Saturday, February 28, 2015
The more I study our current situation the more it's looking like the 1920s just before the market crashed. See if this doesn't sound familiar. Bucket shops which are equivalent of our modern day derivatives sold side bets to the stock market. Trade deficits nearly equal to what we have now. Foreign debt - Germany was made to try and pay for WWI which they couldn't. Inflation for Germany was so bad that it took bundles of marks to buy a loaf of bread. In today's example that would be Greece but they don't have the power to print their own money so they're stuck with the euro that can only be manipulated by big European banks.
Japan is facing an energy crisis as they can't restart their nuclear plant at Fukushima. That "clean up" is surely sucking monies out of the economy. Not to mention the loss of farmland from the contamination zone. No way to stop ground water from becoming contaminated and seeping into the ocean.
Back to Greece which is looking a lot like Germany did back in the 20s. Germany wrestled with the war debt problem until Hitler took power and invoked the Liberty Plan which criminalized anyone in government who tried to make reparations for WWI debt as agreed to in the Young Plan. It was probably the reason he made it to power in the first place. To it's credit the Young Plan canceled much of the debt and stretched payments out to 59 years. Greece as was mentioned before can not restructure its' currency or seem to come up with a viable plan for ending its' economic woes. The European Central bank seems to be unwilling to let Greece sell bonds to help pay its' debt which was the plan for Germany back in the day. Germany by the way finally paid off the last of its' war debt in 2010.
And this week we have one bank fail in Puerto Rico.
Monday, February 23, 2015
We're getting too efficient for our own good. The old method was to cut a worker or two, divide their work load amongst the remaining staff and pocket the difference. And if you were lucky enough to survive the budget cut you might get a penny or two with your newly defined role. And let's not forget a flashy title like foreman, vice president, supervisor, or associate. Which basically meant you were one step above the janitor.
Then there's the "shaving of the hours". Starts out at X hours for a particular job calculated by an estimator. He submits the bid to the home office knowing that he's padded time in case some unforeseen circumstance should arise. Home office knows this and shaves 10% from the hours before turning the paperwork over to the superintendent. The superintendent shaves another 5% just to make him look good before passing it on to the supervisor. The supervisor cuts the hours further figuring it will make him look good. The foreman looks at the paperwork and laughs knowing that it's humanly impossible to complete the job in such a short time. When the job runs over everybody gets scolded for not bringing the job in on time and told the company is losing money. Meanwhile the owners and higher ups are off fishing in Bermuda together.
We are at the beginning of becoming obsolete as humans. We have robot cars and aircraft, robots in factories. Computers do in a few seconds what once took minutes or hours by staffs of typists. And once a robot can repair another robot then we may find ourselves on the extinct list. I have seen an acceleration of this process in just the last 20 years. So this is just the beginning. Economically speaking this doesn't put the masses in a very good position. And what happens when China catches the robotics trend? Will they replace all those low wage workers with machines? That might be cause for political upheaval. Very little is left when it comes to manufacturing jobs that haven't been shipped over seas. Do a little research into your favorite "American" company and I think you'll find it's now owned by a foreign partnership.
They say jobs are coming back to America, they're not. We've lost 62,000 manufacturers in the last 15 years. That's manufacturers not jobs. The jobs that remain are high tech or service related. The problem there is that by the time you've received high tech training the technology has changed. And most service jobs don't pay enough to support one person let alone a family. What's left? Basically it boils down to selling debt or information. Information is cheap and the world is swimming in debt.
Haven't checked bank fails lately...
One fail in Ga. on Friday Feb 13, lucky them.
Saturday, February 7, 2015
Oil, Texas tea, bubblin crude. We're swimming in it. It's all around us even if you don't drive. Think not? Your keyboard mouse and monitor frame are made from oil. Bet there isn't much in the room around you that did come from oil and even if it didn't a trucker had to ship it to a store using oil. You bought it and drove it home using oil. Heck even the roads we drive on are made from oil (asphalt).
So what's all the fuss about? It's an oil war on top of a couple of real wars. Russian and U.S. oil companies were all set to do a 1/2 trillion dollar deal to drill in the Black sea. That's when the tug of war over the Ukraine started. Actually it started when the U.S. backed a pro west Orange party in the Ukraine. Ukraine being $15 billion in debt had the choice of accepting help from the EU or Russia. It was all set to take the EU deal when the president backed out against the wishes of parliament. That's when he was ousted from power and fled to Russia. Ukrainians have a love hate relationship with Russia. They have no love for the old soviet system (true there are still some communists in parliament) but the bulk of the Ukrainian economy relies on trade with Russia.
The Saudis are satisfied with market share. They know that it will hurt their enemies to keep prices low. It will also drive out the smaller competition in the west. All of which seems unusual as they're also funding extremists. So it's a safe bet that the country is a bit polarized, at least amongst the royal family who runs things. Deny all they want but they held fund raisers to bolster Al Qaeda which was proven in the days after 911. Whether they actually funded 911 we may never know unless the redacted pages of the CIA report are revealed. Don't hold your breath for that one.
What's happening to oil right now? The short term price is around $50 a barrel while the future 2016 price is just over $60. So while the short term price is low companies are racing to store oil then sell it later at a higher price. That in itself raised prices a bit. High cost low producing production rigs are being shut down. So the real price will depend on storage costs estimated at around .45 cents a barrel at present. So we may see an uptick in prices in the spring. Whether we see $100 a barrel again is open to debate. The Saudis have said no to that. We use 20 million barrels a day but that figure is going down due to better fuel milages. The tug of war of supply and demand goes on and at the moment it looks like supply is winning.
No bank fails this week
Monday, February 2, 2015
Just like to do some anecdotal research into what's happening to the economy. Had to go to the mall to pick up a part I could not get anywhere else, at least not without a long range drive. Three years ago the mall was about 1/3 empty of shops with only a few strolling the walkways. Today all but a few storefronts were full but sans customers. Oh there were customers but the ones I saw were only questioning the few sales staff present and not buying anything. Sales signs said 50 to 60% off clothing at Sears. Went to an electronics store for a particular part and was immediately pounced on by two twenty something sales personnel. One kid went back to dismantling a display case that once held cell phones. One thing that struck me as odd in looking around the inside of the mall and the parking lot was the absence of teenagers. This was after all the peak time for their appearance, just after school.
Took a fast walk around the inside, wanting to take note of what shops were still in business, I saw many stores with just one cashier trying to look busy or on the phone. So I can only conclude by this outing that the days of "recreational shopping" are all but dead. No longer can junior afford to blow $50 on a video game and video stores are long gone with internet and cable. There was one kiosk that sold nothing but cell phone cases but had no takers. The gal behind the counter looked bored to death.
Don't see any cars with new car stickers driving about the neighborhood. With all the recalls think people might be a bit leery. Nothing more frustrating then to have to return a product that wasn't made right in the first place. Don't forget to fill out the return paperwork along with a DNA sample. And watch out for the restocking fees which translates into them throwing the product on a pallet with other rejects, shrink wrapping it and selling it to some other sucker wholesale.
Need a newer big screen TV for free? Well at least an older newer model. Check Craigslist. The only drawback is you might need a burly friend to help you move it. Some of those suckers weight a couple hundred pounds. An especially good move right around super bowl time of year. Good thing is some of the older models are better made.
And what do we do with all this electronic waste once it's doomed to the junkyard? We recycle it of course. You'd be amazed at the tonnage we rid ourselves in any given day. Where does it go once it's out of sight out of mind? Some of it gets striped and reprocessed right here in the U.S. while some companies don't bother and dump the whole thing on the Chinese. Nothing like letting their kids sweat over a boiling pot of hot toxic solder.
One thing is certain. They just don't make them like they used to. Everything now seems to come complete with a computer or LCD read out. Try buying a range or washer that doesn't have an electronic display. Yeah just something else to break down and it'll only cost 2/3 the price of a new one to get it fixed. Sheesh what a racket.
None this past week but with oil down it's a safe bet more are coming.