sâmbătă, 26 decembrie 2015

Seth's Blog : Very good results (and an alternative)



Very good results (and an alternative)

Hard work, diligence and focus often lead to very good results. These are the organizations and individuals that consistently show up and work toward their goals.

But exceptional results, hyper-growth and remarkable products and services rarely come from the path that leads to very good results. These are non-linear events, and they don't come from linear effort or linear skill.

It's tempting to adopt the grind-it-out mindset, because that's something we know how to do, it's a method that we can model, it's a sort of work ethic.

But by itself, the grind-it-out mindset isn't going to get us a leap. It's not going to lead to a line out the door or 15% monthly growth. That only comes from giving up.

We need to give up some of the truths that are the foundation of our work, or give up on some of the people we work with, or give up on the conventional wisdom. Mostly, we need to give up on getting approval from our peers.

Of course, we still have to keep showing up and grinding out. But we have to do it with a different rhythm, in service of a different outcome.

More hours in the practice room doesn't turn a pretty good musician into a jazz pioneer. More hours in front of the computer doesn't make your writing breathtaking. 

Sure, the work might be just as hard, but it's work of a different sort.

       

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vineri, 25 decembrie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Fed a Creature of Financial Markets; The Draghi PUT; Global Crisis Coming Up

Posted: 25 Dec 2015 12:20 PM PST

Creature of Financial Markets

Stephen Roach, former Chairman of Morgan Stanley Asia and the firm's chief economist, blasts the Greenspan Fed, the Bernanke Fed, and the Yellen Fed in his latest post The Perils of Fed Gradualism.
After an extended period of extraordinary monetary accommodation, the US Federal Reserve has begun the long march back to normalization. It has now taken the first step toward returning its benchmark policy interest rate – the federal funds rate – to a level that imparts neither stimulus nor restraint to the US economy.

A majority of financial market participants applaud this strategy. In fact, it is a dangerous mistake. The Fed is borrowing a page from the script of its last normalization campaign – the incremental rate hikes of 2004-2006 that followed the extraordinary accommodation of 2001-2003. Just as that earlier gradualism set the stage for a devastating financial crisis and a horrific recession in 2008-2009, there is mounting risk of yet another accident on what promises to be an even longer road to normalization.

The problem arises because the Fed, like other major central banks, has now become a creature of financial markets rather than a steward of the real economy. This transformation has been under way since the late 1980s, when monetary discipline broke the back of inflation and the Fed was faced with new challenges.

The challenges of the post-inflation era came to a head during Alan Greenspan's 18-and-a-half-year tenure as Fed Chair. The stock-market crash of October 19, 1987 – occurring only 69 days after Greenspan had been sworn in – provided a hint of what was to come. In response to a one-day 23% plunge in US equity prices, the Fed moved aggressively to support the brokerage system and purchase government securities.

In retrospect, this was the template for what became known as the "Greenspan put" – massive Fed liquidity injections aimed at stemming financial-market disruptions in the aftermath of a crisis. As the markets were battered repeatedly in the years to follow – from the savings-and-loan crisis (late 1980s) and the Gulf War (1990-1991) to the Asian Financial Crisis (1997-1998) and terrorist attacks (September 11, 2001) – the Greenspan put became an essential element of the Fed's market-driven tactics.

The Fed had, in effect, become beholden to the monster it had created. The corollary was that it had also become steadfast in protecting the financial-market-based underpinnings of the US economy.

Largely for that reason, and fearful of "Japan Syndrome" in the aftermath of the collapse of the US equity bubble, the Fed remained overly accommodative during the 2003-2006 period.

Over time, the Fed's dilemma has become increasingly intractable. The crisis and recession of 2008-2009 was far worse than its predecessors, and the aftershocks were far more wrenching. Yet, because the US central bank had repeatedly upped the ante in providing support to the Asset Economy, taking its policy rate to zero, it had run out of traditional ammunition.

Today's Fed inherits the deeply entrenched moral hazard of the Asset Economy. In carefully crafted, highly conditional language, it is signaling much greater gradualism relative to its normalization strategy of a decade ago. The debate in the markets is whether there will be two or three rate hikes of 25 basis points per year – suggesting that it could take as long as four years to return the federal funds rate to a 3% norm.

But, as the experience of 2004-2007 revealed, the excess liquidity spawned by gradual normalization leaves financial markets predisposed to excesses and accidents. With prospects for a much longer normalization, those risks are all the more worrisome.

Only by shortening the normalization timeline can the Fed hope to reduce the build-up of systemic risks. The sooner the Fed takes on the markets, the less likely the markets will be to take on the economy. Yes, a steeper normalization path would produce an outcry. But that would be far preferable to another devastating crisis.
Beholden to Financial Markets

Roach provides a nice historical perspective but he misses the boat in regards to risks.

Not only is the Fed a creature of the Financial markets, it is beholden to the markets. For some treasury durations, the Fed became the market.

Unfortunately, it's not just the Fed.

Global Crisis Coming Up

Global imbalances have never been worse.

The Bank of Japan is the only market for Japanese government debt. And in Europe, government debt trades at preposterously low and sometimes negative yields. The "Draghi PUT" is at least as big as any PUT by Greenspan.

The risk is not that the Fed (central banks in general) will spawn more asset bubbles. It's far too late to raise that concern. Massive bubbles in equities and bonds have already been blown.

Banks that were "too big to fail" are far bigger now than ever before.

Beggar-thy-neighbor competitive currency debasement is the order of the day in China, Europe, and Japan.

Let's not pretend we have a choice that will prevent another devastating financial crisis. We don't. Only the timing is in question.

Mike "Mish" Shedlock

Merry Christmas!

Posted: 25 Dec 2015 10:15 AM PST

Economic reports will commence in just a bit. First things first. Merry Christmas!



Mike "Mish" Shedlock

Seth's Blog : Let's build a school



Let's build a school

Consider a last-minute donation to Room to Read. They will facilitate the building of a school in a village that has no school.

Imagine growing up in a place with no school...

And your donation will be matched dollar for dollar. It's difficult to overestimate the long-term impact of literacy. I've been a supporter for years, and it always feel good.

And.. Some of my colleagues have stepped up and started the Compassion Collective, an urgent cause supporting those most in need from the refugee crisis. Please consider adding your support.

Also: If you get some downtime this vacation, you might want to check out two thank you gifts from me:

My course on business models. It's free for the first 2,000 people who take it this week, happy holidays.

And the persistently popular, if a little low-fidelity, Startup School podcast, recorded live a few years ago. 

       

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joi, 24 decembrie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Google, Ford Enter Partnership on Self-Driving Cars

Posted: 24 Dec 2015 10:27 AM PST

Self-driving cars are the wave of the future, sooner, not later. The trend is now impossible to deny. The only question that remains pertains to the speed of the rollout.

2020 is no longer a pipe dream as many thought. 2030 is far too distant.

The breathtaking speed of possibilities can be seen in a non-exclusive announcement Google Partners with Ford on Self-Driving Vehicles.
Citing sources familiar with the matter, Yahoo Autos reports the partnership is equally beneficial for both parties, with Ford getting a boost in self-driving software development and Google gaining access to invaluable automobile manufacturing expertise.

Ford just this month announced plans to begin field tests of prototype self-driving vehicles in California. Google, on the other hand, has a fleet of 53 cars that have together clocked more than a million miles on public roads in San Francisco and Austin, Texas.

Google's tie-up with Ford is not exclusive, the report notes, meaning deals with other car makers could be in the works.

The world's largest and most profitable tech company, Apple, is also rumored to be working on its own automobile project in secret. Dubbed Project Titan, AppleInsider sources indicate Apple's skunkworks initiative is currently operating out of a secret lab near the company's Cupertino, Calif., headquarters.

While Apple has yet to comment on Titan - CEO Tim Cook actively dodged questions in a "60 Minutes interview" - the company has made numerous hires from the auto industry, including former Tesla engineers and software developers working on autonomous technologies.
The big splash will not be personal vehicles, but rather the loss of millions of long-haul truck jobs and short-haul taxi jobs to automation.

Those jobs will vanish by 2025 at the latest. Something between 2020 and 2022 seems more likely, and even 2020 would not be much of a surprise given the speed of announcements.

Mike "Mish" Shedlock

Seth's Blog : Powering a digital future



Powering a digital future

Only twenty years ago, when we first started figuring out the digital landscape, there were no tools. None. 

Sending 400 emails was a feat, and having a website was a little like having a pet monkey. Rare, expensive and difficult.

Now, there are tools. (Scroll down to the see the huge list). Thousands of them. Most cheap, most vibrant, all of them interesting signposts on one version of the road to where we're heading next.

I've spent about ten hours going through this list. Data moves back and forth, information is presented in dozens of ways, systems are robust and can be used by organizations of any size.

The last decade were about everyone becoming a publisher (blogs, photos,videos). Now, everyone is also a digital marketer/data wizard.

Even if you don't use these tools to spread your message or manage your time, know that someone else is going to.

       

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miercuri, 23 decembrie 2015

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


UPS Delivers 36 Million Packages Tuesday, Double Normal; Sign of Huge Holiday Sales?

Posted: 23 Dec 2015 04:24 PM PST

Double Normal

Christmas is just over a day away. Package delivery is at record volumes. Does that portend a huge Christmas shopping season?

Before addressing that question please consider the Supply Chain article UPS Delivers 36 Million Packages - Double Normal.
UPS expected to deliver 36 million packages yesterday, double its normal volume, as online retail sales continue to grow during the Christmas season.

The parcel service has hired an extra 95,000 seasonal workers to help with the expected onslaught of packages, said Fortune magazine.

The company said it expects to deliver some 630 million packages between Thanksgiving and the end of December, up 10.3 percent from 2014.
Sign of Huge Holiday Sales?

A huge surge in overall sales remains to be seen.

The Supply Chain headline "UPS Delivers 36 Million Packages - Double Normal" sounds exciting, but that is for a single day, not the entire season. The hype is not apparent until one dives into the details.

Overall package delivery is up a very healthy 10.3% but is that at the expense of in-store sales?

To be sure, there was a splurge of last minute shopping, including some by me.

I can point out some gross inefficiencies at the micro-level.

I ordered four items a few days ago, of the exact same undisclosed nature (because my wife might be reading this and the presents are for her), all from the same store, and all in the same online order. I received not one package, but four packages, in four different deliveries (morning and afternoon over two days). The deliveries were all rushed, with no delivery charge.

Somewhere in this supply chain, there appears to be some gross inefficiencies.

Personal anecdotes aside, until we see actual retail sales reports, I am sticking with my forecast that increased online sales will not hugely overpower an otherwise lackluster holiday shopping season.

Mike "Mish" Shedlock

Positive Side of Negativity

Posted: 23 Dec 2015 12:52 PM PST

Being the persistent optimist, I try to look on the bright side of things. Today, lets investigate the "positive side of negativity" as pertains to Spain.

In the wake of fragmented Spanish elections that left no political party or coalition with an outright majority, the Socialists Rejected a Deal with Spanish PM.
The arduous task of assembling a new government for Spain got off to a bad start on Wednesday after the leader of the Socialist party flatly ruled out any deal with the Popular party of prime minister Mariano Rajoy.

[Mish: Facing reality is a positive, not negative event. If new elections are coming, as seem likely, it's best to admit that now, rather than give false hope to something that cannot possibly work. In this light, rejection of something that cannot work is a good thing.]

Pedro Sánchez, the leader of the Socialists, held a brief meeting with Mr Rajoy in the prime ministerial compound outside Madrid — but apparently only to reiterate his opposition to any accord.

"We will vote against the Popular party and against Mariano Rajoy as prime minister. Voters have asked for change," he told a news conference after the meeting.

[Mish: Change is good. Voters asked for a change. So why shouldn't they get change?]

Officials close to Mr Rajoy signalled their disappointment with the Socialists' stance but declined to read the rejection as final. "It was not the best of starts but it was the start of the process, not the end," Fernando Martinez Maíllo, one of the PP's deputy leaders, said.

[Mish: Note the denial by Rajoy. That's a bad thing. It's best to get rid of bad things. I am optimistic that Rajoy won't last.]

Rajoy accused Mr Sánchez of arriving at the meeting "carrying a No in front of him" and for "not having a positive attitude". Echoing earlier statements by Mr Rajoy himself, Mr Martínez Maíllo urged the centre-left to commit to a stable government for Spain and to show "responsibility".

[Mish: Sánchez remains absolutely positive he will not work with Rajoy. I see positives in this outcome except from the self-serving point of view of a corrupt politician hoping to cling to power.]

Mr Rajoy and his Socialist counterpart are not known to have a good personal relationship. The two clashed bitterly in a televised debate shortly before the elections, with Mr Sánchez describing his opponent as "indecent" and Mr Rajoy castigating his opponent as "mean" and "miserable".

[Mish: Please look on the bright side. The mudslinging from both sides was likely accurate each way. Moreover, it provided much-needed entertainment value just as Donald Trump provides in the US.]

But the PSOE has little chance of leading a government alliance itself, especially since it is unlikely it could win over Podemos for such a deal. An early election is also undesirable, given the apparent resurgence of its upstart competitor on the left.

[Mish: The Financial Times is looking on the dark side of things. An early election could also lead to a stable outcome instead of an impossibly fragmented coalition that cannot last. Why assume the worst?]

At the same time, there is growing clamour from Spain's business and media establishment for some kind of three-way alliance between the PP, the PSOE and Ciudadanos.

Albert Rivera, the leader of Ciudadanos, also threw his weight behind such a link-up on Wednesday, pointing in particular to the risk posed by the Catalan independence movement. Spain, he said, needed a pact between the three parties "to guarantee the unity of Spain".

Mr Rajoy has invited Mr Rivera as well as Pablo Iglesias, the Podemos leader, for talks next Monday.

[Mish: Should the talks fail, accentuate the positives.]

Accentuate the Positives

  1. Rajoy will be gone. 72% of voters wanted someone else!
  2. A splintered coalition would have failed anyway.
  3. Catalonia deserves the chance to self-govern if it so desires.
  4. Talk of Spanish exit from the eurozone will be back in play.

    Of course, if PP were to win the next election, Rajoy would be back in office, with points 1-4 negated. Some would view that as positive, others negative.

    Positivity is in the eyes of the beholder.

    Mike "Mish" Shedlock

    4th Quarter GDPNow Forecast Plunges to 1.3% Following Housing and Other Data; What's Next?

    Posted: 23 Dec 2015 10:41 AM PST

    In the wake of recent data, the 4th quarter GDPNow Forecast dipped to 1.3% from 1.9% on December 16.



    From the Atlanta Fed: "After yesterday's third-quarter GDP revision and this morning's personal income and outlays release, both from the U.S. Bureau of Economic Analysis, the nowcast for fourth-quarter real consumer spending growth fell from 2.6 percent to 2.1 percent. The nowcast for real residential investment growth fell from 8.0 percent to 0.9 percent after yesterday's existing-home sales release from the National Association of Realtors."

    I took one look at recent housing data and concluded GDP would take a big hit vs. prior expectations. And that's precisely what transpired given the oversized plunge in residential growth from 8% to 0.9%.

    But sometimes things do not turn out as appears intuitively obvious.

    Such was the case following strong a construction report on December 1 in which the GDPNow model forecast took a dive only to recover on other data later, then plunge as we have seen today.

    For an explanation as to how this happens, please see Why Does GDPNow Model Sometimes Move Counter to Economic Releases?

    If Christmas sales are weak, 4th quarter GDP will be flirting with zero.

    Mike "Mish" Shedlock

    New Home Sales Rise Less Than Expected From Revised Sharply Lower October

    Posted: 23 Dec 2015 10:06 AM PST

    November new home sales came at a seasonally adjusted annualized rate (SAAR) of 490,000 vs. an economic consensus of 503,000. Worse yet, October's big gain was revised sharply lower from 495,000 to 470,000.

    This is going to take a hit out of GDP estimates. Nonetheless Bloomberg manages to spin this as a big positive.
    Rising construction is bringing supply into the housing sector and helping to lift new home sales, which rose 4.3 percent in November to what is still however a lower-than-expected annualized rate of 490,000. The month-to-month gain follows a very strong 6.3 percent rise in October which, however, has been revised sharply lower to 470,000 from an initial 495,000. Houses for sale rose 5,000 in the month to 232,000 which is up from 210,000 in November last year. At the current sales rate, supply is at 5.7 months which, because of the rise in sales, is down slightly from October. Still, rising permit data point to more homes coming into the market.

    Price data are also constructive, up 6.3 percent in the month to a median $305,000 with the year-on-year, which had been negative, up 0.8 percent. Still, this is a modest year-on-year rate and, relative to the very strong 9.1 percent year-on-year sales gain, points to discounting. Prices in this report appear to have room to move higher.

    Regional sales data have the West up more than 20 percent in the month with the year-on-year rate at plus 4.7 percent. Sales in the South, which is by far the largest region, rose 4.5 percent in the month for an outstanding year-on-year gain of 19.4 percent. The Midwest and Northeast both show monthly and yearly declines.

    Sales of existing homes have been limping along but sales of new home sales, despite all the monthly volatility which is routine for this report, are solid and look to remain solid.
    Synopsis

    October's gains were revised to+6.3% from an initial reported gain of 10.7%. That would sound good except for the 12.9% plunge in September.

    Bloomberg claims "new home sales are solid and look to remain solid" but that's puts a bright coat of paint on an a rather dull-looking reality.
      
    New Home Sales



    Volatility makes it hard to precisely determine the trend, but I took a stab in purple.

    From May 2014 through February of 2015 home sales were generally strengthening. As with manufacturing, the trend has been generally weakening since then.

    New One Family Homes Sold



    Does that "look to remain solid"? Is that "solid" in the first place?

    Mike "Mish" Shedlock