Seth's Blog : Eventually, snow melts



Eventually, snow melts

That doesn't mean that there isn't value in shoveling someone's walk.

Most things will get addressed sooner or later.

What happens if you take the side of sooner?

The naysayers will share plenty of reasons not to stick your neck out.

There are good reason to ignore those skeptics: Because it matters. Because we need your leadership. Because now is better than later.

       

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• Debunking the Myth "Consumer Spending is 67% of GDP"
• Crowdfunding Review: Exploding Kittens; Bankrupt Zano; Will Crowdsourcing Ever Work?
• East Coast Blizzard - Some Love It: Legal Sledding on Capitol Hill First Time in 140 Years; Panda "Tian Tian" Loves Snow
• Rajoy Says Leftist Parties Causing "Terror in Europe" as Spanish Government About to Fall

Debunking the Myth "Consumer Spending is 67% of GDP" Posted: 24 Jan 2016 10:55 PM PST Consumer Spending Myth It is widely believed that consumer spending accounts for approximately two-thirds of the economy. A few of us dispute that claim. Reader Gary writes "You had made the comment more than once that manufacturing is really a much larger part of GDP than is frequently quoted. I could not find how you got there, but ZeroHedge has a nice Pie Chart that shows what you have stated." It's Only a Manufacturing Recession The chart Gary referenced is from "But It's Only A Manufacturing Recession, What's The Big Deal" - Here's The Answer. I am not sure of the origin of that chart, or its precise accuracy, but the essential idea rings true. GDP Illusion In Is the US Economy Close to a Bust, Pater Tenebrarum at the Acting Man Blog points out ... One thing that we cannot stress often enough is that the manufacturing sector is far more important to the economy than its contribution to GDP would suggest. Since GDP fails to count all business spending on intermediate goods, it simply ignores the bulk of the economy's production structure. However, this is precisely the part of the economy where the most activity actually takes place. The reality becomes clear when looking at gross output per industry: consumer spending at most amounts to 35-40% of economic activity. Manufacturing is in fact the largest sector of the economy in terms of output. In The GDP Illusion Tenebrarum writes ... Sure enough, in GDP accounting, consumption is the largest component. However, this is (luckily) far from the economic reality. Naturally, it is not possible to consume oneself to prosperity. The ability to consume more is the result of growing prosperity, not its cause. But this is the kind of deranged economic reasoning that is par for the course for today: let's put the cart before the horse! In addition to what Tenebrarum states, please note that government transfer payments including Medicaid, Medicare, disability payments, and SNAP (previously called food stamps), all contribute to GDP. Nothing is "produced" by those transfer payments. They are not even funded. As a result, national debt rises every year. And that debt adds to GDP. Real GDP is constantly overstated because it's obscured by a cloud that hides monetary inflation and ignores both debt and bubbles. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Crowdfunding Review: Exploding Kittens; Bankrupt Zano; Will Crowdsourcing Ever Work? Posted: 24 Jan 2016 07:24 PM PST Crowdsourcing Hype Robots and artificial Intelligence will destroy 5.1 million jobs by 2020 says a study on the "Future of Jobs". Crowdsourcing was one of the big factors noted in the study. My comment last Friday was "I suspect crowdsourcing is one of those things with huge potential that never really flies because there is no money in it for anyone." More accurately, I should have said "no net money for anyone but the promoters". This weekend, readers emailed a series of article on a cwowdsourcing that I had not seen. Crowdsourced Zano Implodes Please consider the January 18 Media.Com article How Zano Raised Millions on Kickstarter and Left Most Backers with Nothing. The gist of the story is one of Zano, a drone-maker that sought to raise $190,000 to put a prototype into production. The company raised millions but the drones could not fly.  Said one person involved: "I unpacked my Zano and tried to fly it indoors, as I guess most people did. It really didn't go very well at all, banging into the wall. So I took it down to a local park and tried to fly it there. After 10 or 15 seconds, it would just go off and do its own thing, zipping off sideways until it got out of range. Basically, it was just awful. The video was pretty poor quality too." The promotional videos displayed smooth, professional shots. "As [with] any commercial video, people are going to edit out the takes that aren't as good." The article notes "UK market analyst firm Juniper Research predicts that that investments made in technology via crowdfunding platforms will increase sevenfold from an estimated $1.1 billion last year to $8.2 billion by 2020. If we want a democratic, open, freely accessible alternative to banks and venture capitalists, then we will have to accept occasional failures like Zano along with runaway successes like Pebble, Oculus Rift, and Veronica Mars." Media.Com concludes with some sobering bullet points ... Financial pressures led the creators to ship Zano units that they knew were not ready, and additionally to favour pre-order customers in the hope of receiving additional revenues. The liquidation is proceeding in a professional manner, but is unlikely to result in any refund, however small, to any Kickstarter backer. I do not believe that the creators possessed the technical or commercial competencies necessary to deliver the Zano as specified in the original campaign. Kickstarter, and other crowdfunding platforms, should reconsider the way that they deal with projects involving complex hardware, massive overfunding, or large sums of money. There should be better mechanisms to identify weak projects before they fund, as well as new processes to provide mentorship, support and expert advice to newly-funded projects. Related Articles October 30: Crowdfunding for Internet Stock Sales Approved by SEC November 2015: When Crowdfunding Projects Go Wrong January 21: Kickstarter Digs Deep Into Case of Doomed Drone Biggest Crowdsourcing Efforts Bloomberg reports on the Biggest Crowdfunding Campaigns of 2015, cleverly commenting "no the Greek Bailout did not make the list". Exploding Kittens and Russian Roulette I confess. I never heard of "Exploding Kittens" or anything else the crowds are funding. "Exploding Kittens is a highly strategic kitty-powered version of Russian Roulette. Players take turns drawing cards until someone draws an exploding kitten and loses the game. The deck is made up of cards that let you avoid exploding by peeking at cards before you draw, forcing your opponent to draw multiple cards, or shuffling the deck," wrote the creators in the official webpage. "So if you're into card games or laser beams or weaponized enchiladas, please help us make this game a reality. We think you'll love it as much as we do," they added. Expect More Beanie Babies Maybe the crowds can identify popular games in advance, maybe not. But when it comes to serious applications, any expectation that crowdsourcing will be a disruptive force seems silly. The crowds also brought us Beanie Babies and Pet Rocks. Expect more of the same. I commented on truly disruptive processes in Fourth Industrial Revolution: Robots, Artificial Intelligence Will Destroy 5.1 Million Jobs by 2020. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

East Coast Blizzard - Some Love It: Legal Sledding on Capitol Hill First Time in 140 Years; Panda "Tian Tian" Loves Snow Posted: 24 Jan 2016 12:56 PM PST Not everyone hates the unusual blizzard that dumped 2 feet or more of snow in Washington D.C. and other locations on the East coast. Giant Panda Stars at National Zoo Please consider Giant Panda Stars at National Zoo in Reaction to Blizzard. "A frolicsome giant panda called Tian Tian appeared to be capturing the bulk of the online attention as videos and other images emerged of animals at the National Zoo in Washington, D.C., as they encountered Saturday's accumulating snowfall." Legal Sledding on Capital Hill DC Residents Flock to Capitol Hill for First Legal Sledding in 140 Years. Just in time for the blizzard that dumped more than 2 feet of snow across the mid-Atlantic, kids and adults took their sleds to Capitol Hill, legally, for the first time in more than 140 years. In a provision from December's spending bill, Capitol Police will halt their enforcement of the sledding ban as long as conditions are safe. Hundreds of people took advantage of the newly changed policy during the record-breaking blizzard on Saturday. The Hill was quickly populated with sleds, inflatable mattresses, inner tubes and other creative forms of transport. "It took an act of Congress, but children are finally welcome to sled down on #CapitolHill," Speaker of the House Paul Ryan tweeted on Saturday. Best Thing From Congress in Years Is sledding on Capitol hill the best thing Congress has done in years? I struggle to come up with anything better. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Rajoy Says Leftist Parties Causing "Terror in Europe" as Spanish Government About to Fall Posted: 24 Jan 2016 12:10 PM PST Following a December election that has left Spanish politics deeply fragmented, People's Party (PP) leader, Prime Minister Mariano Rajoy's  has been unable to secure the majority coalition he needs to rule. Unless someone has a majority, it is the role of the king, otherwise a largely ceremonial role, to see if anyone can build a coalition. First chance goes to the party receiving the most votes. Here's a sequence of events with brief translations and a couple of comments from reader Bran who lives in Spain. The clips are from last Friday through today. Links are in Spanish. Rajoy declines the offer by the king to try to form a government. However the news is later tempered with his words "I haven't renounced the right to be chosen, it is that right now I don't have the votes". Friday - http://politica.elpais.com/politica/2016/01/22/actualidad/1453478212_032444.html   During the round of meetings with the king, Iglesias (leader of Podemos) announced without any warning that he would seek to form a coalition with PSOE based on proportional representation of power in the government with Sanchez as president and himself as vice president and ministers also proportionally assigned. Iglesias includes IU (left) as part of the tripartite and asks for a Catalan referendum. Apparently Sanchez was only informed of the offer when he went to meet the king. Friday - http://politica.elpais.com/politica/2016/01/22/actualidad/1453461680_098827.html   Sanchez's first reaction was a cautious welcome, saying "Voters would not understand if I and Podemos did not understand each other". He says he will hold talks with Podemos over the weekend. However Iglesias carried on his overt approach by tweeting his position with statements like "the historic possibility that he (Sanchez) will become president is a smile from destiny that he should be thankful." Friday - http://politica.elpais.com/politica/2016/01/22/actualidad/1453464023_797332.html   Reactions of the regional heads and ex-heads of the PSOE, including previous party leader Rubalcaba was not favorable. Rubalcaba stated "It is the first time I have heard an offer of accord to form a Government while gravely insulting the party with which you hope to govern with." There is even a new hash tag #Respetoal PSOE "Respect PSOE"  Friday - http://politica.elpais.com/politica/2016/01/22/actualidad/1453496560_129777.html?rel=cx_articulo#cxrecs_s   Message from Bran on Saturday: "Hello Mish, I'll keep posting through the politics but if you are thinking of writing on it, be careful not to be caught off guard. There are more twists and turns than we might imagine.   Rajoy, having resigned his candidature, but still offering it, launches straight into the offensive from his self-declared position of opposition, labeling Sanchez "mortgaged and undignified" for hypothetical agreements with Podemos politica. Saturday - http://politica.elpais.com/politica/2016/01/23/actualidad/1453545112_869649.html   Sanchez refuses to pick up the gauntlet, broadcasting that he will not present himself as candidate for now because that right still  belongs to Rajoy because PP has the most seats. Sanchez also smacked down Podemos in the process, saying his own candidacy won't be launched by blackmail. The actual word Sanchez used is "chantaje", which means "story telling leverage", a bit lighter than blackmail. Saturday - http://politica.elpais.com/politica/2016/01/23/actualidad/1453553795_291625.html   PP says Podemos offer to align with PSOE "causes terror in Europe". Saturday - http://ecodiario.eleconomista.es/politica/noticias/7299394/01/16/El-PP-asegura-que-la-oferta-de-Gobierno-de-Pablo-Iglesias-ha-causado-terror-en-Europa.html   Sanchez now says he will attempt to form a government if the king asks him to. Saturday - http://politica.elpais.com/politica/2016/01/23/actualidad/1453553795_291625.html   Rajoy says that PSOE/Podemos coalition will not be able to govern because he will use the PP majority in the senate to block it. Saturday - http://ecodiario.eleconomista.es/politica/noticias/7299046/01/16/Rajoy-amenaza-a-la-union-PSOEPodemos-No-podran-gobernar-tenemos-la-mayoria-en-el-Senado.html   Yanis Varoufakis, former finance minister of Greece says the troika will tie the hands of a PSOE/Podemos government. Saturday - http://www.eleconomista.es/economia/noticias/7299442/01/16/Varoufakis-advierte-que-la-Troika-ataria-las-manos-de-un-Gobierno-PSOEPodemos.html   Bran comment on Sunday: "All sorts of covert and overt activity is taking place. For now, all the political leaders reject coalitions that can reach a majority. We will have to see how the PSOE/Podemos relationship pans out, because they will still need to pick up additional seats from fringe parties to reach a majority." Breaking the Logjam The Financial Times reports Podemos Proposes Leftwing Coalition to Break Spain Logjam. The anti-austerity Podemos party on Friday made an audacious move towards breaking Spain's post-election political logjam, proposing a three-way coalition government with the Socialists and the United Left party. "If the PSOE [the Spanish Socialist party] wants it, there can be a government of change," Pablo Iglesias, the Podemos leader, told a news conference in Madrid. He was speaking after meeting Felipe VI, the Spanish monarch, whose constitutional role includes proposing the next head of government to parliament. Another complication is that the Socialists, Podemos and the United Left would still not hold a majority in parliament. The three parties together control 161 seats in the 350-seat parliament, meaning they would be 15 votes short of an absolute majority. To win the premiership and pass future legislation, they would need either the support or the abstention of smaller regional parties, including the two parties that support Catalan independence from Spain. For the Socialists, a party that prides itself on its staunch defence of Spanish unity, it would be a deeply uncomfortable situation. The proposal made by Mr Iglesias marks the first concrete offer to create a left-of-centre government coalition since Spain went to the polls in December. The election produced a deeply fragmented parliament that leaves neither the right nor the left an obvious path towards a stable majority. Mr Rajoy, the leader of the conservative Popular party, has proposed a centrist alliance between his own party, the Socialists and the centrist Ciudadanos party. The Socialists have so far rejected the prime minister's offer. Problems Facing Leftist Coalition PSOE insists Catalonia stay united with Spain Podemos is open to Catalan elections The third group of fringe parties needed to form a coalition demand Catalonia independence Spanish Government About to Fall The most likely possibilities are a new election (if no one can achieve a majority), or an unstable coalition of leftist parties. Barring an unlikely last minute miracle, the government of Mariano Rajoy is over. New elections are in the cards immediately, or a bit down the road after an unstable coalition of some sort falls apart. Either way, Rajoy is burnt toast. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Seth's Blog : All my best posts are the posts I haven't written



All my best posts are the posts I haven't written

Sometimes I'll get a great idea for a post while out walking or showering or generally not in front of a keyboard. Not just great ideas, but fabulous ones.

And then, after rehearsing the keywords over and over so I don't forget before I write it down, I forget.

And that post, the post I didn't write, the post that never saw the light of day--that's the best post ever.

I think most dreams work this way.

The thing is, an unwritten post is no post at all. It's merely a little bit of gossamer on wings of hope. Doesn't count.

The only good posts are the ones I've written.

I think most dreams work this way, too.

       

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Arrogant Trump: "I could stand in the middle of 5th Avenue and shoot somebody and I wouldn't lose voters" Posted: 23 Jan 2016 03:30 PM PST At an Iowa rally earlier today, Donald Trump made the arrogant claim "I could stand in the middle of 5th Avenue and shoot somebody and I wouldn't lose voters". CNN reported Trump refused to clarify what he meant. Donald Trump boasted Saturday that support for his presidential campaign would not decline even if he shot someone in the middle of a crowded street. "I could stand in the middle of 5th Avenue and shoot somebody and I wouldn't lose voters," Trump said at a campaign rally here. After the event, Trump declined to answer when asked by CNN to clarify his comments. Teflon Trump At what point does making arrogant, seemingly idiotic statements matter? No doubt his campaign is working on damage control now. Here's the likely explanation: "Trump was obviously referring to being attacked and responding in kind." Reaction So Far - Positive Then again, perhaps Trump can just brush it off. NPR has this Report on Trump. NPR's Don Gonyea reports that so far, the reaction to Trump's remarks has followed a familiar pattern. "His audiences love it. His opponents try to use it against him — but so far, to no avail," Gonyea reports. "I talked to some of his supporters and they say, 'Yeah, sometimes he makes me cringe, but I still like him and I still think he's the right thing for America.' " One supporter, who spoke to ABC News, said he found Trump's point clear — but mentioned Trump could have articulated it differently. "He probably could've worded it a little bit better," campaign volunteer Brandon Fokkema said. Fed Up One thing's for sure: Former New York City mayor, Michael Bloomberg is so fed up with both Democratic and Republican candidates, that despite the longshot odds, Bloomberg Contemplates Running for President as Independent. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Bloomberg Contemplates Running for President as Independent; Longest of Longshots Posted: 23 Jan 2016 03:10 PM PST Former New York Mayor, billionaire Michael Bloomberg, is fed up with Donald Trump, the republicans in general, Bernie Sanders, and Hillary Clinton's shift to the left to fight Sanders. As a direct result of being fed up with everyone but himself, Michael Bloomberg Mulling Run for President as Independent. Mr. Bloomberg, 73 years old, has long contemplated a run at the White House. But the unlikely rise and continued strength of Donald Trump, along with polls suggesting Hillary Clinton's campaign may be flagging, have driven the billionaire businessman closer than ever before to entering the race, a close adviser said Saturday. Eyeing a potential opening for the first time, Mr. Bloomberg has retained a consultant to help him run on the independent ballot in state primaries. He has commissioned polls to test his path to victory. And he has directed the close circle of advisers who worked for him as mayor and have remained by his side over the past two years since he left office to begin mapping out a blueprint for a run, one adviser said. That adviser said the former mayor has been upset by what he sees as extremist rhetoric from Republicans in the race, as well as a leftward turn from Mrs. Clinton, who is fending off an unexpectedly strong challenge in the Democratic primary from the more liberal Vermont Sen. Bernie Sanders. If he runs, Mr. Bloomberg is likely to face hurdles with voters, especially those outside the Northeast, where he is better known. A recent poll by Morning Consult showed Mr. Bloomberg receiving 13% support from voters, Democrat Hillary Clinton getting 36% and Republican Donald Trump 37%. The same poll found that 43% of voters either hadn't heard of Mr. Bloomberg or had no opinion. Morning Consult said the poll was conducted from Jan. 14 to Jan. 17 among a sample of 4,060 registered voters around the country. Longest of Longshots Should he choose to run, Bloomberg would be the longest of longshots. But, he has a lot of money to waste. Should he choose to do so, would it help or hurt Trump? Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Seth's Blog : The client and the customer



The client and the customer

This is a choice, a huge one in the life of the freelancer, the entrepreneur or anyone who seeks to engage with the marketplace.

The customer buys (or doesn't buy) what you make.

The client asks you to make something.

The customer has the power to choose, but the client has the power to define, insist and spec.

There is a large number of potential customers, and you make for them before you know precisely who they are.

There are just a relative handful of clients, though, and your work happens after you find them.

If a customer doesn't like what's on offer, she can come back tomorrow. If the client doesn't like what you deliver, she might leave forever.

You can do great work for either.

But don't confuse them.

Choose your customers. Choose your clients.

And most of all, choose which category you're serving.

[Worth noting: Software and the internet let us disrupt a market by transforming clients into customers and customers into clients. People who used to have to take what was an offer can now get a customized version almost as easily. And people who used to pay extra for the bespoke version can now have the convenience and economy of merely buying what's on offer.]

       

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• Former Hasbro CEO Says "Providence Should Consider Bankruptcy"; An Option Chicago Needs
• Existing Home Sales Bounce Essentially a Mirage; Supply Drops to 11-Year Low: Is that a Problem?
• Fourth Industrial Revolution: Robots, Artificial Intelligence Will Destroy 5.1 Million Jobs by 2020
• China Openly Pledges to Sink the Yuan vs. the Dollar

Former Hasbro CEO Says "Providence Should Consider Bankruptcy"; An Option Chicago Needs Posted: 22 Jan 2016 12:40 PM PST Providence, the capital of Rhode Island, is in such bad financial straits that Former Hasbro CEO Alan Hassenfeld has this scary message for state officials Providence Should Consider Bankruptcy. In a candid interview with the Providence Business News, Hassenfeld said he fears Providence is in deeper trouble "than anyone comprehends" and that officials should consider bankruptcy in order to right the ship. "I'm not sure, and this will shock you, I'm not sure if we shouldn't pull a Detroit or Central Falls and level the playing field and start all over," Hassenfeld told PBN. Hassenfeld is among the most prominent Rhode Islanders to publicly suggest Providence should consider bankruptcy. In 2011, tiny Central Falls filed for Chapter 9 bankruptcy, slashing pensions and ordering 4% annual tax increases for five straight years in order to improve the city's finances. Under new Mayor James Diossa, the city has earned high praise for helping the city recover, but Central Falls had the state's fourth-highest residential property tax rate ($27.63 per $1,000 of assessed value) and second-highest commercial tax rate ($39.67 per $1,000) in 2015, according to the state Division of Municipal Finance. Illinois Needs Bankruptcy Solution A least Rhode Island offers cities and municipalities a choice. Illinois has no provision for municipal bankruptcies. As a direct consequence, Illinois cities and school districts sink deeper and deeper in debt, even though taxes go higher and higher. Illinois "Too Big a Risk" Chicago was supposedly on the "short list" of cities GE was considering for its new headquarters. But GE instead selected Boston. GE said "Illinois Too Big a Risk". GE accurately cited Chicago schools, pensions, corporate tax rates, financial meltdowns, budget holes, and a rock-bottom state debt rating. Too many risks? You bet. So what is mayor Emmanuel and the Illinois legislature going to do about it? Tax Hikes and More Tax Hikes Mayor Rahm Emanuel's solution to this mess was to make the biggest tax hike in history. On October 28, 2015 I commented Chicago's Sheep Dogs Approve Mayor's Tax on Sheep; Quote of the Day "It's Not a Piece of Art". The "sheep" in question are Chicago taxpayers who will need to pony up a historic property tax hike of $589 million to fund the city's police and fire department pensions. Deal or No Deal 25 cents out of every Illinois taxpayer dollar goes to Illinois pensions. Yet, Illinois has the worst funded state pensions in the entire nation. On January 20, I reported "B" Word Hits Chicago: Illinois Governor Proposes Bankruptcy for Chicago Public School System. To appease the unions and save his own job in the process, mayor Emanuel's spokeswoman, Kelley Quinn,  responded "The mayor is 100 percent opposed to Gov. Rauner's 'plan' to drive CPS bankrupt," Emanuel's. I commented "When a politician's job depends on not understanding a problem, there's no way in hell the problem will be understood." Yesterday I read Illinois governor Bruce Rauner and the Democrats agreed on a pension deal. Just hours later the deal fell through. A headline that yesterday said "deal reached" today says "Rauner backs Cullerton pension plan - but Cullerton says it's not his plan". The fundamental difference is over collective bargaining. Cullerton said he believes collective bargaining should continue to exist, but Rauner disagrees. No Deal Governor Rauner says "reforms first". Emanuel and the Democratic legislature say "money first". Rauner would be a fool to accept that offer. So we sit. Illinois still does not have a budget for 2015. A quick check of my calendar says it's already 2016. I applaud Rauner's holdout. Chicago should not get one dime until Illinois gets needed changes in bankruptcy law, and until cities can escape the enormous expense of prevailing wages laws and collective bargaining. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Existing Home Sales Bounce Essentially a Mirage; Supply Drops to 11-Year Low: Is that a Problem? Posted: 22 Jan 2016 10:56 AM PST Home Sales Bounce Misleading December existing Home Sales bounced a whopping 14.7% from November's dismal showing. But most of that bounce is a mirage. Last month, new documentation rules pushed sales into December. Smoothing out the distortions, the average of the last two months was 5.11 million. That's well below the 5.43 average of the prior six months. So, there were indeed distortions last month, but there is also underlying weakness. Bloomberg Econoday reports ... Existing home sales bounced back sharply in December, up an outsized 14.7 percent to a 5.46 million annualized rate that just tops Econoday's top-end forecast. Year-on-year, sales are up 7.7 percent in a major contrast with the minus 3.8 percent rate of November. But November was an unusual month skewed lower by new documentation rules that pushed sales into December. Averaging the two months together shows a 5.11 million rate that is well below the 5.43 average of the prior six months. Total sales for 2015 came in at 5.26 million, well up from 4.94 million in 2014. Single-family homes led December's bounce, surging 16.1 percent to a 4.82 million rate and a 7.1 percent year-on-year gain. The trend for condos has been much stronger with the year-on-year gain at 12.3 percent and with monthly growth in December at 4.9 percent to a 0.640 million rate. Low supply in the market has been a big negative for sales and is a major concern in this report. Total homes on the market fell to 1.79 million from November's 2.04 million with supply relative to sales falling to only 3.9 months, far below 5.1 months in November and sizably below 4.4 months in December 2014. Supply right now of existing homes is as low as it's been in nearly 11 years, a factor the report warns that may slow sales during the spring. But low supply is a plus for prices where data in this report are firming. The median is up 1.9 percent in the month to $224,100 for a very respectable 7.6 percent year-on-year gain. Regional data show wide sales gains led by the West at 23.2 percent on the month followed by the South at 14.6 percent. Year-on-year, the Northeast is out in the lead at plus 11.9 percent followed by the Midwest at 9.9 percent. Housing is showing some life but gains, including those for new homes, are being held back by lack of supply. Still, price appreciation is a rising plus and is well above other price areas including wage growth. Price Appreciation Is price appreciation a plus or a minus? Bloomberg says "price appreciation is a rising plus". I suggest that with every increase in price, homes become less and less affordable. Supply Drops to 11-Year Low Bloomberg says "Total homes on the market fell to 1.79 million from November's 2.04 million with supply relative to sales falling to only 3.9 months, far below 5.1 months in November." Why did supply relative to sales plunge? Because November sales were skewed to the downside and December to the upside. Expect a rebound in supply numbers next month. Existing Home Sales With Distortions Smoothed If you smooth the distortions, today's reported bounce is no more than a mirage. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Fourth Industrial Revolution: Robots, Artificial Intelligence Will Destroy 5.1 Million Jobs by 2020 Posted: 22 Jan 2016 10:01 AM PST Fourth Industrial Revolution Coming A new study on the "Future of Jobs" by the World Economic Forum at Davos claims a Fourth Industrial Revolution is Coming. The Fourth Industrial Revolution includes developments artificial intelligence, robotics, nanotechnology, 3-D printing, genetics, and biotechnology. Although no industrial revolution has ever destroyed jobs, the study concludes a net 5.1 million jobs will vanish in the world's 15 leading countries. Those countries account for roughly two-thirds of the global workforce. The report is a 167 page PDF slog. Here are a couple of tables I created from the report data. Job Family Losers Job Family Losers Job Losses in Thousands Office and Administrative 4,759 Manufacturing and Production 1,609 Construction and Extraction 497 Arts, Design, Sports, Media 151 Legal 109 Installation and Maintenance 40 Total 7,165 Job Family Gainers Job Family Gainers Gains in Thousands Business and Financial Operations 492 Management 416 Computer and Mathematical 405 Architecture and Engineering 339 Sales and Related 303 Education and Training 66 Total 2,021 I understand the losses, at least part of them. But gains in financial operations? Everything Rosy but Healthcare Curiously, the following chart from the report makes everything look rosy except healthcare. I don't accept that chart, at least for the implied reasons. Yet, after boomers die off en masse, I foresee all kinds of health-related jobs will vanish until the next retirement boom hits. Trucks and  Taxis What about truck and taxi drivers? I expect millions of truck hauling and taxi jobs will vanish soon, in the USA alone, by 2025. I searched the report for the word "truck" and found this lone reference: "Advanced robots with enhanced senses, dexterity, and intelligence can be more practical than human labour in manufacturing, as well as in a growing number of service jobs, such as cleaning and maintenance. Moreover, it is now possible to create cars, trucks, aircraft, and boats that are completely or partly autonomous, which could revolutionize transportation, if regulations allow, as early as 2020." That paragraph was under the category "Advanced Robotics and Autonomous Transport" given a disruptive weighting of 9%. Let's dig deeper with a look at disruptive weightings. Technological Drivers of Change Driver of Change Rated as Top Trend Expected Timeframe Condensed Notes Mobile internet and cloud Technology 34% 2015-2017 Rapid spread of internet-based service models Advances in Computing Power and Big Data 26% 2015-2017 Ability to handle the unprecedented flood of data New Energy Supplies and Technology 22% 2015-2017 New technologies like fracking and new energy supplies will have profound geopolitical and environmental repercussions Internet of Things 14% 2015-2017 Remote sensors Crowdsourcing and Peer-to-Peer Platforms 12% Impact Felt Already With peer-to-peer platforms, companies and individuals can do things that previously required large-scale organizations. Advanced robotics and Autonomous Transport 9% 2018-2020 Robots more practical than humans in manufacturing and service jobs. Autonomous vehicles could revolutionize transportation. Artificial Intelligence and Machine Learning 7% 2018-2020 Voice recognition will make automation of tasks long regarded impossible for machines Advanced Manufacturing and 3D printing 6% 2015-2017 On demand production has far-ranging implications Advance Materials, Biotechnology, Genomics 6% 2018-2020 Life science breakthroughs will have profound impact on medicine and agriculture. Bio-engineering critical to pharmaceuticals, plastics and polymers, biofuels. The last column is my set of abbreviated notes, condensed from descriptions in the report. The first three columns are as presented in the report. Discussion of Disruptive Factors I fail to see what big advances in computing power will do. Nor do I see crowdsourcing as a big factor. I suspect crowdsourcing is one of those things with huge potential that never really flies because there is no money in it for anyone. Remote sensors will eliminate the need for some humans, but hasn't that been underway for quite some time? If not, we can certainly get rid of all the meter maids. On the energy side, fracking is an environmental disaster, and a bust for now, perhaps for a long time. And much of the clean energy systems only work with government subsidies. Battery technology will likely improve and replace or greatly reduce the need for gasoline. If so that will be very disruptive indeed. But will batteries destroy jobs or just disrupt them? Gas stations could become battery switching stations. That may require people to change the batteries, but it will also eliminate gas delivery and gas production jobs. Regardless, this type of change won't be in place by 2020. I struggled mightily with the report's 34% rating for "Mobile Internet". It's possible for huge numbers of teaching jobs to vanish with classes over the internet. And applications like Uber will also have an impact. Yet, this category is over-rated. Biggest Disruptive Force My number one job destructive force is advanced robotics and autonomous transport. Uber ties into this category as well. Uber is adding jobs for now. In the not so distant future, long-haul trucking jobs, Uber driving jobs, and all taxi driving jobs will vanish. Millions of driving jobs of all kinds will vanish in the US alone, by 2025 though, not 2020. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

China Openly Pledges to Sink the Yuan vs. the Dollar Posted: 22 Jan 2016 01:38 AM PST China Drops Dollar Peg If China was really serious about doing what every major country in the world does, it would float the yuan. On Thursday, I saw this MarketWatch headline: China Serious about Dropping Dollar Peg. I was totally unimpressed after reading the article. China will not do the one thing it has needed to do for decades: Let the Yuan float. China still insists on setting artificial pegs that the market openly mocks. China Pledges to Sink the Yuan DAVOS, Switzerland--A senior Chinese official Thursday affirmed China's intention to decouple its currency from the U.S. dollar, while the head of the International Monetary Fund urged Beijing to improve communication with markets about changes to its foreign-exchange regime. For years, China has hitched the yuan's value to U.S. dollar, but its central bank signaled in December that it would break the peg and instead manage the Chinese currency against a basket of 13 currencies. "We're serious about the basket approach," said Fang Xinghai, a senior economic adviser to the Chinese leadership, at a panel organized by the World Economic Forum here Thursday. "It's a decided strategy." With a crawling peg, the yuan has appreciated with the strengthening U.S. dollar, hurting Chinese manufacturers while the economy is weakening. Decoupling the yuan from the dollar could help Beijing's effort to rekindle growth. "There's some catch-up to do" when it comes to adjusting the yuan's value against the dollar, said Mr. Fang, a director-general in the Office of the Central Leading Group on Economic and Financial Affairs, which functions like the White House's National Economic Council. "Once we're done with it, the yuan will be stable again," he said. Stability Nonsense The entire notion that a peg creates stability is complete nonsense. But don't listen to me. Instead, ask Switzerland. China's last peg worked, until it didn't. That peg did help China's export model as long as the US dollar was sinking. Now China pledges to peg to a basket. In other words, China wants to sink the yuan. Supposedly this will create stability. To reach stability, China openly admits instability. Reserve Currency  Nonsense People keep telling me the Yuan will soon be the world's reserve currency. I have openly mocked such pronouncements for a decade. I mock such pronouncements again today. China's bond markets are neither big enough nor liquid enough to handle the task. And China still cannot get off currency pegs. China Drops Currency Peg It Cannot Defend China Dropped the dollar peg. To what? To a floating peg! Why? Because China cannot defend the existing dollar peg. China disguised that fact with a "serious" announcement pretending to be something else. Price of Stability Expect huge volatility. It's coming. Instability is the price we have to pay for stability. Mike "Mish" Shedlock Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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