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luni, 19 august 2013

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Seth's Blog : "Do you have three minutes?" The conservation of mental bandwidth

"Do you have three minutes?" The conservation of mental bandwidth

It's not the three minutes it will take to do this favor for you. Everyone has three minutes.

And it's not even the noise and the wear and tear of the mental clutch as we shift from one task to another.

For me, and for many people, it's the leakage of mental bandwidth.

Fear is the enemy of creativity and innovation and of starting things. The resistance hates those things—they are risky, they might not work, so the resistance pushes us not to do them.

On the other hand, it loves the notion of to-do lists and favors and multi-tasking and yes, continual partial attention, because those are perfect hiding places, perfect places to avoid the scary work but still be able to point to a day's work, well done.

But if you have nothing else due, nothing else to do, no other measurable output but that thing you've promised yourself, if all your mental bandwidth is focused on this one and this only, then yep, you can bet that you will get more brave.

Before internet connectivity poured from the sky, I was able to get on a train, plug in my Mac and have nothing to do for four hours but write. And so I wrote. I once bought a round trip ticket to nowhere just to eliminate every possible alternative... pure, unadulterated mental bandwidth.

Plenty of places to run, plenty of places to hide. None of them are as important as shipping your best work today.

• Email to a friend •

duminică, 18 august 2013

Mish's Global Economic Trend Analysis

Official Denials Run Rampant in India; "No Question" of Economic Crisis; Rupee Plunges to Record Low; Gold Coin Imports Banned
3D-Printing Spare Human Parts; Ears and Jaws Already, Livers Coming Up ; Need an Organ? Just Print It
Egyptian Stocks Sink, CDS Show Egypt in Top-10 Riskiest Countries; EU Ponders Suspending Aid; McCain, Rand Paul Issue Statement; Civil War?

Official Denials Run Rampant in India; "No Question" of Economic Crisis; Rupee Plunges to Record Low; Gold Coin Imports Banned

Posted: 18 Aug 2013 09:59 PM PDT

When news came last week that India tightened capital controls and banned gold imports, I pinged Pater Tenebrarum at Acting Man with a pair of comments.

Looks like India is about ready to blow up
Looks good for gold

He agreed on both counts.

"No Question" of Economic Crisis

On Saturday came an "official denial" in an amusing way. Please consider "No Question" of India Economic Crisis.

There is "no question" of India going back to an economic crisis experienced in 1991, as its rupee currency is now linked to the market and foreign exchange reserves are adequate, Prime Minister Manmohan Singh said on Saturday.

"There is no question of going back to 1991," Singh said in a Press Trust of India report published by the Economic Times newspaper on its website, making reference to a balance of payments crisis the country suffered that year.

"At that time foreign exchange in India was a fixed rate. Now it is linked to market. We only correct the volatility of the rupee."

The news agency report said Singh acknowledged India's ballooning current account deficit, which he blamed on large imports of gold as a contributing factor.

"We seem to be investing a lot in unproductive assets," Singh said.

India is trying to curb its citizens' apparently insatiable demand for gold, through measures such as hiking import duties, banning the import of coins and medallions and making domestic buyers pay cash.

The government wants to hold bullion imports this year to "well below" last year's figure of 845 metric tons.

Complete Agreement

I agree there is "No Question" of Economic Crisis. When a country implements capital controls and bans gold imports, the country is clearly in a state of economic crisis, no question about it.

There is one difference between 1991 and now, because the rupee is no longer pegged. This means that instead of attempting to defend a rate with interest rates hikes or gold outflows, India "only" has to "correct the volatility of the rupee".

Only? That's all? So why doesn't India do it?

Don't Worry - Capital Controls are Not Capital Controls

Last Wednesday the Reserve Bank of India denied capital controls were capital controls with promises stable policy environment.

The finance ministry has said it will take all measures to provide a stable policy environment to stem the volatility in rupee and clarified that measures announced by the Reserve Bank of India (RBI) on Wednesday should not be seen as capital controls.

"There is no question of us putting any restriction on outflows... There is no control of outflows of dividends, profits, royalties, or on any kind of commercial outflows which happen in the normal course...," Department of Economic Affairs Secretary Arvind Mayaram told reporters on Friday.

Official Denials Run Rampant in India

The denial is rather amusing given "The RBI announced lowering of the limit on outward remittances by resident Indians to 75,000 dollars from 200,000 dollars a year and reduced the overseas investment limit for domestic companies under the automatic route to 100% of net worth from 400% of net worth earlier."

Here is another humorous statement ""Gold, silver, platinum are what we believe as non-essentials. We have put curbs on that. I don't think we need any more curbs," he said. Another finance ministry official said the measures taken by the RBI cannot be termed as capital controls as they were aimed at ensuring prudent borrowings by corporates."

Don't Worry, It's Not Capital Controls ...

If the measures are aimed at "prudent borrowing" (as determined by the state of course)
If the restrictions limit outward remittances on individuals to $75,000 from $200,000
If the restrictions the overseas investment limit for corporations
If it pertains to gold, silver, and platinum

Anything else that's not capital controls? Not yet, but I expect more "non-capital controls" to be implemented next week.

Food Inflation

On Wednesday, the Wall Street Journal reported India Inflation Accelerates in July.

India's inflation moved out of the central bank's comfort zone in July, as food prices rose and a weak local currency increased the cost of imports.

The wholesale price index, India's main inflation gauge, rose 5.79% from a year earlier, compared with 4.86% in June and at its fastest pace since February, data from the Ministry of Commerce and Industry showed Wednesday. That exceeded the median estimate of 5.00% in a poll of 13 economists. According to the Reserve Bank of India, inflation above 5.00% hurts the economy's growth prospects.

The latest data will increase the pressure on the central bank which is caught between rising prices and a slowing economy, and pose policy challenges to Raghuram Rajan, who takes over as central bank governor in early September. Though the wholesale inflation has eased from around 10% a couple of years ago, inflation at the retail level is still near double digits.

Food prices increased 11.91% from a year earlier in the past month, compared with 9.74% in June. Vegetable prices rose a staggering 46.59% in July, after a 16.47% increase in June.

Onion Prices Up 144%

Onions, a primary staple in the India diet are up a mere 144% according to Live Mint.

The latest wholesale price index (WPI) numbers released on Wednesday show that onion prices rose 144% in July over the year-ago period, after a similar increase in the previous month. Since January, onion price levels have been nearly double what they were a year ago.

The persistent increase seems to be finally ringing alarm bells, with state governments across the country fighting to bring down prices. Higher onion prices have not only added to high food price inflation, but also rattled governments over the years, for example contributing to the defeat of the Bharatiya Janata Party (BJP) in state elections in Delhi in 1998. Hence the alarm!

Enormous Property Bubble

I have commented several times on India's property bubble. For example, please consider

May 10, 2013: Huge Bubble in India Home Prices Ready to Burst

August 1, 2013: India Housing Bubble Still Expanding

Explaining the bubble is easy enough. Inflation is rampant and investors are willing to chase assets rather than hold on to declining Rupees.

Rupee Hits Record Low of 62/Dollar

Reuters reports Rupee hits record low of 62/dollar, foreign investors baulk.

Finance minister Chidambaram tried to talk up the rupee on Friday after it plumbed another record low on concerns the Reserve Bank of India's (RBI) latest measures to defend the currency could be a step towards outright capital controls.

Traders said the RBI was forced to step in to prop up the rupee as measures from the central bank late on Wednesday restricting how much Indian citizens and companies can invest abroad were seen as yet another roll of the dice that is undermining investor confidence.

Concerns that policymakers were losing control over the currency spread to the stock market, which dropped 4 percent, its biggest one-day decline in nearly two years.

Indian policymakers have cobbled together a slew of steps over the past month in a bid to halt the rupee's slide, including the central bank's extraordinary steps on July 15 to drain cash from the system and raise short-term interest rates in an economy already growing at a decade low.

Yet none of the steps or the rhetoric so far have convinced investors that India can attract overseas investments, which is seen as essential in narrowing a record high current account deficit that is the biggest source of the rupee weakness.

Rupee Plunges 40% in Two Years

The above chart explains the nature of the crisis: Rampant credit and monetary growth that has fueled inflation, capital flight, and a desire to hold gold.

Currency Stress Hits India

On June 24, I wrote Currency Stress Hits India: Rupee Near Record Low, Emerging Nations Face Capital Flight; Global Currency Crisis Awaits. Here is the pertinent snip.

Defending the Rupee

Just like Brazil defending the real, India now feels compelled to defend the rupee. Good luck with that idea if capital flight takes off in a major way (and I suspect it will).

India does have currency reserves, but those can vanish in a hurry if things get out of hand. And if India does use currency reserves to defend the rupee, I rather doubt the India bond markets will take all that kindly to it.

Thus defending the rupee against further declines is easier said than done if the markets have indeed soured on the country, and that is precisely how it looks now.

Global Currency Crisis Awaits

A global currency crisis awaits. I do not know what country triggers first. It could easily be Japan, China, Brazil, India, Australia, Canada, the UK, or any of many countries in the eurozone (as well as numerous countries not on anyone's radar).

This sad state of affairs is courtesy of mad central bank monetary policies coupled with inane can-kicking fiscal policies everywhere you look.

Just Your Imagination

But hey, don't worry. There is "No Question" of economic crisis, not in India, nor anywhere else. It's all a figment of your imagination. So move along, and whatever you do, don't buy gold.

To help prevent its citizens from doing such a foolish thing, India banned gold coin imports.

What country is next to ban gold imports?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

3D-Printing Spare Human Parts; Ears and Jaws Already, Livers Coming Up ; Need an Organ? Just Print It

Posted: 18 Aug 2013 06:58 PM PDT

Science marches on at a blistering pace. The star-trek "replicator" that seemed preposterously far-fetched is now here.

For example: Accidentally cut your ear off? Just 3D print a new one

This week, researchers at Hangzhou Dianzi University in China unveiled their Regenovo 3D printer. Unlike more familiar 3D printers, which work with plastic or metal dust, Regenovo prints living tissue – such as these little ears.

The Hangzhou team aren't the only ones 3D-printing spare parts for people. Earlier this year, a team at Cornell University in Ithaca, New York, also demonstrated an ear printer, and Organovo in San Diego, California, are on the way to building fresh human livers

3D Printer Provides Woman with a Brand New Jaw

Last year, New Scientist reported 3D Printer Provides Woman with a Brand New Jaw

An 83-year-old Belgian woman is able to chew, speak and breathe normally again after a machine printed her a new jawbone. Made from a fine titanium powder sculpted by a precision laser beam, her replacement jaw has proven as functional as her own used to be before a potent infection, called osteomyelitis, all but destroyed it.

The medics behind the feat say it is a first. "This is a world premiere, the first time a patient‐specific implant has replaced the entire lower jaw," says Jules Poukens, the researcher who led the operation at Biomed, the biomedical research department of the University of Hasselt, in Belgium. "It's a cautious, but firm step."

In this operation, a 3D printed titanium scaffold was steeped in stem cells and allowed to grow biocompatible tissue inside the abdomen of the recipient. Then, in 2009, researchers reported successfully printing copies of whole thumb bones - opening the way for the replacement of smashed digits using information from MRI scans.

By using an MRI scan of their patient's ailing jawbone to get the shape right, they fed it to a laser sintering 3D printer which fused tiny titanium particles layer by layer until the shape of her jawbone was recreated. It was then coated in a biocompatible ceramic layer. No detail was spared: it even had dimples and cavities that promoted muscle attachment, and sleeves that allowed mandibular nerves to pass through - plus support structures for dental implants the patient might need in future.

The team were astonished at the success of the four-hour jaw implant operation, which took place in June 2011 but which has only just been revealed.

Need an Organ? Just Print It

Please consider Scientists 3-D Print With Human Embryonic Stem Cells

3-D printers can produce gun parts, aircraft wings, food and a lot more, but this new 3-D printed product may be the craziest thing yet: human embryonic stem cells.

Using stem cells as the "ink" in a 3-D printer, researchers in Scotland hope to eventually build 3-D printed organs and tissues. A team at Heriot-Watt University used a specially designed valve-based technique to deposit whole, live cells onto a surface in a specific pattern.

The cells were floating in a "bio-ink," to use the terminology of the researchers who developed this technique. They were able to squeeze out tiny droplets, containing five cells or fewer per droplet, in a variety of shapes and sizes. To produce clumps of cells, the team printed out cells first and then overlaid those with cell-free bio-ink, resulting in larger droplets or spheroids of cells. The cells would group together inside these spheroids. Spheroid size is key, because stem cells need certain conditions to work properly. This is why very precisely controlled 3-D printing could be so valuable for stem cell research.

After being squeezed out of a thin valve, the cells were still alive and viable, and able to transform into any other cell in the body, the researchers say. It's the first time anyone has printed human embyronic stem cells, said lead researcher Will Wenmiao Shu, a professor at Heriot-Watt.

The words fascinating and remarkable do not remotely describe this technology. Unbelievable comes close, yet here we are. I cannot imagine advancements in the next 20 years let alone 100 years from now.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Egyptian Stocks Sink, CDS Show Egypt in Top-10 Riskiest Countries; EU Ponders Suspending Aid; McCain, Rand Paul Issue Statement; Civil War?

Posted: 18 Aug 2013 11:18 AM PDT

The violence in Egypt following the military overthrow of former president Mohamed Morsi continues to escalate. Over 800 are dead according to official reports, thousands dead according to other reports.

The stock market, bond market and credit markets have all responded. Credit Default Swaps (CDS) soared to 810, placing Egypt in the top-10 of countries likely to default on sovereign bonds.

Please consider Egyptian Stocks Fall Most Since June as Violence Sparks Protests

Egyptian shares fell the most in two months as Islamists called for more protests following a government crackdown that has left at least 800 people dead. Borrowing costs rose for the first time in seven weeks at an auction today.

The benchmark EGX 30 Index slumped 3.9 percent, the most since June 12, to 5,334.55 at the 1:30 p.m. close in Cairo.

Stocks slid as concerns of an escalation of violence grew following calls by supporters of former Islamist President Mohamed Mursi to continue demonstrations demanding his reinstatement. At least 173 people died in weekend clashes that followed the violent breakup of pro-Mursi protest camps on Aug. 14. The stock market closed Aug. 15 in the first unscheduled shutdown since January 2011, when it suspended trading for almost two months.

Yields Rise

Egypt sold 5.5 billion pounds at an auction of treasury bills today, with the yield on three-month notes rising 18 basis points from last week to 11.44 percent, according to central bank data on Bloomberg. The yield on nine-month bills advanced three basis points to 12.41 percent. Yields on both maturities had plunged 311 and 260 basis points, respectively, since the military deposed Mursi July 3. A 6.5 billion-pound auction, canceled Aug. 15 amid the unrest, will be held tomorrow, according to central bank data on Bloomberg.

Five-year credit default swaps, contracts which insure the country's debt against default, climbed to 810 basis points, according to CMA data, ranking Egypt among the 10-riskiest credits in the world.

EU Considers Suspension of €5bn in Aid

The Financial Times reports EU to consider suspension of €5bn in Aid to Egypt

Brussels said it will "urgently review" relations with Egypt following an escalation in violence over the past week that has left EU leaders increasingly worried about the future of peace and stability in the Arab world.

EU officials said that the review was likely to recommend a suspension of various forms of aid and loans in total worth €5bn, which had been earmarked to help Egypt in its transition towards democracy following the popular revolution that ended the military regime of Hosni Mubarak two years ago. Suspension would require the backing of EU member states.

The EU together with its 28 member states in November promised Egypt a total of €5bn in grants and loans for a series of initiatives and projects on the condition that democratic reforms were implemented. There was no timescale for disbursement of the funds.

EU officials said that it was too early to identify exactly which parts of the EU-Egypt relationship would be affected by the review but they added that the blocking of funds was "very much on the table".

McCain, Lindsey Graham Finally Stand with Rand on Egypt Aid

In the US, Breitbart reports McCain, Lindsey Graham Finally Stand with Rand on Egypt Aid

Sens. John McCain (R-AZ) and Lindsey Graham (R-SC) have finally come around to joining Sen. Rand Paul (R-KY) in believing that the U.S. should cut off aid to Egypt amid the deteriorating conditions in that country.

In a joint Friday afternoon statement, McCain and Graham called for the $1.5 billion of annual U.S. aid to Egypt to be cut off until conditions improve there.

"The massacre of civilians this week in Egypt has brought our longstanding relationship with that country to a fork in the road," McCain and Graham said. "The interim civilian government and security forces – backed up, unfortunately, by the military – are taking Egypt down a dark path, one that the United States cannot and should not travel with them."

Both Graham and McCain opposed an amendment Paul offered in late July that would have redirected the $1.5 billion per year the U.S. spends on Egypt to help rebuilding the interior of the United States. "All I can see is the billions of American tax dollars that he chooses to send overseas," Paul said on the Senate floor during that battle, according to Politico. "The president sends billions of dollars to Egypt in the form of advanced fighter planes and tanks while Detroit crumbles.

"In our hour of need in our country, why are you sending money to people that hate us?" Paul added.

When McCain opposed Paul's amendment cutting off aid to Egypt, he argued that such a move would hurt Israel. "This is a question of whether the senator from Kentucky knows what's better for Israel, or if Israel knows what's better for Israel," McCain said.

Graham made the same argument. "I have a letter here from AIPAC [American Israel Public Affairs Committee] I asked them to comment," Graham said, according to Foreign Policy magazine. Graham then cited the AIPAC letter: "We do not support cutting off all assistance to Egypt at this time."

Clearly Rand Paul had this correct from the start.

Civil War Possibilities

Pater Tenebrarun at the Acting Man blog comments on the chaos, asking Could a Civil War Break Out?

As most of our readers know, we have followed the events in Egypt off and on ever since the so-called 'Arab Spring' led to the deposition of former strongman Hosni Mubarak.

Here is a list of the most recent articles, which have followed the brief stint of Mohammed Morsi as president.

Egypt – From Spring to Winter in One Step

Arab Winter in Full Swing

More Turmoil in Egypt

How the Arab Winter Could Become Spring

Initially we pointed out that the 'new boss was the same as the old one'. He had simply adopted the state's apparatus of coercion for his own purposes. We then pointed out that he had failed in the most important task of his presidency: namely that of improving the economy. It is very difficult to do so, given the vested interests in Egypt. It is for instance estimated, that the army controls roughly 40% of the economy. Thus any reform attempt that may result in reducing the army's influence on economic life is probably doomed from the outset. Our friend Raj reports regularly from Egypt, and he too stated very early on that unless Morsi managed to right the economy, he was going to be doomed.

Let us not forget, it was probably mainly a surge in food prices that ultimately led to the downfall of Mubarak. What Egypt needs more urgently than anything else is free market capitalism.

Following the bloody confrontation between the army and the supporters of Mohammed Morsi – who, it must be pointed out once again, won the election fair and square and was deposed in a coup – one must fear that the chaos will worsen and could eventually morph into a civil war type situation. In that case, we would expect the military to install a junta and attempt to rule the country under emergency regulations.

In the 'Egyptian street' people are convinced that Morsi was only deposed after the US secretly gave its placet to the coup, and very likely this interpretation is correct. After all, the Egyptian military relies heavily on US aid, therefore it probably wouldn't take such a step without first getting the nod from the puppet masters holding the purse strings.

Mubarak's reign has shown that it is in principle possible to oppress the population of Egypt for a long time. The army is no doubt counting on its superior firepower to enable it to do the same thing again. It has already arrested the most important leaders of the Brotherhood, thereby 'decapitating' its main enemy.

The main problem is actually not that the Brotherhood insists on the return of the legitimately elected president Morsi, the main problem is that many people have nothing left to lose due to the miserable economic situation. Moreover, like many other Arab states, Egypt's demographics are such that there is a very large contingent of young people. Young people are by nature less likely to shirk confrontation, they are more hot-headed and less risk-averse than older people. Many are also jobless and see no future for themselves in today's Egypt. It may therefore not be so easy to suppress the revolt and the probability of a civil war breaking out cannot be dismissed out of hand.

Egyptian Pound

Civil War Has Started

It appears to me that a civil war has already started. Regardless, the pertinent question is "How quickly can the military suppress the violence?"

I do not know the answer to that. However, one can watch the stock market, interest rates, credit default swaps, and the Egyptian pound to survey the progress. The currency has stabilized for now, but indicators in aggregate are not so promising. Initially, yields fell following the overthrow of Morsi. Now, along with CDS, they are on the rise.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Seth's Blog : Mirrors, cameras and cultural evolution

Mirrors, cameras and cultural evolution

It's safe to say that everyone reading this has seen an accurate reflection in a mirror. Everyone you know has seen their face in a mirror as well.

A thousand years ago (a nanosecond in evolutionary time) virtually no one had.

Mirrors are a big deal. Elephants and primates have been shown to be able to recognize themselves in a mirror, and the idea of self-image is one of the cornerstones of our culture. Hard to imagine walking through the world without knowing what you look like.

Fascinating aside: When we see a famous person in the mirror, our perception changes.

I hope we can agree that in 2013, anyone who gets uncomfortable around mirrors, who says mirrors aren't their thing, who tries to avoid a job where they might see a mirror--that person is a bit outside the mainstream.

Cameras are mirrors, but unlike the momentary glimpse of the traditional mirror, they are permanent, and now the web amplifies them. Do you see how many people pose for snapshots? The unnatural posture, the fake smile... there's anxiety here, and it's because unlike seeing ourselves in the mirror, we're being captured, forever. Multiply this fear by the million people who might see this photo on Instagram...

No one gets tense in front of mirrors any longer. Experienced professionals don't get tense in front of cameras, either.

It probably used to be okay to say, "mirrors freak me out," or to assert that they contained demons. No longer. It certainly wasn't uncommon for cultures to resist cameras at first, and to take the phrase, "take a picture," quite literally. This resistance is also dying out and almost gone.

And yet... And yet we still freeze up when someone takes a picture, we hold our breaths before we go on stage, we give away our deepest insecurities when someone puts us on video...

Mirrors and cameras each took a generation or more to catch on as widespread foundations of our culture. It's not surprising, then, that so many people fear social media. It's about us, and when we're on the hook, in front of people we can't know or trust, we hold back.

For a while.

And then we don't.

• Email to a friend •

sâmbătă, 17 august 2013

Mish's Global Economic Trend Analysis

Tweedle Dum vs. Tweedle Dee; Does Janet Yellen Have What It Takes?

Posted: 17 Aug 2013 02:48 PM PDT

The battle over the next Fed chairman is on. Will it be Janet Yellen or Larry Summers?

The Washington Post comments "Janet Yellen called the housing bust and has been mostly right on jobs", asking Does she have what it takes to lead the Fed?

Don't bother reading the article. And don't bother reading any of the equally ridiculous pro-Summers articles you can easily find.

For starters, it is highly likely that President Obama has already made up his mind. He is pretending there is a choice to be made when there is really no choice unless some political event forces a change in direction between now and the announcement.

The supporters of Yellen cite her focus on jobs. The supporters of Larry Summers cite his crisis management skills.

The detractors of Yellen cite her even-more-dovish-than-Bernanke monetary stance. The detractors of Larry Summers question his crisis management skills.

I suggest Summers has a proven track record of crisis management due to his proven track record of causing them, hardly a ringing endorsement for Fed chairman.

The Detractors Win

The detractors win both sides. Neither Yellen nor Summers is qualified. In fact, there is not a single person who would take the job that is qualified. There should not be a Fed at all.

The idea that a group of economic wonks can sit down and micromanage the economy to health is preposterous. Central bank clowns have proven time and time again they have no idea what the interest rate should be.

A massive bubble in dotcom stocks followed by a massive bubble in housing is proof enough. And this Fed on which Yellen sits has triggered asset bubbles in stocks and bonds and she cannot even see it.

Crisis Management Needed

Curiously, lots of analysis suggest we do not need Larry Summers because there is not going to be another crisis.

Rest assured there will be another crisis, and much sooner than most think. But that does not make Summers qualified. His role is to help create crises, not stop them.

Tweedle Dum vs. Tweedle Dee

The only candidate that makes sense is the candidate who will set a target date to end the Fed. Unfortunately, no such candidate is on the short list.

The choice is between Tweedle-Dee who rates to slosh money around even more than Bernanke in a futile effort to create jobs, and Tweedle-Dum who will do whatever Wall Street wants.

Practically speaking, is there really a difference?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

US Car Makers Crank Out Cars Around the Clock; Who is Buying the Cars?

Posted: 17 Aug 2013 11:37 AM PDT

US car makers are cranking out cars three shifts a day. The goal is to run plants around the clock, 365 days a year, even eliminating breaks.

Please consider Open All Night: America's Car Factories.

Nearly 40% of car factories in North America now operate on work schedules that push production well past 80 hours a week, compared with 11% in 2008, said Ron Harbour, a senior partner with the Oliver Wyman Inc. management consulting firm.

"There has never been a time in the U.S. industry that we've had this high a level of capacity utilization," he said.

But fresh from a near-death experience during the recession, auto makers are reluctant to put money into bricks, mortar and machinery that could become a drag on profits if car sales fall. Volkswagen new $1 billion Chattanooga, Tenn., factory recently cut 500 workers after sales of its new Passat sedan swooned.

Through a series of agreements negotiated with the United Auto Workers union, the Detroit Three now can schedule work at night and on weekends without paying as much in overtime as they would have in the past. Adding a third shift, as many plants have done, also reduces overtime. Overtime pay also starts after 40 hours a week, not after eight hours a day as in the past. On top of those savings, a newly hired Big Three factory worker now earns about $15 an hour versus $28 an hour for veteran workers, under postrecession labor pacts.

Toledo factory managers recently changed break schedules to squeeze out even more production. Instead of shutting down the assembly line eight times a day for routine breaks, they have hired extra workers to fill in during breaks, so the line doesn't stop running.

GM is running six of its U.S. plants through the night on three-shift schedules. Last year, GM produced 3.24 million vehicles in North America compared with 4.52 million in 2007—when it had five more assembly factories.

Ford has gone a step further, adding a fourth crew of workers at some engine and transmission plants to keep those factories running 152 hours out of the 168 hours in a week.

The techniques have helped expand production by 600,000 vehicles during the past 15 months—the equivalent of about three assembly plants, says James Tetreault, Ford's vice president of North America manufacturing. Ford doesn't plan to build a new North American assembly plant, he says.

"In an ideal world, we'd like all our plants to run around the clock, 365 days a year," says Mr. Tetreault. "That would be a financial dream. But we don't know how to do that yet."

Who is Buying Cars?

So who is buying new cars? It's not millennials struggling to find a job, loaded up in student debt and delaying family formation.

The Wall Street Journal reports Who's Buying 'Youth' Cars? Seniors.

In recent years, auto makers have developed a bevy of pint-size models like the Chevy Sonic, Fiat, Ford Fiesta and Kia Soul, and promoted them using social-media, music festival sponsorships, and in some cases, daredevil stunts. To hype the new Chevy Sonic, General Motors Co. filmed the subcompact parachuting out of a plane for an online campaign aimed squarely at 18-to-30-year-olds.

But the largest customers for these cars, about 42% of buyers this year through May, are closer to retirement age, according to registration data compiled by car-shopping website Edmunds.com. The proportion is up from just 29% five years ago.

Meantime, the percentage of 18- to 34-year-olds buying new subcompact cars fell to 12% through May, down from 17% in 2008, according to registration data.

Of course, 50 and 60-somethings are some of the biggest buyers of all cars.

"The baby boomer generation is the largest cohort in the marketplace," Kia's Mr. Sprague said. "Just by virtue of their numbers being so large, we'll continue to see them skew the data for a long time."

Last year, buyers 55 and older accounted for more than 40% of all new car sales, up from 33% in 2008 while buyers between the ages of 18 and 34 represented only 12% of new-car purchases. And that is down from 14% five years ago, according to Edmunds.com.

Auto makers' big prize is the "Millennial Generation"—that group of consumers in their 20s and 30s whose numbers could rival the postwar baby boom that has dominated the auto market for decades.

Millennial Generation "Big Prize"

As more and more seniors stay employed longer (because they have to), the demand for cars has kept pace. I keep wondering how long that can last. The average age of those working at fast-food restaurants is telling.

There is no pent-up demand that I can see, at least in the age group of those buying.

Auto makers are targeting the big prize, the millennial generation, and curiously even youth cars are not going to the youth. And I do not think they will.

The generation of millennials is nowhere near as big as the boomers, and as a class, the millennials are struggling in low-pay jobs (if they can find work at all), and burdened down in student debt to boot.

And look at the pay differential of the car makers: $15 an hour for new workers versus $28 an hour for veteran workers.

Most importantly, a secular shift in attitudes towards cars and debt have changed. Millennials are not boomers nor do they have boomer attitudes. Carmakers should enjoy the boom while it lasts. The "big prize" is not around the corner.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Seth's Blog : The self-defeating quest for simple and easy

The self-defeating quest for simple and easy

Bullet points, step by step processes that are guaranteed to work overnight, proven shortcuts...

If it was easy, everyone would do it.

Worth noting that surgeons don't sign up for medical school because they're told that there is a simple, easy way to do open heart surgery.

It's not that we're unable to handle complicated problems, it's that we're afraid to try. The Dummies mindset, the get-rich-quick long sales letters, the mechanistic, industrial processes aren't on offer because they're the best we can handle. No, they sell because they promise to reduce our fear.

It will take you less time and less effort to do it the difficult way than it will to buy and try and discard all the shortcuts.

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