The hard stuff is measurable, quantifiable and easy to put into a spreadsheet. This concrete stuff gives you an easy way to demand a bonus or track progress.
The soft stuff is merely essential, the real reason you do what you do.
Ironically, then, hard is easy and soft is difficult.
The question, I guess, is whether or not you and your team spend most of your time on the hard stuff, merely because it's easier to measure, to argue about and to hide behind?
Dismal economic conditions in the eurozone accelerate to the downside as evidenced by falling retail sales. Let's take a look at the Eurozone in aggregate, as well as the three largest countries.
Sales fall for thirteenth month running in November
German sales remain flat while Italy records another severe fall
Rate of decline in France slows to weakest in five months
Summary of November findings
The Eurozone retail sector remained stuck in a sharp downturn during the penultimate month of 2012, according to Markit's PMI® data. Sales fell for the thirteenth consecutive month, and remained well below the level seen one year earlier.
The PMI rose slightly in November to 45.8, from October's 45.3. The latest figure signalled a sharp fall in retail sales compared with one month previously, and the average for the fourth quarter so far (45.5) is the second-lowest since Q1 2009. Moreover, the trend for 2012 so far (45.6) is the lowest annual average of any year since the survey started in 2004. The previous record low was in 2008 (46.1).
Retail sales across the single currency area fell on an annual basis for the eighteenth month running in November. The rate of decline was sharp, and stronger than the average over this sequence. Year-on-year sales rose in Germany, but fell at a near-record pace in Italy. The annual rate of decline in France slowed since October, but remained sharp overall.
Comments
Commenting on the retail PMI data, Trevor Balchin, senior economist at Markit and author of the Eurozone Retail PMI, said:
"November's set of numbers portrayed the weak position the Eurozone's retailers find themselves in going into the crucial festive season. Actual month-on-month sales continued to fall sharply, resulting in another marked drop compared with one year previously. The data are consistent with consumer spending having declined for five straight quarters come the end of the year.
Italian high street businesses recorded a further sharp decrease in sales in November, leading to more job losses in the sector. There was also a steep drop in purchasing activity as firms made efforts to reduce inventory levels. Meanwhile, average prices paid for goods for resale rose at a modest rate largely on the back of higher oil-related prices.
The seasonally adjusted Italian Retail Purchasing Managers' Index® (PMI®) fell to a seven-month low of 35.5 in November, from October's reading of 37.3, signalling a further sharp month-on-month decrease in total high street spending. The headline index has posted below the neutral mark of 50.0 continuously since March 2011, and remains below its average over that period.
In line with the sustained downturn in sales, November data showed that high street spending was down sharply compared with the situation one year previously. Furthermore, the annual rate of contraction was the steepest since May's survey record. November saw actual sales again fall well short of planned levels, with the overall degree of underachievement the most pronounced for five months.
November data pointed to a further sharp decrease in retailers' gross margins, which anecdotal evidence suggested was the result of discounted selling prices as well as a fall in sales. The rate of decline was little-changed since the previous survey period and faster than the historical trend. Also dampening profitability over the month was a rise in average purchase prices. Firms commonly linked the increase in their cost burdens to higher oil-related prices.
Margins squeezed amid sharp rise in wholesale prices
Actual sales underperformed initial targets in November
Summary
At 50.2 in November, the seasonally adjusted Germany Retail PMI was little-changed from 50.3 during October and, by remaining close to the 50.0 no-change value, signalled broadly stagnant month-on-month retail sales in Germany. This has been the general trend throughout the second half of 2012 to date. Anecdotal evidence from survey respondents largely suggested that subdued consumer confidence was the main factor weighing on retail sales during November.
French retailers report slower fall in sales during November
Gross margins fall at slower, albeit still marked, rate
Further reductions in purchasing and stocks
Summary
The contraction in French retail sales continued in November, but at a weaker rate. Both the monthly and annual measures showed less marked declines. Sales once again disappointed relative to previously set plans. Gross margins continued to be squeezed, although the rate of decline moderated.
The headline Retail PMI® posted 48.8 in November, up from 46.0 in October. The latest reading was indicative of a moderate pace of decline that was the weakest since June. Where a decline in sales was recorded, this was generally attributed by panellists to a difficult economic climate, reduced levels of customer footfall and strong competition.
European House of Cards
This entire European house of cards comes crashing down the moment either Germany or France takes a sharp turn to the downside.
Germany will follow (in a major way) the rest of Europe soon enough. It is simply impossible for the German export machine to keep humming with a massive slowdown in Asia, and an outright disaster happening in Greece, Italy, Portugal, and Spain.
Warning bells are flashing loudly, but few hear the call.
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Last year the Republicans had a chance to accept spending cuts to tax hikes at a 10-1 ratio. They declined. Now president Obama does not want to bargain. Who can blame Obama (except Republicans)? We may disagree, but that is part of the platform that got him elected.
The Republicans do not want to bargain either. And who can blame them (except Democrats)?
Regardless, Republicans blew a golden opportunity last year and that chance is gone. Obama has the upper hand now, and nothing will change that setup.
I certainly am opposed to tax hikes without something substantial in return.
Yet, if Obama holds his ground, the only way to have some cuts across the board right now is for the fiscal cliff to happen.
Could it be that the best political outcome may actually be the dreaded "fiscal cliff"? The fiscal cliff will hit military spending but why shouldn't it? The US could easily defend itself on half its current budget actually.
President Barack Obama and House Speaker John Boehner stood their ground with opposing plans to avert the fiscal cliff and warned there was no quick path to a solution.
Obama has proposed a framework that would raise taxes immediately on top earners and set an Aug. 1 deadline for rewriting the tax code and deciding on spending cuts, according to administration officials.
It calls for $1.6 trillion in tax increases, $350 billion in cuts in health programs, $250 billion in cuts in other programs and $800 billion in assumed savings from the wind-down of the wars in Iraq and Afghanistan, according to the officials, who asked for anonymity.
Boehner said less than 30 minutes later during a news conference at the Capitol in Washington, that the proposal, presented to congressional leaders by Treasury Secretary Timothy F. Geithner, did nothing to move talks along.
"There's a stalemate, let's not kid ourselves," he said.
Stalemate Solution
The stalemate "solution" comes with its own set of problems.
Contrary to popular belief, the risk is not that too much is done, but rather that both sides unwind nearly the entire "fiscal cliff", achieving no budget reductions at all.
Speaking of which, it's high time we "stop kidding ourselves" about what is happening. There are no budget cutbacks at all under discussion. Rather the discussion centers around reductions in assumed increases, and politicians are having a tough time even with that.
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
While Facebook began as a personal platform, it's now a top resource for businesses to find and engage new customers.
The stats are astounding. 86% of small businesses now consider Facebook a valuable marketing tool. Fans of a business are 79% more likely to buy from it than non fans. One fifth of consumers now feel more comfortable buying from a business' Facebook page than from its website.
Here's the full story on why Facebook means business, and why your business needs to be on it (and hey – we can help).
Weekly Address: Urging Congress to Extend the Middle Class Tax Cuts
President Obama speaks to the American people from a busy factory floor in Pennsylvania about the urgent need to pass the middle class tax cuts, which will give families and businesses preparing for the holidays the certainty they need going into the New Year.
Democrats and Republicans must come together to pass one thing that everyone agrees on—extending income tax cuts for 98 percent of American families and 97 percent of small businesses, and there is no reason to wait. The President urges Congress to take action to help grow our economy and strengthen the middle class.
If Congress does nothing, every family in America will see their taxes automatically go up at the beginning of next year. A typical middle-class family of four would see its income taxes go up by $2,200. That's $2,200 out of people's pockets. That means less money for buying groceries, less money for filling prescriptions, less money for buying diapers. It means a tougher choice between paying the rent and paying tuition. And middle-class families just can’t afford that right now.
The President asked the American people to speak loudly by sharing what $2,000 means to them online on Facebook and Twitter using the hashtag #My2k. Here's how to get involved:
Holidays at the White House: Earlier this week, the First Lady previewed the 2012 White House holiday decorations, showcasing this year’s theme: “Joy to All.” The decorations embrace several beloved White House traditions, including 54 decorated trees throughout the residence and a White House gingerbread house. The First Lady explained that this year’s theme “celebrated the many joys of the holiday season: the joy of giving and service to others; the joy of sharing our blessings with one another; and, of course, the joy of welcoming friends and family as guests into our home over these next several weeks.”
Vice President Biden Goes to Costco: On Thursday, the Vice President visited the newly opened Costco in Washington, DC. After picking out a few Christmas presents and other items, he spoke about the importance of extending tax cuts for middle-class families.
Organizations that grow start by selling their serices and products to people who care.
These organizations are staffed by people who care making something that demands "caring-about" for people who have chosen to care.
It can be colored shoelaces or vinyl records or handmade medicine balls. These aren't for everyone, and they require effort to find, to buy and to maintain, but for those that care about the cutting edge or innovation or style, they're perfect.
Then, over time, many of these organizations start to make products and services that are carefree. The people who produce them care so much about what they're making that they get good at it, the design becomes simpler, the pricing becomes better, and more people use it. The result is efficiency and distribution.
Until soon, the product or service is used by people who don't care so much about the original intent, they just want something easy and functional and available and cheap.
This is the classic diffusion of innovations process. (Learn more about this key concept here, here and here). Those in the mass market choose to be the mass market because they're too busy or distracted or bored to be the innovators and the geeks. They don't care enough to be on the edge.
Some examples: ebooks were first sold to just a few people. They were tricky to download, they weren't cheap and they required more effort. Over time, the price of the reader comes down, more books are available and it becomes more attractive to the mass market.
Or the car transforms from something for millionaires and hobbyists into the Honda Civic. You don't buy a Civic because you want to do your own tune ups. You just want it to work, and to be inexpensive.
Or the charity that starts out on the bleeding edge of technology, raising speculative money from a few philanthropists, but then moves into the mainstream and becomes an easy cause to explain and support.
Or the musician and his band and his label who goes from hand-crafting music to mass-producing live spectacles.
Apple, of course, is the classic example. The Mac was, for the longest time, only bought by people who cared a lot about which computer they bought. And the iPhone transformed the market because it became a phone for people who wanted to care about their phone.
The recent launch of the iPhone5 disappointed the geeks, but that was on purpose. Apple introduced a phone for their target market, which is people who don't care as much about the phone as the geeks do. They introduced a phone that worked, not one that was fascinating because it was loaded with untested new features.
But here's where it gets interesting...
The first step is people who care making a product for people who care.
The second step is people who care making a product for people who don't care.
And the third step, so difficult to avoid, is that the growing organization starts hiring people, not necessarily people who care, to grow their ever-industrializing company. And since they are servicing customers who don't care, those employees who don't care can get away with it (for a while).
Think General Motors, 1986. No one pushed back on the horrid design and build quality of the Cadillac. No, the people who cared all bought a Mercedes instead, and those that didn't care, didn't care. Until it was too late.
You're not going to have hordes of disappointed mass market customers cursing you out about quality or design. They don't care enough to do that.
It's totally okay for an organization to have the mission of making a carefree, ubiquitous product or service for people too busy or focused elsewhere. Totally fine to make something that's popular largely because it's popular. The danger creeps in when your team listens to their (mass) market and stops caring as well. When that happens, a new company comes along to care again.
In Japan things have gone from Grim to Grimmer. The Markit/JMMA Japan Manufacturing PMI™ shows Japanese manufacturing sector contracts at sharpest rate in 19 months.
Key points:
Output and new orders both continue to decline Capital goods producers register sharpest falls in production and sales Inventories and employment cut amid subdued economic outlook
Summary:
Operating conditions in the Japanese manufacturing sector continued to worsen in November. The deterioration was driven by falls in output, new orders and employment as the economic climate remained difficult. Amid an uncertain outlook, manufacturers also cut inventory levels and lowered purchasing activity.
Investment goods producers also recorded the steepest fall in staffing levels during November. With the consumer and intermediate market groups also registering reductions in employment, a net fall in total manufacturing payroll numbers was recorded for the second month in succession.
Reduced sales and a subdued economic outlook were reported to have led to the reduction in staffing levels in the latest survey period. Similar factors led to declines in inventories and purchasing activity over the month. The fall in stocks of raw materials and semi-manufactured goods was the steepest in over a year-and-a-half, while input buying was pared to the steepest degree since April 2011.
As my friend John Mauldin suggests, Japan is a bug in search of a windshield. I highly doubt Japan can make it to 2022 or even 2017 before it runs into serious issues.
Actually, Japan has extremely serious issues already, it's just that the market is ignoring them for now. If interest rates rise by a mere 2% or so, interest on the national debt will consume 100% of Japanese tax revenue.
Global imbalances are mounting. I suspect within the next couple of years (if not 2013) Japan will resort to the printing press to finance interest on its national debt and the Japanese central bank will start a major currency war with all its trading partners to force down the value of the yen.
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
The European Central Bank was right to refuse access to documents on the economic situation in Greece to a journalist in 2010, because disclosure would have undermined the public interest, the General Court of the European Union ruled.
"Disclosure of those documents would have undermined the protection of the public interest so far as concerns the economic policy of the European Union and Greece," the court ruled on Thursday.
The European Court has thus established an important legal principle. If you claim to act in the public interest, you can break the law. And the definition of the public interest rate, is, of course, a political one.
Unfortunately, that is quite an accurate assessment. The ruling can be appealed the the European Court of Justice within the next two months, but I do not have high hopes for a different result.
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
Peter Schiff was on Capital Account with Lauren Lyster on Tuesday. For that show, he was asked, and he agreed to debate me on hyperinflation. Thus, I semi-expected to be on the show as well.
I even received email confirmation from the Capital Account producer last Sunday Friday.
The headline of the email was "Peter Schiff is Good".
The body of the email was "I let Schiff's people know that you were the guy he will be debating and they were cool with it so we are definitely on for next Tuesday at 12:30pm your time."
Minus Mish (which I will gladly explain below), here is the Schiff interview with Lauren Lyster.
Lauren challenged Schiff with "Whatever happened to hyperinflation?"
I heard an amusing response from Schiff as follows "I still say that hyperinflation is a worst case scenario. I never say we are going to have it for sure."
The whole idea is to get out of the US Dollar. It is on the verge of collapse. The people who don't get out of the US dollar are going to be completely broke and that is obvious. Look at what Ben Bernanke did. Interest rates are zero. Money is free.
Bernanke is going to run up printing presses as fast as he can. This is pure inflation Latin American style. This is hyperinflation; this is Zimbabwe; this is the identical monetary policy of the Weimar Republic.
I am just as convinced that people who have their money in US dollars are going to be just as broke as people who have their money with Madoff.
I do not know how much time you have. With the dollar dropping 5% a week at this point, could it snap back? But what if it keeps falling? What if it's down 5% next week? And 5% the week after that? And then what if it drops 10%? and another 10%? At some point a year from now the dollar could be dropping 5% a day.
The inflation rate in Zimbabwe is over 100 million percent a year.
Unfortunately that audio display of nonsensical hype has been removed. Conveniently perhaps?
Now, in a massive display of revisionist history, Schiff claims that hyperinflation is a "worst case scenario".
In a further amusing turn of events, Schiff further backs down from his previous hyperinflation stance telling Lauren Lyster:
"At some point the specter of hyperinflation is so enormous, and the dangers so apparent that will change. But before we get to that point w will have very very high inflation. Much, much higher than we had in the 1970s. If inflation is 30% a year or 40% a year, technically is it hyperinflation? Probably not."
Really? When?
Semi-Expectations
Before offering further comments on the prospect of 30-40% annual inflation, let's back up to the opening paragraph where I stated "I semi-expected to be on the show as well."
Actually, I fully expected Schiff to wimp out, and I even told the producer in a phone conversation, in advance, that the debate would never happen.
"But he Schiff's people agreed to it", said the producer. "It will never happen" said I, and it didn't. [Correction note, this was a phone conversation. I recalled "Schiff" but made the change to "Schiff's people" by request.]
You see, I have been through this multiple times before.
Schiff once told Max Keiser that he would debate anyone. Max asked me if I would debate Schiff. I replied "of course, but Schiff will not debate me." When Max said Shiff agreed, I said "set it up then".
As with Capital Account, once Schiff found out who he was debating, he backed out.
The reason I told Max that I was certain Schiff would back out is that I went through the exact same setup with a CNN radio affiliate.
Charles Goyette Fundraiser
When Peter Schiff was running for Senate, best selling author and radio talk show host Charles Goyette (who happens to like both of us), tried to patch things up between Schiff and I.
Goyette agreed to moderate a discussion between us, and I told Schiff that I was willing to stress the things I agreed with him about (and there are a few). I even told Schiff we could record the session and if Schiff did not like the results we would not play it.
I did not grant myself the same "no play" opportunity.
Yet, Schiff would not even agree to that. And a fundraiser Goyette planned for Schiff never happened.
That's one hell of a grudge folks. Since then I put up with numerous email challenges such as "Are you afraid to debate Peter Schiff?"
I draw the line with this documented wimp-out by Schiff coupled with his blatant revisionist history.
Agreements With Schiff
I have two major agreements with Schiff.
We both like gold and silver.
We both agree with the need for small government.
I was willing to stress those points in a three-way conversation with Goyette and Schiff but that never happened.
Right now, with the 10-year treasury yield at 1.62% I see no value in treasuries. Schiff would surely agree with that position (going much further of course, to outright loathing of US treasuries).
Like Schiff, I also think the US will indeed have a day of reckoning. However, I think the Yen, the British Pound, and the Euro are all likely to have a day of reckoning first.
Being too US dollar focused (to the point of outright hatred of the US dollar), has been a major Schiff downfall. So has been his love of China (which I will also gladly debate Schiff about anytime he wants).
Sad State of Affairs
This whole saga has been a sad state of affairs. And topping off the list is having to read Paul Krugman blast Schiff in his post on Thursday Varieties of Error
Some readers may recall the "Peter Schiff was right" campaign of 2009, a sort of public-relations blitz claiming that Schiff, an Austrian-oriented commentator, had foreseen everything correctly. It wasn't really true even then; still, Schiff became a fixture of right-wing TV shows, constantly warning about how expansionary monetary and fiscal policies were about to produce hyperinflation.
Well, Cullen Roche catches a TV host actually putting Schiff on the spot, pointing out that he's been predicting that hyperinflation since 2008, so where is it?
Good question. And I'd like to pursue the question a bit more, not just or even mainly about Schiff, but more broadly about the role of predictions — including wrong predictions — in economics. ...
I certainly have no problems with Krugman blasting Peter Schiff, because quite frankly Schiff deserves it.
Peter Schiff was wrong about massive inflation in 2008 and in my opinion, Schiff still is wrong today.
So why does Schiff refuse to debate me? He gave Capital Account an excuse something along the lines of not wanting to give me any credibility by debating me.
The ultimate irony is that Schiff needs credibility, not me.
I believe the most likely reason he will not debate me is he is afraid of debating anyone sufficiently able to challenge his ideas. It's easy when you can stand up and preach. It's much tougher facing someone who does not bow down at your feet.
Pragmatic Capitalism
Krugman linked to an article on Pragmatic Capitalism by Cullen Roche. So, let's take a look at Roche's article What About That Hyperinflation?
Regular readers know I am a big fan of getting called out on things. Not because I like to be wrong or making other people look silly, but because I sincerely enjoy the constructive criticism. Over the years I've been wrong about plenty of things. That's totally normal in this business. When you write as much stuff as I do about things as hard to understand as the monetary system then you're bound to get tripped up. It's one incredibly long learning curve we're all walking on here and I doubt anyone ever gets to the end of it. The world of money and finance is one big complex puzzle and I enjoy working with readers and other people trying to solve that puzzle. Anyone who tells you they've solved it is probably lying or misleading.
Anyhow, there's a real power in being wrong. The quote "there are no mistakes, only lessons" is completely true if you actually live your life that way. I like to say "it's in being wrong that we learn to be right". So when I see people being called out for their mistakes (in a respectable and mature way) I think that should generally be applauded because it provides the platform for learning and improvement.
So I loved it tonight on RT when Lauren Lyster asked Peter Schiff "what about the hyperinflation…you've been predicting since 2008?" I've had a lot of fun over the years at the expense of the people who called for hyperinflation in 2008 (Schiff certainly wasn't the only one), but I've only done that because it provides a great lesson for many others. Obviously, Schiff is sticking to his guns, but that's not the point here. The point is to seriously consider why was Schiff wrong and why I have been right? Was I working from a superior understanding of the monetary system? Or have I just been lucky? You need to decide that for yourself, but you need to really explore those questions and truly consider both approaches and why one seems to have worked out far better than the other.
In regards to hyperinflation I do not think Krugman, Roche, or I were lucky. Rather, I think hyperinflationists in general made four major errors.
Four Major Errors
Schiff and many others simply fail to understand the role of credit in a credit-based economy.
Many of those calling for hyperinflation were too US-dollar focused.
There are numerous currency problems elsewhere that should have been easily seen.
There is an absurd faith in China (of all places) even though money supply growth in China has far exceeded money supply growth in the US.
I could actually go on with numerous other flaws in many hyperinflationist's calls but they are now so obvious that even Peter Schiff has felt a need to resort to revisionist history to duck them.
Austrian Point of View
The problem I have with Krugman's pounding of Schiff is the lumping by Krugman of Austrians as if there was one Austrian point of view. There's not. I have been harping for years about those four points above, as well as numerous other reasons hyperinflation is highly unlikely.
Yet, we have to suffer from another "I told you so" kind of post from Krugman even though some of us Austrians have been in agreement with Krugman all along that "hyperinflation is nonsense".
Krugman concludes his article with "But as far as I can tell, very, very few people have been willing to let the evidence speak."
I agree, and the final irony is that I can say the same about Krugman.
Why can't Krugman look at Japan and see the US is heading down the same path, except that Japan will have its currency crisis first. What happens after that is uncharted territory.
After all, Schiff is right that the path the US is on is not remotely sustainable. I think even Krugman would agree. It's just that Schiff's timing, endgame, and sequence of events between now and "eventually" are horrendously off.
Side Note on Comment System
Many people have been unable to login and leave comments. I believe the problem has been rectified.
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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