowing more honey to dip. That worked great so they borrowed some more. They even started dipping into the large pot that held the honey collected so the older people in the land would have some honey in retirement. They said they would replace it someday, but they were so obsessed with dipping the honey that they never did.
The people of Nectarania tried to replace the obsessed honey dippers with new ones, but this was very difficult to do. Some of the dippers had been dipping so long that people just accepted their honey addiction as normal and were consigned to providing them with greater amounts of honey. In other instances, new dippers were sent to D.N. and were better for a while, but the longer they were there the more they too became enamored with the honey pots.
Just when it looked like things couldn’t get any worse, the people choose a pooh bear as their next leader. They knew pooh bears loved honey, but this pooh bear promised the most wonderful things the people had ever heard. And this pooh bear was so full of it, that sweet honey literally dripped from his lips. Even though the production of honey was temporarily receding in Nectarania, the pooh bear dipped honey like crazy. While some people complained that he was dipping too much honey, the pooh bear reasoned that after this slow time was over that he could come up with many new ways to extract more honey from the people. The people of Nectarania began to fear that this great pooh bear would squeeze them harder than ever before.
The people of Nectarania consulted their history books and read that at one time a king ruled the land and controlled all the honey. This king was deposed when the people decided that they wanted the freedom to control their own honey. But now it seemed that the king had been replaced by many little kings led by a grand pooh bear who at times seemed to want all the honey he could get his paws on.
Monday, June 21, 2010
Potty Economics
The latest unusual economic indicator is located in your bathroom. It’s toilet paper! I’m not making this up. A recent article on MSN Money says toilet paper sales can tell us much about the economic recovery. (article here)
I feel obligated to comment on this new indicator since I have written about other unusual economic indicators. But I assure you that I will treat this subject with the seriousness and professionalism it deserves and will resist the temptation to include any snide puns.
Some economists are flush with excitement at the possibility of a new economic indicator, but I think the argument on this one is a bit too thin to do the job. You know that the situation has hit bottom (or touched bottom) when economists are reading toilet paper instead of tea leaves.
Toilet paper sales plunged in late 2008 and 2009 as the economy swirled downward. You could have knocked me right off my stool with this news. I would have theorized that toilet paper sales would be impervious to economic conditions, but The Great Recession was so nasty sales and production both went down.
Consider that there are no substitutes for this product. Corn cobs or leaves might work in a pinch, but are not viable in the long-term. However, many “downsized” people downsized their toilet tissue purchases. It is speculated that people went from using two-ply to one-ply and from name brand to cheaper off-brands. I knew the recession resulted in tough times, we now know it also created rough times.
There is a possibility that some people did intentionally cut back on toilet paper usage for environmental reasons. Sheryl Crow proposed in 2007 that global warming could be improved if people limited themselves to one sheet per session. Then there was the 2009 campaign from Greenpeace that claimed that our use of plush toilet tissue was destroying the environment. While I think it is important to go green, when green goes up against brown, brown usually wins. And if you wanted to quickly destroy an environment, imagine yourself on a four-hour plane ride with a group of Sheryl Crow disciples. (I wonder if those drop-down masks work at normal cabin pressure).
But what makes this recession different is the amount of people who suffered a reduction of income. The unemployment rate is around ten percent. Add in the part-time workers for economic reasons and the discouraged workers (no longer looking for work) and you are up to 17% of workers. Now add in the people who took a pay cut in 2008-2009 which is basically everyone in the transportation industry as well as many other hard-hit industries. Add to that nearly every commission sales person (including every real-estate agent). You need to include all waitresses and service providers whose income and tips depend on customer volume. Finally, you have many small business owners whose income also is based on volume. People depending on dividend and interest income from investments also took a hit.
Run the grand total and maybe 30% or more of the working population suffered a drop in income. And even with the recession over, incomes are still lower than a few years ago. While most corporate pay cuts have been restored, many people in the other categories are still are trying to recover. In addition, many workers laid off in 2008-2009 have found new jobs that pay less than their previous ones.
However, the economy after being strained is starting to loosen up and interestingly toilet paper production is up 13%. Toilet paper factories are being dumped on with orders and are pushing out product at a rate not seen in months. This is an indication that consumers are wiping away their economic fears and spending money again.
And now the market may be having a movement back to the other end. A new three-ply toilet tissue sold well in 2009 and continues to swell in popularity. The product’s success was probably fueled by people who maintained their income levels and were looking for more comfort. Or it may just be the stress of the economy has inflamed the hemorrhoids of the nation like never before (we need some o-balm-a).
You don’t need to be a bloodhound to know that conditions were smelly and this is one paper that you didn’t have to read to know things had hit the skids. I don’t want to poo-poo the findings too much, but this is a trailing indicator (so lift up your shoe and remove it from the discussion). I don’t believe this indicator means squat unless there is another recession of this magnitude. There are many products that followed the same sales pattern as toilet paper during this recession. It is not unique so I believe that we can eliminate this indicator from the discussion and start back to square one.
I feel obligated to comment on this new indicator since I have written about other unusual economic indicators. But I assure you that I will treat this subject with the seriousness and professionalism it deserves and will resist the temptation to include any snide puns.
Some economists are flush with excitement at the possibility of a new economic indicator, but I think the argument on this one is a bit too thin to do the job. You know that the situation has hit bottom (or touched bottom) when economists are reading toilet paper instead of tea leaves.
Toilet paper sales plunged in late 2008 and 2009 as the economy swirled downward. You could have knocked me right off my stool with this news. I would have theorized that toilet paper sales would be impervious to economic conditions, but The Great Recession was so nasty sales and production both went down.
Consider that there are no substitutes for this product. Corn cobs or leaves might work in a pinch, but are not viable in the long-term. However, many “downsized” people downsized their toilet tissue purchases. It is speculated that people went from using two-ply to one-ply and from name brand to cheaper off-brands. I knew the recession resulted in tough times, we now know it also created rough times.
There is a possibility that some people did intentionally cut back on toilet paper usage for environmental reasons. Sheryl Crow proposed in 2007 that global warming could be improved if people limited themselves to one sheet per session. Then there was the 2009 campaign from Greenpeace that claimed that our use of plush toilet tissue was destroying the environment. While I think it is important to go green, when green goes up against brown, brown usually wins. And if you wanted to quickly destroy an environment, imagine yourself on a four-hour plane ride with a group of Sheryl Crow disciples. (I wonder if those drop-down masks work at normal cabin pressure).
But what makes this recession different is the amount of people who suffered a reduction of income. The unemployment rate is around ten percent. Add in the part-time workers for economic reasons and the discouraged workers (no longer looking for work) and you are up to 17% of workers. Now add in the people who took a pay cut in 2008-2009 which is basically everyone in the transportation industry as well as many other hard-hit industries. Add to that nearly every commission sales person (including every real-estate agent). You need to include all waitresses and service providers whose income and tips depend on customer volume. Finally, you have many small business owners whose income also is based on volume. People depending on dividend and interest income from investments also took a hit.
Run the grand total and maybe 30% or more of the working population suffered a drop in income. And even with the recession over, incomes are still lower than a few years ago. While most corporate pay cuts have been restored, many people in the other categories are still are trying to recover. In addition, many workers laid off in 2008-2009 have found new jobs that pay less than their previous ones.
However, the economy after being strained is starting to loosen up and interestingly toilet paper production is up 13%. Toilet paper factories are being dumped on with orders and are pushing out product at a rate not seen in months. This is an indication that consumers are wiping away their economic fears and spending money again.
And now the market may be having a movement back to the other end. A new three-ply toilet tissue sold well in 2009 and continues to swell in popularity. The product’s success was probably fueled by people who maintained their income levels and were looking for more comfort. Or it may just be the stress of the economy has inflamed the hemorrhoids of the nation like never before (we need some o-balm-a).
You don’t need to be a bloodhound to know that conditions were smelly and this is one paper that you didn’t have to read to know things had hit the skids. I don’t want to poo-poo the findings too much, but this is a trailing indicator (so lift up your shoe and remove it from the discussion). I don’t believe this indicator means squat unless there is another recession of this magnitude. There are many products that followed the same sales pattern as toilet paper during this recession. It is not unique so I believe that we can eliminate this indicator from the discussion and start back to square one.
Thursday, June 3, 2010
Very Dippy Thoughts
Today’s topic is the “double-dip”. Some double-dips are good. My favorite double-dip is a German Chocolate Cake/Jamoca Almond Fudge combination at Baskin Robbins. Likewise, double-dip roller coasters can be fun. Riding these is very similar to investing in the stock market. The major difference is that you are guaranteed to get off of the roller coaster with the same amount of money you started with, very different with stocks.
Most double-dips have negative connotations. The charlatan who unethically or illegally gains financially from drawing income from two sources, George Constanza double dipping his potato chip, and of course the dreaded double-dip recession.
Some analysts appear obsessed with the possibility that we will have a double-dip recession. Every week there are new articles on the subject, but double-dip recessions are rare. Economists are concerned that global credit problems, a Spanish banking crisis, a new Korean War, a second housing slump, money supply tightening and a disruption in Chinese trade, will plunge the U.S. economy back into recession. It is possible for this economy to fall back into recession, but to dwell on the subject is sort of morose and potentially self-defeating. There will be plenty of time to analyze it after it happens, so shut up already.
The Model T is not predicting a double-dip recession. The current graph of The Model T is shown below. It still says we are in the beginning of a “UL” shaped recovery. Note though that according to the graph, the economy will take an extended time to recover.
GDP Forecasts
My panel of economic experts forecasted a 2.8% growth rate for Q1 and the last revision was 3.0%. The panel is forecasting 3.5% for Q2, 3.1% for Q3 and 3.2% for Q4. So not even close to a double-dip predicted here. Although it should be noted that the panel members did not predict the first recession. (For what it’s worth, I personally think the forecasts for Q3 and Q4 are high).
The Stock Market
June is a key month for the market. The May drop was more pronounced than normal for the start of a bull market. If there is more correction in June, this market has no legs. Almost all the “data driven” models are predicting some type of market correction of 10-40% or even more. Most analysts predicting market increases are basing their forecasts on emotional based factors. They argue that the data models are not valid due to the indicators being unreliable due to the bizarre financial circumstances. This argument is self-defeating. If the economic indicators remain messed up, it is because the economy remains messed up. The unreliability of the indicators is a bad thing, not a good thing.
Yes We Could Double-DipThere is a way that a double dip recession could happen. If the stock market drops 20% or more in a short time period, panic will reenter the economy. Remember that all recessions have some psychological factors and if panic causes consumers and businesses to stop spending, you will get more layoffs and possibly another recession. This would indeed be a strange occurrence. The stock market could drop to where the data models say it should be and this causes the recession. It hurts my head to even think about this one. My suggestion is for everyone to head to Baskin-Robbins and chill out.
Most double-dips have negative connotations. The charlatan who unethically or illegally gains financially from drawing income from two sources, George Constanza double dipping his potato chip, and of course the dreaded double-dip recession.
Some analysts appear obsessed with the possibility that we will have a double-dip recession. Every week there are new articles on the subject, but double-dip recessions are rare. Economists are concerned that global credit problems, a Spanish banking crisis, a new Korean War, a second housing slump, money supply tightening and a disruption in Chinese trade, will plunge the U.S. economy back into recession. It is possible for this economy to fall back into recession, but to dwell on the subject is sort of morose and potentially self-defeating. There will be plenty of time to analyze it after it happens, so shut up already.
The Model T is not predicting a double-dip recession. The current graph of The Model T is shown below. It still says we are in the beginning of a “UL” shaped recovery. Note though that according to the graph, the economy will take an extended time to recover.
GDP Forecasts
My panel of economic experts forecasted a 2.8% growth rate for Q1 and the last revision was 3.0%. The panel is forecasting 3.5% for Q2, 3.1% for Q3 and 3.2% for Q4. So not even close to a double-dip predicted here. Although it should be noted that the panel members did not predict the first recession. (For what it’s worth, I personally think the forecasts for Q3 and Q4 are high).
The Stock Market
June is a key month for the market. The May drop was more pronounced than normal for the start of a bull market. If there is more correction in June, this market has no legs. Almost all the “data driven” models are predicting some type of market correction of 10-40% or even more. Most analysts predicting market increases are basing their forecasts on emotional based factors. They argue that the data models are not valid due to the indicators being unreliable due to the bizarre financial circumstances. This argument is self-defeating. If the economic indicators remain messed up, it is because the economy remains messed up. The unreliability of the indicators is a bad thing, not a good thing.
Yes We Could Double-DipThere is a way that a double dip recession could happen. If the stock market drops 20% or more in a short time period, panic will reenter the economy. Remember that all recessions have some psychological factors and if panic causes consumers and businesses to stop spending, you will get more layoffs and possibly another recession. This would indeed be a strange occurrence. The stock market could drop to where the data models say it should be and this causes the recession. It hurts my head to even think about this one. My suggestion is for everyone to head to Baskin-Robbins and chill out.
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