From an economic perspective I like this idea, but I know people will find a way to screw it up. The only "One World Currency" that would work is one that has a fixed supply. From a religious perspective I don't really like this idea at all, but what can you do? This is the next step in the time line...
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Urban Survival...
Sustainable Run Rates
Buckle up and try to stay awake though this, as I've got my lecture robe on and have been sniffing the china board marker for a few minutes: Want to know when it will be easy to call the ultimate bottom here in the Second Depression? Wait for factory run rates to stabilize. "And what brings this up," you're wondering? Well, buried in all the headlines and economic noise on Monday was this little report from the Midwest Fed that 'factory activity slips in February'. And, looking elsewhere, the astute investor could notice that a "Poll - India's Feb industrial output seen down 1 pct/y/y".
Then we have to consider the headlines out of the UK where happy-talk/rally-the-sheep blather about manufacturing has been finessed in ways that add immeasurably to what out predictive linguistics pals call this period of developing 'surreality'. Here's a perfect example.
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If your 'bias' is to believe the government mantras about the road ahead - the sort of "Good times are just ahead, citizen" rhyme off the last Depression's jingoisms, then the headline for you is "Pound Rises Versus Euro as U.K. Factory Output Beats Forecast " (Bloomberg)
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If, on the other hand, you have a preconception of a more moderate outlook - perhaps a slight skepticism, you could opt for the Forbes headline "UK Feb factory output falls less than expected." No, this isn't really good news, but it's less rally-cry sounding than the Bloomberg report.
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But which Bloomberg report? Here's one that is downright dismal-sounding: "U.K. Manufacturing Drops Most Since at Least 1968" which sounds, well, bad.
Confused? "Beats Forecast" may be viewed in a "only fell off a 24 story building instead of a 30 story building" kind of way. "Less than expected" may refer to it only being a 16-20 story building, while "Most since 1968" sounds like it refers to the mess on the concrete, compared with other manufacturing death leaps in the past.
Sorry if this is a bit graphic, but it's important to have your head firmly wrapped about the way numbers of column inches of 'news' reports can be distilled down to a single number while the rest of the words in the story - a few hundred in many cases - boils down to contexting this way or that.
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Once you're nodding "Yeah...OK...so what?" the next item up is understanding that economics of the conventional sort hates...and I mean loathes in a fearsome way, the very idea of cycles. Oh sure, those cycle guys (Schumpeter, Juglar, Kitchin, Kuznets, Kondratieff/Kondratiev, et all) make interesting reading, but the study of economics as the complex interaction between cycles is generally frowned on by economists of the mainstream stripe. (*If you've really been hitting the coffee this morning you'll notice that of these cycle guys, why are there so many with last names starting with 'K'? I should change my last name, perhaps...)
All of which would be fine if the conventional-thinking sorts had a demonstrated record of accurate predictions, but they don't as evidenced by the crap-pile economy we're in right now, the main feature of which is what? Pretty much falling everything. And that's why we need to consider something that I've yet to see discussed in economics in anything other than nearly incomprehensible multiagent variant studies that'd make your head hurt. I call it simply "The Slosh."
No, it's not exactly an original concept, since it's covered pretty well in the study of complex systems - which gee, gosh, economics really might be -- but it doesn't make headlines because no one has come up with the really simple way to convey the information, other than infer how the slosh is going by looking at a broad economic indicator, such as the Consumer Debt figure due out from the Fed today, which has me sitting on the edge of my chair with anticipation. Either that or because I need to run down the hall, but let's assume it's anticipation...
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My consigliore', the JD in Tax Law and CPA fellow who I often credit with being not only a good friend, but a fine economics thinker, actual got me to thinking about how 'slosh' worked when we were exchanging views on the old Long Wave Economics newsgroup run by the University of Colorado back in the day. He had made some very interesting comments about how in his modeling of the economy (easily done with linked spreadsheets if you have enough time on your hands) suggested that, just for example, oil price movements could take as long as 60-months to be fully integrated into the price behavior of all markets.
If you're a conventional economist, stuck in formula-land, a good starting point for visualization would be a multivariate implementation of the Putnam-Norden-Rayleigh Curve:
Where
Ea=Effort in person months
td=The nominal delivery time for the schedule
ta=Actual delivery time desired
Or, maybe the F.N. Parr alternative. What I envision is something like this, and I'll annotate this as a oil price change implementation, supposing that you have an oil price change - like the OPEC shockers of the 1970's coming through the system...
So was the 1980-81 'soft patch' just a result of a new stability point in run rates and consumption following the 1970's oil shocks? Maybe...
And so it goes for how economic shocks work out. As to where we are today? If I were guessing where we are presently in how the curve is developing, we might be looking at something like this:
Pardon the lines not being precisely smooth - it's early yet and I don't have a lot of time to spend on getting the drawings 'just sop' but you can see the problem: There's a fair chance that we will have some kind of a gulf problem develop between this fall - when around the end of October it will start to dawn on markets, I figure, that "OMG we are still in a recession and is this a DEPRESSION will kick in...and the Obama folks will be right saying "Remain Calm: Economic recovery is almost here..." but by then the villagers with the pitchforks and torches will be at the gates of government at all levels asking "WTF?"
But, thanks to the miracle of offset curves, we can sketch out the road ahead in very general terms, and hopefully have a much smoother sail through the Straits of Disaster.
That funny shaded box are, by the way, means that we could argue endlessly about precisely where things are, but the main thing is to get the overarching view right and let the rest fall into place.
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OK, now that you're back to sleep, we move on to the next pointer. Starting with Robin Landry's latest note to his clients:
"Once in awhile I like to focus on the larger trend to clarify my views as to where we are in the market, and what I believe is ahead. Below is a weekly chart of the Dow with the count I have as my primary count, based upon other technical indicators I use to help me stay objective in my analysis. As the chart shows, the low on March 6th was the end of wave 3 and we are currently in a 4th wave rally which should last several months before turning down in a 5th wave to new lows. That low would be the end of the larger wave 1 or A, and a rally lasting almost a year would begin to form a larger wave B before turning back down for wave C to even lower lows and the end of the bear market.
My secondary count says that the recent low was the end of wave 1, and we are in a wave 2 rally. The short term difference is of little consequence to most investors, but the pattern will be more complex if my primary count is correct. Under my primary count the market should rally to about 9700 sometime later this summer to early fall, then the decline in the 5th wave would begin. I will discuss targets for the 5th wave low once the 4th wave top is in. If the count is my secondary count, the rally will like reach a higher level around 11250 and the wave pattern a more simple ABC or Up-Down-Up. Either way we are in a period where the surprises are likely to be to the upside until the rally is over. There is one other count which is much more bearish and I will discuss it should the market action dictate a change in my analysis regarding the 2 counts discussed in this update.
The main point I want to drive home is that this is just a BEAR Market Rally. The LOW is not in and we still have several years of overall market declines to come if my analysis is correct and I believe it is. I would like to be wrong, the economic stimulus works, the economy turns up, and everything is great again, but history and common sense says it won't. To put it in a more simple analogy, I liken the stimulus program to telling someone who is deep in debt that the answer is to borrow more money and spend his or her way out of debt when common sense says it will only delay the inevitable bankruptcy. Such is the madness in Washington. As always questions and comments are welcome. I will answer them as time permits." rlandry@allegiance.tv
And this is the place where I have to point out the usefulness of having the 'skewed curves' thing in mind, because you can see not only how I'm viewing things, but how Landry's work - which comes from about 30-years of pushing data around following grad school has reached a similar outlook.
And as if Landry's work and my view isn't enough, I can help but note another guy who has much the same outlook as mine & Robin's is Dr. Marc Faber who says "Stocks may see 'correction' of 10%" before we continue the rally. So from 8,000 and change, a knockdown of 10% would be 7,200, which as I've told you before is what? Landry's 7,200 (or 7,100 next level down) of support.
If you're really, really awake, you should here something that sounds almost, well, George-like about this part of the Faber story:
"“We need some kind of correction, maybe around 5 to 10 percent, and after that we can maybe rally more into July,” said Faber, the publisher of the Gloom, Boom & Doom report. “The economic news, while it won’t be good, the rate of getting worse will slow down.”
Don't mean to spend so much time on the mechanics of how all this works out, but then again, people come here looking for serious economics and light-hearted humor. This is not financial advice...just how I think things will play out: Gold lower before higher, stocks lower before higher, and if you think the sociopolitical air is charged and tense now? Wait until this fall. Keep October 26th circled...not that it will be the day, but around there and the weeks following, say the linguistic reports, government's gonna be hunkered down trying to cope with a whole mess of humans who haven't had the roadmap handy who are going to be frothing mad about prices going up and wages going down.
The only thing that keeps us from auguring into new Third World status is manufacturing of something at a sustainable run rate. And, since our manufacturing of bogus financial products has been outed, we've now got to come up with something else. Unless, of course, we can figure out a new 'over-unity' kind of government, where government gives back more than it takes in the way of taxes.
Pardon me if I don't expect that breakthrough in human events will be coming any time soon. So, I will just work on my garden, tend my investments, and ponder how the system can keep the obvious hidden in plain sight for so long.
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