Sunday, November 29, 2015

Graphing Madness, Courtesy of the St. Louis Fed

I stumbled on a cool graphing app on the St Louis Fed web site. You can graph several economic indicators on the same graph, and you can vary assumptions. The underpinnings are federal data, which is primary and high quality. The link above goes to a graph of Department Store Retail sales over the past 23 years. Here's a screen shot:


Looks like Department Stores peaked out in 2001 with $20B in sales, and today department stores can expect around $14B in sales. This is about 30% lower than 2001. Definitely significant.

You can also compare Department Store Sales to online retail sales by simply clicking on the add data series button.


This graph indicates Department Stores' sales have leveled off, and the diminishing amount of sales (30%) is insignificant compared to the amount online retail grew. I would not say Department Stores are suffering due to online retail at all, but are likely showing the results of changed shopping habits. All of the department stores are smart, and using the web to their advantage. Nonetheless, the scale of the new graph makes $6B in diminished sales look flat because online sales went from $5B to $87B, or more than 4 times the peak of Department Store Sales. Graphs and statistics, if not used responsibly, can lead to erroneous conclusions.

Go on the site, and experiment with some graphs. They show trends, but are not a crystal ball where a person can read future events. The use of this data is a good guide to investing. I love to geek out and see examples of trends I have suspicions may exist, or proof I am wrong!

Sunday, October 25, 2015

Stalled Growth

I read a great article in Forbes today about how investors shouldn't invest in stock in companies where growth stalls, but earnings increase.  The valid point made was companies who stall usually have shrinking sales in the future. The article showcased two companies, Microsoft and McDonald's and stated only 7% of companies have significant growth after a stall point.

Stalled Growth Charts - Check out the original on Forbes.

Microsoft and Intel are both great companies, but I would not invest in either at this point. I think both companies will continue on, but their sales will only be a shadow of what they used to be. This is due to the breakage of the classic WinTel duopoly on desktop and laptop computers. The breakage occurred because consumers and companies switched to tablet and phone computers operating iOS or Android. Many workers still need desktop computers, thereby creating a limited demand for them, but many companies switched to thin clients for their desk bound workers in place of the more expensive desktop computers.

In an attempt to stay relevant, Microsoft threw in the towel with the effectively free Windows 10 OS, Microsoft will leverage their patent portfolio into earnings that will flow into the future, so don't expect the company to disappear.  They also produce a killer tool, the Surface Pro 4. Its a high performance tablet type ultra light laptop computer. The company will do fine in the future, but they won't have those huge sales and profit numbers from years ago.

Intel is in a similar position to Microsoft, where sales have cooled, but they are still bringing out innovative products. Lay offs are on the horizon as frequently seen in cooling companies. Intel is reporting flat sales, quarter to quarter, which means their sales potential has been met. However, their new line of server chips, Skylake and Greenlow, are both stellar in performance and low power consumption.

McDonald's surprised me. During the Great Recession, they were the darlings of Wall Street because they posted high growth sales and smart marketing in the form of coffee. Today, though, they are the cheapest game in town. You can get a breakfast for $2 because all beverages are a dollar, and there is an extensive dollar menu. Nowhere else is this possible. Fast food is all about the average ticket and low prices will make that all important metric diminish. The Forbes article indicates the McDonald's success story is about to change.

I don't think McDonald's, Intel, or Microsoft are alone in flat sales.  If you look at NYSE YTD stock charts, that market is lower now than it was on January 1st, 2015, and this usually indicates weak fundamentals. NASDAQ is showing opposite trends with YTD growth. Likely this opposing trend is due to a tech bubble, I don't see how tech can continue to rise with Amazon offering $50 quad core tablets. A rising tide raises all ships, but an ebb tide lowers them.

I see evidence of lowering prices creating an ebb tide. Acquaintances tell me Toyota called them to turn in their 2014 car to buy a 2015 car to lower their payments. Gasoline, a main driver of inflation remains low. Social Security COLA (Cost of Living Adjustment) won't be powering an increase for seniors this year due to low inflation.  With the China Economy receding and leaders employing desperate measures to keep growth at 7%, I would say we have a period of slack global demand.  US GDP Growth is similarly slow. I would expect to find more companies with dismal increases in sales.

One area is booming, and that is Real Estate. Here in Portland OR, we have a housing shortage with rents and home prices increasing dramatically. Market values rose 20% over the past year. Of course, this reminds me of the go go years in the early 2000s. If people start to use their houses as ATM machines, then the economy could start to grow again. Time will tell.

All in all, we are in interesting times. Hopefully everyone will come together to ensure a return to fast economic growth.

Sunday, September 27, 2015

Moore's Law?

A while ago, I noticed that computers weren't getting any better.  By better, I mean no longer faster in newer generations.  I put up a post observing this trend a while back.

Today, I read a great article in the New York Times.  The author observed the aging of Moore's law, and discussed how chips were becoming more power efficient, but not faster.

I think there's a gap between software and the capabilities of the computer. By gap, I think the computer is able to run more complex software, but we don't know how to write that kind of software yet.  Nor are we able to articulate what we would like.  Sounds like Kondratiev's Law at work. Computers are maturing and no longer spurring the economy forward.

Debian Jessie

A few months ago, I installed Debian Jessie 8 on a 64 bit core 2 quad machine. Since then, the machine (being very large as in full size) has sat gathering dust.  Finally, I put it together last night. Today I had to troubleshoot the DVI cables, and now I have a nice dual head machine. (dual head is two monitors). For a long time, Debian has been a fascinating distribution for me.

Debian has the most programs (repositories) of any of the Linux multiverse. Debian is the grandmother of many other distributions, such as Mint, Ubuntu up to a few years ago, Xandros, and others. Distrowatch has a complete list of Linux distributions. Interestingly, Linux seems to be funneling down into three top versions of software, and Debian is an older distribution.

One of the prominent US versions of Linux is the Red Hat universe which consists of Red Hat Enterprise Linux, Fedora and Centos.  Fedora is the bleeding edge distro where changes and new untested software appear first.  Red Hat Enterprise Linux and Centos have very few versions, being a super stable business distro. The biggest difference between Red Hat Enterprise Linux and Centos is paid support.  Red Hat Enterprise Linux is a very stable and well supported software suite.

Another group of prominent distributions is based on Arch Linux. Arch uses rolling upgrades, so users don't have to update their machines. Spatry, a leading You Tube Linux personality, has a Manjaro distribution available. Apart from every color being black and sometimes hard to read, this is a great distro.

The last major distribution is SUSE.  SUSE seems to be big in Europe, especially Germany. SUSE uses Red Hat's program installation coding known as Red Hat Package Manager or RPM for short. SUSE has roots far separate from Red Hat.

I first became interested in Linux in 1994. I used Slackware, Yggdrasil, and the original Red Hat. Back then, we had to buy special hardware to work on Linux because many drivers were proprietary and limited to Windows or OS10.  Since then, I tend to use old computers, so Linux always installs easily.

Now the introduction is over, I wanted to write a few thoughts about Debian.  The reason I installed this operating system is due to the large amount of writing I have to get done.  My favorite computer repair man, Ron at PC Triage, always says writers like Linux best. Linux in general, but especially Debian, is  very stable compared to Windows.  In Linux, writers have free access to the language commercial printers use in their set up, where one of the common languages is LATEX. LATEX is available as a plug in in Libre Office.  The CEO of Red Hat wrote a book using Libre Office on a Fedora 22 laptop. And Ron says writers love the bullet proof stability, oh did I mention that already?

So far so good with Debian. Seems like I've turned the clock back to one of the initial versions of Ubuntu. The .deb packages go in pretty easily.  The video drivers seem to agree with my card.  The screen are sharp and bright.

Playing You Tube is easy with this, flash just worked out of the gate.

All in all, Debian seems like a great OS.

Monday, July 20, 2015

Glad I'm not a Gold Bug!

Gold, and other commodities (especially precious metals), are always being touted as investments that increase in value when the markets get squirrely. The bond market is certainly odd right now, with treasuries costing the issuer more.  This is related to the liquidity trap.  Investors are worried that they will  not be able to sell bonds easily, leaving no easy place to park money.

A gold bug is someone who irrationally expects the sky to fall (markets to crash, life as we know it to cease, or the dissolution of civilization), and their full position in gold and other precious metals to pay off. Frequently gold bugs can be seen on the Discovery Network swimming underwater to find raw gold on the sea floor or living in desolate Alaska strip mining hills and operating large crushers and wash plants. Their efforts usually seem to pay off, at least on the shows, but in real life the over exposed precious metals investor is usually bankrupted by market conditions. We studied a case study in MBA school of a gold mine in Canada.  The investors made money on an exhausted claim until they pushed it too far and lost everything.  Losing everything is usually the fate of people who are emotionally invested in their investment position, the way gold bugs are emotional about gold.

Commodities, stocks and bonds frequently trade places.  Usually when one is up the others are down because people are moving their money in between investments. The decrease in Gold seems a little drastic lately, though.  Market forces could be to blame.  Anonymous sellers sold 5 tons of gold in China last night. Other factors are the resolution of the Greece crisis, low inflation, high flying stock market, and dozens of better places to put money.  Still though, Gold hit a 5 year low yesterday.  And that volatility makes me happy I'm not a gold bug!

Monday, July 6, 2015

Is Greece Only the Beginning?

A while ago, I wrote about how the world financial markets were sliding.  Back in April, the issues seemed to be slowing growth, and lower retail prices.  An additional problem that surfaced since then is an ETF (Exchange Traded Funds) liquidity crisis.  This is creating a dysfunctional bond market. When bonds are dysfunctional, the problems usually spread into stocks.  Bloggers are writing of the possibility of a bond bubble implosion. This is significant.

Other significant problems include Greece's economic melt down and possible exit from the Euro. They also voted down an austerity solution to their problems.  This leaves a fairly large tranche without support.  The US seems to be only indirectly involved in this, but once again bad news travels fast.

The final, and to my mind, largest significant problem is China's stock market implosion. They lost 29% of value over the past 21 days on the SSE (Shanghai Stock Exchange). China went so far as to prevent IPOs (Initial Public Offerings). Many are saying this is not a bubble, but it sure looks like one to me.

Ancillary problems include the potential of a technology stock bubble, real estate prices that are going up too fast in the Portland OR area, smart professionals getting into the Real Estate business, and negative sovereign debt yields.

All these small details factor together into a world economy that has deep seated issues. With both Greece and China having obvious issues, most would wonder if the financial system is getting ready to freeze up again, like in 2008. Even if the problems in China and Greece spread to the US, our government and the central  bank have tools at hand to reverse the trends. They've been successful so far, so the market problems are likely to be solved prior to any type of crash.

I feel like a gold bug; We should have a little bit in precious metals, and have some cash at home too.

Monday, June 1, 2015

The Coming Fusion of the Internet and Financial Services

The other day at work, an established customer came in to skate. I've known her about 20 years.  She's always been a financial services type, for both accounting and financial advice for individuals. I was surprised to hear she shut down her financial consulting service and so I asked why.

She said using the Internet required keeping up with technology, and that the standards and rules for her type of business on the web are becoming strict.

I pointed out the Internet wasn't made for financial services, or even for that matter, buying and selling of consumer items. Both financial services and consumer items require the secure passage of identifying information.

The Internet was designed in the late 60s to be a method to allow computers to communicate even in the face of war, when several computers could be out of touch with each other. In the ancient form,  the Internet enabled any computer to communicate with another, without encryption, or even testing to see if the other device was safe. Today, we need to be able to encrypt information and tell the system exactly who we are.

We've heard a lot lately about the FCC taking over the Internet. I think this development has a lot to do with ensuring people prove who they are with their real identity so they can buy things or use financial services via the Internet. In this era of terrorism, tracking money and people becomes more important. Additionally, many states passed laws requiring businesses to safeguard personally identifying information, or face fines.

Lately, I've seen coverage of several banks shutting down their branches. This is likely due to people using mobile banking to deposit checks. Phones tend to transmit a lot of data in addition to their uses on the Internet.

I think we can expect more intrusion on our Internet lives. When I sign up for e-mail now, I have to give a mobile phone number. I think this is a unique identifier.  Additionally, anytime you give credit card information you are also identifying yourself.

Instances of this are likely to get more prevalent in the future. Perhaps we will get chipped, but prior to that eventuality, computers will likely ask for bio-metrics. In the short run, we should expect fewer independent shops for financial services, as the government clamps down on fraud and the costs to keep up with technology and the ever changing Internet world increase.

Monday, May 4, 2015

Debian Jessie, pt. 1

A friend of mine, who is a professional writer, read my blog.  He said the blog is all-over-the-place.  He's right, but, as I told him that day, I have a lot of interests.  My interests are sports management in the form of large facilities like ice skating rinks and health clubs, Linux, Writing, and the interconnections between economic conditions, business health and innovation. I can't write about sports management due to a non compete agreement, and the fact I do it for a living, but the rest are fair game.

Today's article is about Debian Jessie.  To quote the words of Ron at, the people who are happiest with Linux are writers.  I find this observation interesting. People who write are content-creators, and the art of creating written content hasn't changed over the years. (Visual content production has changed a lot, and Apple is the way to to.) I tried to use Dragon Naturally Speaking to write verbally, but I found that speaking doesn't work for me.  Dragon is good software, therefore the problem is with me. I'm not sure why.  Perhaps too many years staring at the keyboard has made permanent imprints in my brain.  What really brought the keyboard as a necessity concept home for me is when I installed a computer operating system years ago, and the screen said the computer was installing a human interface when it meant a key board and mouse.  I realized in that moment, that even though computers had changed radically, our ability and methods to input or output information into our brains had not changed.

I chose to install Debian today because this is a new release, and because I am really happy with a Centos installation at work.  We use Centos for our time clock computer because our employees clock in and out on an ADP system via the Internet. We found the combination of Centos and a really inexpensive, old Dell thin form factor computer made a system that keeps on working.  Its been working for years.  We've never seen a Windows computer work so flawlessly without interruption.  Centos, similarly to Debian, has a long release cycle.  The long release cycle, where an operating system is maintained for 5 years or more, makes sense to me because I want to use the computer, not spend all my time updating the Operating System.  Debian's advantage over Centos is more applications and programs.

Once I get the system installed, I will report on the good, the bad and the ugly. Will a Debian system offer enough to keep me happy?

Tuesday, April 14, 2015

We're Sliding into Spring!

Spring seems to mean tepid weather, at least here in Oregon.  Our weather is warm and sunny this year, except for a cold snap this past week.  Weather does enter into economic trends, especially when the average family has to spend less on heating.  This is the fist time economists have brought weather into the mix on why the economy grew slowly.

Most of the economic news stories trickling through, seem to equate the tepid growth with a strong dollar, a resolved stevedore strike and lower priced gas.  Here's a story from Reuters which states these elements as factors in a tepid economy.  

But wait, there's more! (this part makes me feel like a late night TV Huckster).  Foreign economies seem to be experiencing similar problems.  In some ways this makes sense, since the US is a prime trading partner, and the size of the US economy virtually means the rest of the world is affected by the US expansions or contractions.

China's growth diminished to 7% and slowing quickly.  This is a problematic trend for a variety of reasons. 

In 2009, our MBA class went to Shanghai.  China at that time was obviously an emerging economy.  Road construction was everywhere, and we watched Suzhou being built.  The statistics on Suzhou are surprising.  They were in the process of building a city for one million people, putting up 10 or 12 story apartment buildings everywhere, digging and filling an artificial lake, and creating neighborhoods.  The rural people were moving to the city, and Suzhou would become a world class China-Singapore industrial park.  At the time, China's growth was in the low double digits.  This type of construction is the forerunner to economic expansion.  At the same time, people in China were worried if the economic growth slowed to 7 or 8%, they would have social unrest and difficult circumstances.  Now, with China's growth so low, I wonder what effect this can have on the rest of the world.

The IMF thinks Europe and Japan are doing better by giving them upgrades, but the US got a downgrade for our slowing economy.  Interestingly, they predict China is under 7%, and slowing economies include Russia at -3.8%. 

Looking at these travails from an overview position, the world economy is slowing.  This is going to make it difficult for the Fed to raise interest rates, although fortunately they are being patient. US Retail sales also slowed during the first quarter.  All of these factors point to slowing economies, and perhaps super low inflation brought about by weak retail sales.  This is not good news.  These developments mean the financial crisis in 2008 is still with us.  Additionally, this means the Kondratiev wave low point is still alive and well.  Hopefully a new technology will emerge that will pull us out of the Kondratiev trough!

Wise investors should rig for stormy seas. 

Wednesday, April 8, 2015

Bubble Bubble Toil and Trouble

Lately, it seems as though everyone is writing about a financial bubble.  Here's a few of the latest stories on this:

Tech Crunch's view on Tech Bubble  
Concedes we are in the midst of a tech bubble, but praises the positive effects of a bubble.  Seems to miss the point everyone loses a lot of money.

Boston thinks they are experiencing another bubble
Boston thinks their property prices are escalating too fast.  They are not alone.  Portland OR might have a similar problem.

China's Tech Bubble
If our own tech bubble isn't enough, we can share in China's bubble too.   Proves teh tech bubble is worldwide.

Serious Questions on a Stock Bubble
This article questions the possibility of a stock bubble in the overall market.  Depends on if you believe in a rigged market or not. Even Warren Buffet is questioning the lack of under-priced equities. 

China's Long Discussed Property Bubble
China's real estate market is long ready for a correction; I've been hearing this one for years.  Seems like China's economy beats the odds regularly.

And then last, but not least, the new Treasury Bonds with the negative interest rate.   The latest nation to announce this practice is Switzerland.Negative interest is wrong on a variety of levels.  The best way I can get my head around the concept is to compare negative interest to playing slot machines on Las Vegas' strip. One casino offered 'loose slots' where they advertised the fact they paid out 99.5% of the money spent on slots.  This means, if you invest a large enough amount of money in slot machines, that overall, you will get 99.5% of your money back.  Of course, everyone in the casino is hoping they are special and will win the jack pot. I wouldn't invest in something htat took a bit of my money and assured me of a loss.

Seems like everyone is getting jittery, a sure symptom of a bull market about to run out of steam.  Once market values start sliding, then the sell off will begin.  Which industry will trigger the slide this time?  Anyone's guess, but most likely stocks or tech.

Saturday, March 14, 2015

World Economy Unbalanced: What will Crash Next?

Today, I talked to a young woman who was convinced Real Estate was the secret to untold riches.  She told me that the market was appreciating rapidly so she was becoming an agent.  I smiled, and left her to her dreams.  Later, I reflected on other people who told me similar things.  Right before the Real Estate crash in 2007, several of my acquaintances told me they were becoming mortgage loan officers, bulk mortgage securities traunchers, or even real estate agents.  All of them were attracted to the perceived easy money in the field.  Some of them were very unlikely candidates to occupy white collar job titles.  One was a hot water heater installer, another operated a print shop, and some were indigent.  Reminds me of Joe Kennedy's shoe shiner. 

The conversation with the young woman brought back those memories from a decade ago.   Like the other acquaintances, she was an unlikely candidate. The last I knew she was going to Graduate school, yet today she showed up married and on the trail of easy riches in Real Estate.  The Real Estate market in Portland OR has boomed back compared to the dark days of 2009.  People are moving to Portland, so they will drive the price of housing up.  However, this conversation showed an overall weakness in the economy.  I perceive a bubble in Real Estate because unlikely people are flocking to the industry.

Let's take a look at major problems:

Gold Prices go down steeply

Wholesale Prices Decline in US for 4 Months

Dollar's Value Surges

Oil Prices Drop Again

Stock Prices Decline for a Third Week

Fears of Destructive Deflation

Tech Stock Bubble (Whenever someone says no bubble, there really is)

Student Loan Bubble

Easy Mortgage Loans  (Real Estate bubble reforming)

Negative Sovereign Debt Interest Rates

Mike Bird from Business Insider has an interesting theory.  He thinks a strong dollar is leading to some kind of financial market crash.  And his rating of strong dollar really means incredibly strong dollar.  He has a chart that shows a strong US Dollar related to major events. 

 From Business Insider

The strong dollar prior to Lehman Brothers being allowed to fail was weaker than today's dollar.  The failure of Lehman Brothers led to the mortgage melt down.  Mike Bird's theory has merit, but not entirely for the reason of his chart.

Part of the Kondratiev and the end of a Kuznets cycle is the prediction of deflating prices.  Perhaps the Keynesian interventions in the US and foreign economies held deflation at bay, and today's strong dollar is a symptom of delayed problems. 

We are at a perfect alignment of several forces, as seen by the links to various pieces of the economy that are showing weaknesses.  In any event, several possibilities exist:
  • Nothing will happen.  The dollar will continue stronger, and then grow weaker.  People will be happy as the prices of their groceries go down, but something will happen that makes prices higher.
  • The government will intervene and this crisis will fade.  The Fed will raise rates, or change money policy.  Perhaps the government will rescue an industry.
  • Something will break.  Several possibilities exist, none of them palatable:
    • Stock Market Crash
    • Interest Rate Increase
    •  Financial market system freeze or collapse
    • Destructive Deflation Cycle begins
  • Other events may occur that are not predictable.
  Under any analysis or scenario, there are too many places where the macro economy is going wrong.  Once we get past the merge point of all these crises, we will know and understand why the dollar is so strong today.  We are definitely in uncharted waters, and caution should be the watch word of the day.

Thursday, March 12, 2015

Market Watch Misses the Mark

I was reading Market Watch where Cody Willard made a short-sighted statement.

He said,

"Oil's collapse has been a function of cyclical oversupply after a long boom/bubble period, and that such a drop in energy prices is decidedly not deflationary."

Perhaps oil's decline is more about supply and demand than deflation.  That is possible.  However, energy prices underlay every sector in the greater economy.  The effects of such a drop in oil prices will be deflationary because prices in all industrial sectors will become lower.  The reduction in asset values for oil companies who had to list non-produced oil at $95 a barrel due to SEC rules will lead to deflation on some small scale.

On the face of it, his statement is correct, but ignores the larger picture.

An additional interesting conclusion from his statement indicates that the Kondratiev and Kuznets long economic cycles are alive and well.  A lack of demand is a classic symptom of Kondratiev winter.

I think the lower oil prices will create temporary deflation.  I don't think we'll get a destructive spiral.

Mixed GDP results: Deflation is Winning

You might be wondering  what inflation and GDP (Gross Domestic Product) growth have in common.  The two measures are different, but connections between the two exist.  If GDP is not adjusted for inflation, then inflation becomes part of the GDP growth.  If an economy grows at a real GDP rate of 1% with an inflation rate of 1.5%, then the GDP will grow at a 2.5% rate.  Most economies need a reasonable amount of inflation to maintain a healthy growth level.  A gradual rise in prices helps economic activity.  At the same time, if an economy has a deflation of 1.5% with a growth of 1%, then the economy will shrink by 0.5% in nominal GDP.  Deflation, just like inflation, tends to spiral to higher and higher levels. 

The biggest danger in deflation is that debt takes on a higher value, and capital assets (like your house) take on lower values.  As debt becomes more valuable, and assets are worth less, people tend to get paid less, thus weakening the economy even more.  This is a spiral, and each time the cycle repeats, values become lower and lower. 

An era of deflation makes sense when the current Kondratiev cycle tapered in stagnation while waiting to generate a new cycle.  The Kuznets curves indicate that infrastructure is not growing right now, and that is reflected in the current low oil prices.  The Saudi Arabians need more defensive hardware, so they are forced to sell their oil even in the face of market saturation.  Or the doomsday theorists think the Russians or the Saudis want to shut down the oil shale business.  Oil shale costs a lot to exploit and low oil prices mean the market value of the oil will not exceed the cost of production.  Either way you cut the argument, we are in an era of economic dysfunction.

I'm reading a lot about very modest GDP growth the world over.  Articles never seem to note if they are using real GDP (Amounts adjusted for inflation) or if they are using nominal GDP.  Usually when comparing GDPs, economists will use real GDP. Most nations seem to be posting very mild GDP growths, all under 1%.  Japan seems to have whipped their recession for now with a GDP growth of 1.5% annualized.   India, whose other distinction is being an emerging economy, is posting 7 - 8% growth.  This is actually mild because an emerging economy should post over 10% growth.

The US has mixed economic news.  A Wall Street Journal article points to stronger results in GDP due to increases in health care spending. Another article points to oil companies counting their assets at $95 per barrel, rather than the real oil value of $48 to $58 per barrel today.  In itself, this development could create deflation.  Other sources stated that China is facing the deflation specter, and the same source talked of larger economies like the US, Germany, France, etc. having similar problems.  The fear of deflation is raising its head in large economies that shouldn't be concerned.  

The most potent weapon in the Central Banks arsenal for fighting deflation is decreasing the spot interest rate.  This is the so called over night rate banks pay for transfers between each other.  Central Banks reduce this rate to zero, or close to 0, in the face of negative economic news in the hopes of stimulating the economy into growth.  However when this rate goes to 0%, the Central Banks, in a rational world, can't lower the rate anymore.  Or can they? Several sovereign debt issuers have lowered their interest rate to a negative amount. This means for every $1,000 invested, the return is less, perhaps $990. 

The synthesis of these facts reveal a world economic system that is still reeling in the face of the Great Recession of 2007-2009.  I believe the Great Recession is a symptom of a Kondratiev long cycle coming to an end because the root cause of the Recession was an asset devaluation and crash of the banking system.  The long wave cycle will have to play out prior to prosperity, as seen in the late 90s, returns. 

My short term suggestions are divest energy companies, and balance your portfolio so you have plenty of diversity.  Right now is a hard time to tell which companies and industry sectors will do well in the coming few months. 

Sunday, March 8, 2015

Innovation vs. Differentiation

I'm seeing a lot of press on the new Apple watch.  I love seeing new technology, and even better scoring new technology for my personal use.  I hear some of the Apple watches will cost thousands. 

Perhaps prices as rich as that reflect excitement for the new wearable technology. 

The last few large product introductions Apple rolled out are mere differentiation rather than innovation.  For example the iPhone 6 and 6+ both seemed to build on the success of the Galaxy line of phones.  while the 6 and 6+ were likely innovative for Apple, they seem to be a method to hold on to a limited product market.  The same is true of the watches.  Ebay has plenty of blue tooth watches that will work with any phone, 2,281 for sale on March 8th.  Apple's will be fancier, cooler, and designed better than the examples on E-Bay, but functionally will be similar to what came before.  Apple seems to be trying to catch up to Samsung, because an Apple Watch seems to be a direct parallel of Samsung Gear.  Coincidentally Samsung Gear is Samsung's line of already introduced watches.

This means the innovation cycle is starting to peter out for phones and phone tech just like it has for desk top computers.  By the way, desk top style computers are supposed to post a 1% increase in sales this year, which proves the form factor is still needed.  Everyone who needs a desk top computer now has one, and sales are based on broken or time obsoleted computers. 

I think Berry, Kim and Kim (1993) expressed this trend well:

 Preservation  of market  share  emerges  as a key issue,  and  investment  shifts  from  innovation
to  product  differentiation  in  the  attempt  to  create  and  protect  market  niches.  Image  is all
important  in  the  process  of  introducing  “new  and  improved”  products.

The phenomena of differentiation emerges once innovation has run its course. 

Everyone should enjoy the excitement the genius marketing promotion Apple will start.  Teh energy will be wonderful, but the long and short of it is that Apple's new  product will be differentiation rather than innovation.

On an interesting side note, Berry, in his book, Long-Wave Rhythms in Economic Development and Political Behavior predicted the Great Recession of 2007-2009 based on the conjunction of Kuznets and Kondratiev cycles in 1993. 

 Berry, B. J. L., Kim, H., & Kim, H. (1993). Are long waves driven by techno-economic transformations?: Evidence for the U.S. and the U.K. Technological Forecasting and Social Change, 44(2), 111-135. doi: 10.1016/0040-1625(93)90022-Y

Saturday, March 7, 2015

Lenovo Thinkpad Tablet 2, ca. 2012 +/-

Yes, I'm a certified antique.  Just ask my family.  In these days of product differentiation rather than product innovation, I find being a late adopter is really inexpensive compared to the early part of the product life cycle curve.

With me, everything is a process.  I own a really nice Galaxy Tab 3 10.1" 16Gb tablet.  I like the tablet a lot, but Samsung's bloat ware is killing an otherwise good product.  I found that my tablet was running out of memory all the time, and some of the reason was due to the Samsung apps I had no need for.  I love the size for reading scientific papers while sitting in comfort, but running out of memory all the time revealed that I needed a more capable tablet.  With that said, I had a variety of needs to fulfill.

  • I'm handicapped (I like to think mildly, but if you met me you would see the problem quickly).  Since I'm handicapped, the weight of a good laptop gets heavy.  Therefore, I needed something light.
  • I needed something on the small side, because I like to carry a small messenger bag.  

  • While Android is a great Operating System, based on my favorite Linux, I would like a tablet with more connectivity to my Brother multi-use printer.  An OS with a little more power would be nice.  Android never worked right even with the Brother App loaded and running.
  • I want to be able to hook the tablet up to projectors or conference room video systems for work and presentation.
  • Some kind of dock would be nice too, I like to be able to set up my tablet neatly on the desk and hook into video, network, etc.
  • I wanted to stick with a tablet because I don't always need a keyboard.
  • I have a Lenovo Thinkpad addiction
I went to Best Buy.  They had a variety of laptops, ultralights, and tablets.  I checked out the laptops, but they seemed expensive, particular compared with capable older laptops.  They had a really nice Yoga Tablet that came with a keyboard, but it was only 32Gb, and I was worried about running out of memory.  I decided that the Internet would give me a better insight into what I needed.  

I found an interactive tablet guide on the Internet, and the process of answering questions helped me focus my needs on a specific type of tablet.  I can't find the web site now, but any site that explains tablet specifications category by category will help.  The answer was startling.  Without knowing it, I wanted a Windows tablet because I have an Excel habit.  I also discovered I am better off with a full sized usb connector, and an hdmi connection.  The tool thought I would like a Lenovo tablet called the Tablet 2.  I found this odd, since the tablet wasn't manufactured anymore.  Checking into places to buy it, I found a new one cost $300.  
I wound up finding a refurbished one complete with keyboard on Ebay.  The price was reasonable, so I bought the tablet.  I'm impressed by the tablet. 

Windows 8.1 works flawlessly (this is a Windows Flawless, not a Linux Flawless aka perfection), and I can hook the tab up to my network printers.  I can also use the full sized USB slot for a full sized keyboard.  I found a dock for the device (easier said than done), and I like the way it charges quickly on the dock.  Windows 8.1 on a touch sensitive surface works really well.  And I like the concessions made for people who grew very used to Windows XP. I like being able to use familiar programs like Calibre.  

All in all, I think this is a great replacement for the Samsung tab.  I like getting something top of the line, even though it is an older model.  This one is working well for me, would anyone like to buy a lightly used Samsung galaxy Tab 2 10.1"?

Sunday, February 22, 2015

Kondratiev Waves and Bubbles

I'm reading a 1993 article from a group of researcher named Berry, Kim and Kim (1993).  This article is really good because they predict the bursting of the asset bubble we experienced in 2007 in light of Kondratiev's long wave economic theory. (Yes, the link is Wikipedia, but this entry is fairly accurate). 

Several parts of their article seemed to predict the future quite well.  In 2008, we had a collapse of the real estate market, but we also had rampant high oil prices because speculators were buying up futures.  Sure enough, Berry, Kim and Kim (1993) predicted this out come when they said one of the last acts of the old wave was to create a booming real estate market, and speculation in commodities. We're on the cusp of a new cycle, as the information computer gains of the 1980s are starting to recede. The other translation of our cusp time is slow growth, stagnation and perhaps depression.

 Berry, Kim and Kim (1993) also predicted the current state of innovation as well.  They thought markets would swing from innovation to differentiation, and sure enough, the computer market is in this process right now. Computers from 2007 can do everything computers made today can do. 

Puzzlingly, though, government intervention has led to a robust stock market with low priced resources.  Interest rates are still very low.   CNN says the current NASDAQ boom is different than the last one in 2001.  They say prices will continue to rise.  In 1929, Joseph Kennedy heard stock advice from his shoe shine boy and liquidated his position just in time before the market crashed.  Lately, real estate went up, stocks are very high, and people are starting to report sure money.  In 2005, a rash friend of mine thought the real estate market was absolutely a money maker, and she went into bundling mortgages together in preparation for traunching on the market.  A year later, her company was one of the first casualties of the real estate bust of 2007.  Come to think of it, several friends of mine went into mortgage sales in 2007, and later got their houses foreclosed when they weren't able to work. These friends were unlikely people to go into financial services; one of them was a door to door cable TV sales person, and another installed hot water heaters.  If NASDAQ is a sure thing, look out for the bubble to burst.  This second bubble is confusing, but brought about by government intervention.

The government, although they are trying to get out of the markets, is supporting both real estate and stock markets through quantitative easing.  This is creating a prolonged period of stock gains that seem like irrational exuberance.

Berry, B. J. L., Kim, H., & Kim, H. (1993). Are long waves driven by techno-economic      transformations?: Evidence for the U.S. and the U.K. Technological Forecasting and Social Change, 44(2), 111-135. doi:10.1016/0040-1625(93)90022-Y)

Thursday, January 22, 2015

3-D Printing Smashes Technical Frontiers, predicted by Star Trek

    I've had fun, detailing 3-D printing in previous posts and how that technology will change our lives, just as surely as electronic books, music and movies did.  3-D printing is a big subject, and I keep finding out more. 

Reading up on 3-D printing, I discovered it was a side discovery related to the micro lithography process used to make microelectronic circuits (computer chips).  As a process used to make microelectronic circuits, 3-D printing would lend itself to several dissimilar materials combined together.  Micro-circuits consist of wires, different types of silicon, and insulation. 

Imagine my surprise, when I discovered someone had printed a drone, complete with circuitry. By the way, the drone works.  The motors provide motive force, the propellers spin, and the drone flies. 


Immediately my mind went to how many people talk about Star Trek accurately predicting the future.  Even their communicators looked like cell phones of the early 2000s.  My mind went to the episode, The Trouble with Tribbles.  In that episode, Capt. Kirk gets food from a microwave-like box in the wall with a sliding door.  He uses small cartridge to tell the machine what to make for lunch, the door comes up and the machine neatly presents his food on a plate.  At the end of the episode, when his ship is overrun with Tribbles, there's a Tribble on the plate rather than food.  Today, the Wall Street Journal publishes an article about taste-testing printed food. Seems like future has met science fiction TV.

Star Trek shows a working social construct where many of the technology problems we have yet to face are already conquered.  Just imagine the day when we can make an iPhone in our household printer.  How many people in China will lose their jobs that work for Foxcon, or wherever China produces iPhones?  How many people in the supply chain will no longer have anything to do?  Looks like a hefty short-term labor surplus.

As with any human development, nothing stands still for long.  You can get a villa 3-D printed in China, interestingly in Suzhou, part of which comprises the Sino-Singapore Industrial Park.  I went to Suzhou in 2009, and only saw birdcage type housing, as they built a city with over 1 million residents from a flat plain surrounding a man-made lake. 

3-D printing promises to be a vibrant technology that will replace many other skills and trades.  We, as a species, have to learn how to deal socially with this type of raw power. The short-term may look bleak.  Eventually, because our species is creative, different types of social constructs will replace the jobs we hold dear in this century. 

Wednesday, January 7, 2015

Winds of Change: 3-D Printing

As I write this post, I'm reflecting on what I see as yet another Wind of Change: 3D printing.  Bear with me a little while, I'm seeing this as part of several trends that started in the 90s.

First There was Music

35 years ago I went to college.  Several people I knew used a cassette tape to capture an LP vinyl record.  Everyone knew the cassette tape was the end of the process, because cassettes sounded fuzzy when copied from other cassettes.  Some of the cassettes from that era lasted 25+ years if they were good quality.  Since the cassettes were the end point of the music, most copying went no further.  An average record usually would have under 5 copies made, sometimes just to play in the car by the primary owner.

Once we add technology to the mix, more copies were the norm.  Napster started, and people were able to share music.  Other services in the same general time period were Morpheus, Gnutella, Kazaa, etc.  Using the computer and the Internet, people were able to share one CD millions of times, and every copy was the same.  Even the record companies took notice.  The assault on Intellectual property resulted in record company prosecution of selected individuals.

 The record company prosecutions (RIAA) resulted in consumer dissatisfaction with the companies.  However, they did not stop with consumers, they went after businesses too.  In the early 2000s, for the first time ever, music companies such as SESAC, ASCAP, and BMI came by businesses that played music to their customers and demanded contract payments under threat of legal action

One of the ironies of all this enforcement was the complaints from the artists of not getting very much money for their works.  The musician complaints crescendo with the introduction of Spotify and Rhapsody which they say don't pay the artist much at all. Additionally, complaining gets musicians banned. 

The net effect of the hostilities resulted in the slow death of the music industry since the 90's.  However, people are consuming music differently now, including ringtones.  All in all, the decline is leveling out, but the damage still seems to be done.

Image from Music Business Research and originally from

Movies Came Next

Movies went through similar problems, but they used different techniques to battle the IP Piracy.  Movies went to an early release schedule for DVDs from the theaters, and studios even included regular DVDs with BluRay DVDs.  The MPAA sued several people for piracy and general bitterness against the movie studios came to a head with the SONY studios hack.  Whether North Korea is behind it or not, someone is pretty upset at them.  Still, I'd say people are less upset with the movie studios than the music industry, but you would expect that since the movies took a less combative approach to the problem of piracy. Just like music, people are choosing to enjoy movies in different formats.  If you add both lines, like 2013 with 5.2 DVDs and 3.2 Streams, you get 8.4, pretty much the same amount as 2010, therefore the market is flat lined. 

Chart from The Atlantic

And Then Came Books

eBooks are the rage for the past few years.  In theory, they are cheaper, and easier on the environment.  Major problems with eBooks is consumers do not own them, they simply own the right to read them.  Forget about leaving your book collection to your descendants, or selling them when you come on hard times.  And sometimes they can disappear from you electronic reading device in the middle of the night.  I don't hear much about eBook piracy, but it exists.  Just like Rhapsody and Spotify, authors complain they don't get enough royalties when they rent a book on Scribd, Oyster or the All you can read Kindle service. On the bright side for authors is the very real probability they can self publish and make decent money. 

3-D Printers

Books, Music and Movies are all traditional business models changed radically by technological change.  They all seemed to go through similar stages with varying degrees of success, but in the end the old business model was dead.  I think 3-D printers are in an infancy stage that will result in fundamental change in supply chain management.  Here are a few factors that will make a great change in 3-D printing:
 Future printers will make finished goods in metal.  This is significant because in the past, very few people would make metal objects at home.  3D printers could change all this.  Just think about people making metal guns at home, especially after all the hoopla about the plastic gun made by the plastic 3-D printers. 

The Military  will be able to side step the expensive supply chain insisted on by defense contractors.  When they deploy to remote corners of the world, they simply bring printers and raw materials.  When they need a plane part, they down load the file and wait while the printer makes the item.  The Royal Air Force has already put a printed item on one of their aircraft. 

The printers are becoming cheaper.  Amazon has some for $500 that have fairly decent ratings.  At this point, no one really needs one at home, but as prices fall, they will be easier to use and purchase.  At this point the inexpensive printers will make plastic pieces that might cost a lot if purchased from a store.  Plates, bottles, storage drawers, appliance parts, car parts,  the possibilities are endless.

The Problem

The problem with all of these technologies is established businesses trying to apply old fashioned business models to a new process.  Suing people, and limiting how people can get the product, never seems to work.  Somehow the product still slips out.  Books, music and movies all used to be physical products, but they have all changed over to digital delivery.  Solid objects are the next item to make the metamorphosis to pure digital form.  This is more likely to create change and problems than the previous transitions in books, music and movies.  Cory Doctorow, in his novel "Makers", had some idea of all the trouble this transition will make.  The last couple of posts are about labor surplus.  3-D printers are likely to create even more problems during their adoption because people will be easily able to copy solid objects, and side step traditional supply chains that include factories, warehouses and thousands of workers.  .

And in the copying lies a secondary problem.  Who will be motivated to create if they won't be paid?

Sunday, January 4, 2015

Prepare for a Labor Surplus, Part 2

As this Christmas departs into hard winter, I am seeing more and more industries shifting.  The overall economic news is good, though.  Local news in Portland indicates our economy is getting stronger, even to the degree where arguments over a long derelict area of the city are starting as office workers move into formerly industrial buildings.  On a national level, Willard Witte, an emeritus professor of economics at Indiana University's Kelley Business School, predicts a year where we will be breaking out of the slow growth that has plagued us since 2009.  Even with these optimistic predictions, Alan Greenspan, former head of the Federal Reserve, went on record saying we still have a sluggish economy.  These bright spots in the greater economy indicate that a labor surplus due to technological causes may be alleviated by workers shifting fields, but if Greenspan is correct, we should be thinking about slow growth as a future norm.  (You might want to also read The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better for a lighter look at this phenomena).  These musings lead into the next way to prepare for a labor surplus.

Stay Nimble

Part of your plan B should include being able to shift your plans in the face of a changing environment.  If you plan to get into retail as your plan B, consider that retail is showing cracks right now.  Perhaps something like technical writing or entertainment could work better.  Let's take a quick look at retail.

Retail, long considered the place for people to refuge when other industries hit the skids is showing signs of changes. In our local market, Eddie Bauer is closing a store in Lloyd Center.  Also in Lloyd Center, but in other places as well, Nordstrom is closing stores.  Radio Shack looks to be moving into Chapter 7 January 15th, in a prime example of technological self elimination.  Most of Radio Shack's most popular sale items are now carried on a smart cell phone, so the demand is not there, and they failed to respond to people's new shopping patterns.  Other retailers having trouble include Aeropostale, Sears, and a perennial favorite, JC Penney

Changes in people's shopping patterns are leading to malls being demolished, or seeing them turn into data centers.   This is nothing new, as the Dead Malls web site confirms.  Much of the shopping is moving online, with a 15% online shopping increase in 2014.  Of course, that 15% increase is also a 10 - 15% decrease for brick and mortar stores.  In the future, successful malls and retail centers will have to depend on a mix of entertainment and retail to stay afloat. Some stores use a hybrid approach by allowing customers to order online and pick up in store.  WalMart, and Macy's come to mind quickly, but I am sure they are not the only players. 

If you stay nimble with your plan B, perhaps rather than working retail, you could write catalog entries for retail online operations.  Or work in online order fulfillment or customer service.

Look for the opportunities and take advantage of them.

Change Where you Live

Most people live in large cities.  This is a relatively new phenomena.  I went to Las Vegas and discovered my cabbie was an engineer.  He accepted a job there designing gambling machines, at a company that went out of business.  Other local companies didn't need his skills, and he was flying out to different cities to apply for jobs at great personal cost.  If you live in a small metropolitan area, then you may find the opportunities aren't there.  Oregon is a state with few company headquarters.  This creates a situation where the median salaries are low.  I grew up in Connecticut where many companies have headquarters, and we all experienced better pay and opportunities there than in Oregon.  Connecticut was also part of the East Coast megalopolis, so we could find jobs easily from Boston to New York City.  Also factor in what you do for a career.  I'm sure Las Vegas was much better for restaurant and casino workers than it was for an engineer.  Above all, stay flexible, there are no hard and fast rules for this.

For every piece of advice, an exception always occurs.  A successful Professional Engineer, I.B. Storey, started his practice in Charlottetown, PEI, Canada.  He now has an office in Florida too, but at the beginning PEI was a remote location with a plane ride to almost anywhere having the large energy consuming facilities his practice depends on.


We're in a changing employment market.  Existing jobs are disappearing and changing.  New jobs are starting, and full time employment seems to be shrinking.  (Part time jobs are expanding)  I'm theorizing this is due to a long-term technological cycle called a Kondratiev 55 year cycle combined with macroeconomic trends.  More on Kondratiev later....

I'm envisioning a return to cottage work conditions similar to British weavers prior to the adoption of large mechanized looms.  I think the cottage of the future will center around a work room equipped with a means to communicate at a long distance, printers, 3D printers, office equipment and equipment to make items for barter or sale.  The cottage of the future won't be bucolic, though.  Most will be in high rise buildings in a dense metropolitan area. 

The cottage of the future is the end point; the topic of this series of two posts is how to survive the years between now and an emerging new system.  Work on your plan B, become as self sufficient as possible, be ready for change and examine where you live. 

Thursday, January 1, 2015

Preparing for a Labor Surplus

The other day at work, one of my co-workers had a good question.  She wanted to know what a person could do to prepare for a labor surplus.  Her question was based on the assumption that maturing globalization and practical robotics would lead to a greater labor surplus than exists already.  A labor surplus is what happens when many people are available to work any particular job and employers can easily find a person with exactly the correct skills and experience for the position.  We have this situation in the US right now, even though the unemployment rate is decreasing.  In the long run, everything will work out fine, but the short term adjustment to changes in the labor market brought about by external shocks or disruptive technological innovation can be difficult for individuals.

Her question brought on further thought.  I took a look in the Internet and found an article on called How to Employ and Cope with Surplus Humans.  The article was interesting, although far fetched.  Some of the thoughts, like send colonists to Mars, are not possible today.  Perhaps Michael Moffa thought he was talking about a theoretical situation, but labor surpluses are starting to effect even China as economic growth there slows.   China is off shoring steel production in an atmosphere of slowing domestic consumption.  In 2009, I went to Shanghai where my MBA cohort talked to a factory manager who had just returned from scouting potential future locations in Viet Nam.  He said Chinese labor was becoming too expensive.  If an emerging economy is becoming exposed to labor surpluses brought about by slowing consumption and off shoring production, then the age of labor surpluses is here now and becoming a critical problem.

Americans tend to have an earnings life cycle similar to a product life cycle.  At the beginning workers don't make very much.  Later in life, they make the most they will in their career, and then as retirement age looms, earnings reduce.


As life unfolds, every worker needs to seriously consider what to do when their earnings go down.  Age brings on symptoms of labor surplus.  Due to this fact, I am writing my list designed on a pragmatic approach to ensure a decent lifestyle in every age and phase. 

Have a Plan B

Everyone who has a career needs to keep an eye on trends and developments in their work.  Life happens, and sometimes situations don't work out as planned.  When a favorite job is lost, or when something happens that is health-based, have a plan B.  For me plan B was continue my education so I could have certified skills no one else in my career field possesses.  I am ABD (All But Dissertation) for my PhD, and once I get the PhD many possibilities will open to me.  I still work as a career manager because I love my job, but I wanted to ensure other doors were open.  During my education, I became handicapped, so a PhD makes sense because I can teach sitting down.

Examine your skills and desires to discover what your plan B could be.  Hobbies can grow into businesses.  Cake decorating, bee keeping, E-Bay sales, whatever you do that you enjoy.  My wife decorates cakes, and her plan B is to operate a home-based bakery.  A friend runs a coffee kiosk in a mall, and his plan B is selling on E-Bay.  Others write e-books , consult in their profession, fix computers and operate theme-specific stores.  Teaching from home is possible too.  There is no one path to success.  Make sure your Plan B is something you love so if your career derails, you never go to work again.  And if your Plan B is good enough, why wait?  Especially if your Plan B is not dependent on one customer, employer, or source of income.  Diversification works in stocks and in employment too.

Artistic Skills

Arts and Crafts are not likely to go out of fashion.  Everyone can 3D print small plastic items, but can they make a scarf and mittens?   Or paint a picture?  Not likely, and robots haven't caught on to this yet.  Hand knotted Persian Rugs are still an important cottage business in Iran.  No factory can make such a high quality item.  In Portland, Oregon we have the Saturday Market, but other cities and towns have their own craft fairs.  On the Internet, Etsy comes to mind.  Cottage industries will be popular in the future, as manufacturing fades and people buy in the long tail market made possible by the Internet.  Develop your skills and you will always have something to depend on. 


I like to watch TV reality shows about Alaska.  Many people in Alaska like to live off the grid.  This is a difficult life, and probably not something everyone would want.  There is still a romanticly appealing notion about being independent of most of our advanced civilization.  Still, even for people in cities, there are many skills people can use to increase their self-sufficiency.  The quick ones that come to mind are gardening, chicken raising, canning, jam making, sewing, carpentry, auto mechanics, bee keeping, and many others.  Anyone can become more self-sufficient which will help if something goes sideways.

This is a long post,  Part 2 is here.