2011年度预测：脱离跋涉

Robert Flora

Jan. 17, 2011, 9:32 a.m.

John, you seem to be among the small contingent of intelligent people wanting to promote a splinter reason for major global climate change.  There is a large contingent of individuals, mainly scientists, and their national and international bodies, who state other reasons for climate change.  Yes, is neat to think that you don’t have to look critically at the data, or analyze it, and can still come up with a solid alternative explanation.

Yes, climate change does occur in cycles but have you performed a detailed analysis of such cycles?  The past decade has been the warmest on record and 2010 was the second most if not the warmest year on record, and evidence indicates this current warming cycle is happening very fast.  You appear to be among those who equate local events with 365 days or 10 years of global climatological data and draw a conclusion.

For me, the highly convincing evidence is the declining ratio of carbon 12 to carbon 14 in the atmospheric CO2.  When you have time to understand this very precise data and the reasons behind it, then you may gain more than a superfluous grip on climate change and what may be causing it.

Here’s wishing a good financial analyst might achieve some degree of scientific analysis.  Bob

Josh Patrick

Jan. 12, 2011, 9:26 a.m.

I think your comments on private business owners is a very interesting one and provides a dilemma as we go forward and try to deal with the national deficit.  My solution is that we start taxing K-1’s from schedule C or pass through entities such as LLC’s or Subchapter S Corporations at a different rate from W-2 income.

In my opinion, pass through entities should have a lower rate, maximum of 25% while W2 income could have a higher rate and we would have a much better growth rate.

Private business owners do take all available cash and reinvest it in their business.  I have and continue to do so.  If we lower tax rates on these companies, there will be much more wealth created in this country.  The so called trickle down theories would actually work with this segment of the market.

Josh Patrick
www.stage2planning.com
www.stage2solution.com/bft

Brad Taylor

Jan. 12, 2011, 7:37 a.m.

You mean to say that variables in nature like volcanoes can influence the climate?  Next thing you know crazy people will say that the sun is responsible for heating the planet!

Love the reader comments John!  I’ve been a fan for years, and now I feel I can finally share it!

The bad debt isn’t close to being out of the system yet.  Foreclosures have a long way to go, Europe is in deep trouble, and we have to get serious about our deficit.  Kudos to the Chinese rating agency that downgraded the United States credit rating!  One huge step in the right direction would be if our credit rating agencies could actually regain credibility and properly rate risk.

Ralph Solarski

Jan. 11, 2011, 12:03 p.m.

In the past, you have written quite a bit about the fact that the enormous U.S. federal deficit, and growing national debt, is unsustainable.  Using round numbers, if the deficit is currently 10% of GDP, and the new Congress is just mildly successful in reigning in spending - let’s say to 7% of GDP - that will have a -3% immediate impact on GDP…if it’s implemented in June, it’s a -1.5% impact in 2011, still significant.  Is that factored into your forecast for GDP growth of 2.5 - 3% growth?  Alternatively, if your perspective is that Congress will remain gridlocked and the deficit will remain at 10% of GDP, isn’t there at least a reasonable chance that the bond markets react in 2011 to the irresponsible deficit/debt levels in the U.S. (possibly triggered by either a EU debt crisis or a state such as CA or IL going bankrupt) - resulting in a domino effect that negatively impacts GDP?  Largely based on your newsletters over the past couple of years, I’m of the opinion that while 2011 could be another “normal year” with 2.5 - 3% growth as you said, but there’s a darn good chance that this is the year the piper demands his payment.

Jory Gromer

Jan. 11, 2011, 11:26 a.m.

John I hope many jobs are really being created but I would like to know what type of jobs are being created?  Where I work several large manufacturing companies have left that were paying wage benefit packages of around $20/hour or more.  Those who have been fortunate to find work have had to take jobs paying $10/hour or less with reduced or zero benefits.  Distribution centers do not pay well.  They do hire quite a few people but do not provide much if any opportunity for advancement and the companies often have to go to great extremes just to get people to show up.  Even a small plant like the one I manage requires a number of different skill sets and educational disciplines and all we do is design and make corrugated fiberboard boxes.  We are turning waste paper and virgin wood fiber into containers and marketing tools.  We are engaged in a very highly efficent system of wealth creation that being adding value to raw materials also known as manufacturing.  I believe we need to get over our addition to low cost goods and insist on domestically made products where ever possible.  That will create many and divers types of jobs.  Yes, prices may have to be higher but at prices and wages will find a compatible level while still providing value and employment and opportunity for personal growth for all who want to work.

Keith Wilson

Jan. 10, 2011, 11:06 p.m.

There are quite a number of factors and influences that may impact the manner in which employment statistics will look going forward, and many of them are likely to not follow historical patterns.  These will include the possibility of lower than projected monthly increases to the labor force (currently 125k - 140k per month) due to lower immigration rates as a consequence of both protectionism and the US being a less desireable place to emigrate to, as well as reductions to organic population growth driven by the harsh economic realities of our structural problems causing delays and/or limitations on adding children to family structures.  Additionally, with the low labor utilization rates of 64%, hard economic times will re-introduce many stay-at-home parents and retirees (of all ages) to the ranks of available and desperate to work. 

The variables that impact how significant this effect is are numerous as well, but with growing prospects of continuous currency debasement, and consequently steady erosion of purchasing power, together with uncertain and volatile returns on retirment funds and the possible confiscation of pensions and reitement accounts into US Treasuries (all in the name of protecting us from the vagaries of the market), the likelihood of large swaths of the population becoming seriously financially insecure over time will only add pressure to the income generating needs of society.

Without delving further into the predictive complexities of employment, there is one component of this puzzle that I would be interested to hear your thoughts on.  In this week’s letter you commented on the increases to the unemployment rate that would occur as the discouraged workers (however that gets defined, and I do think that is an area that deserves more work) reintroduce themselves to the workforce.  I fully understand and agree with this point, but there is a question of how this might be measured. 

As I understand, when someone is unemployed for an extended period and falls off the rolls, they are no longer counted as part of the workforce.  This explained a big part of the reason why the official U-3 numbers reduced to 9.4% this past month.  What I am not clear on is how do these folks get added back to the work force when they start looking for work again.  Is there some official mechanism that keeps track of them and can identify when they restart their search process, or are they counted only when they get a job and truly re-enter the ranks of the working?  I would appreciate if you could shed some light on this.

Thank you and keep up the great work.

David Gondek

Jan. 10, 2011, 10:47 a.m.

I will try to tone down my comments, not so much In the interest of decorum, dignity and probity, but more out of a feeling of being worn down by three years of exasperation.

So much of the prognostication, and of what passes for analysis, represents little more than wishful thinking, circular logic and often, downright cheerleading. The mantra, repeated over and over again is “we’ve always done it before”. Betting that history will repeat itself is a time-tested strategy for investing but it certainly shouldn’t be presented as actual analysis. In addition, depending solely on history to chart the way forward is fraught with potential miscalculation. History seems to be a recursive repetition of cycles. There appear to be smaller cycles wrapped inside larger cycles. So while an individual such as Mr. Mauldin (or other so-called economic experts) can look pretty smart in one lifetime (if they are fortunate enough to live in a time that doesn’t encompaas the end of a larger cycle) this shouldn’t be confused with actual understanding and insight.

Why are so many people so eager to jump on the bandwagon of this ‘recovery’ when absolutely none of the causes of the crisis have been addressed, let alone fixed. Compared with 2008 we still have all the same problems only they have grown and are now three years worse! Has the debt (and structural deficits), unemployment, housing, energy, healthcare, under-funded pension funds and the demographics behind these issues improved? Has there been some revelation that our leaders are finally prepared to deal with reality? What has been done to change the direction of our entitlement society and rebuild our manufacturing base in a way that demonstrates we can create goods and services the rest of the world wants to buy at prices they can afford to pay? In the numbers necessary to support how much we continue to spend?

The giant flaw in all this stimulus and QE 1 though infinity is SUSTAINABILITY. What has changed in 2011 that would lead any sane person to believe that our STRUCTURAL problems will disappear? People continue to act like the current crisis is the result sub-prime mortgages or out of control derivatives or even that its just some sort of accounting error that can be fixed with getting rid of mark-to-market or some other magic wand. The point they refuse to acknowledge is that all of these issues are only the symptoms of an economy that was built on a sand castle of debt over the past 30+ years. I submit that we are nearing the end of a larger cycle and we should prepare to reap what we’ve sown rather than rely on the magical thinking of our ‘manifest destiny’ or ‘American exceptionalism’.

You seem like a thoughtful person Mr. Mauldin, unlike so many who only seem interested in finding ways to profit from the demise of our country and principles, so I would very much like to hear how you would address the issues I’ve raised without the platitudes, rainbows and unicorns that seem to make up so much of current economic discourse.

Kim Rampling

Jan. 10, 2011, 1:36 a.m.

Hi John,

The position in the charts by Dr. Prieur du Plessis of Plexus, of South Africa concerning the very weak position ranking of Australia in both manufacturing and non-manufacturing PMI surveys does not greatly surprise me.

I have have just moved to New Zealand after living and working four years in Sydney, Australia. Perhaps the most interesting aspect of the Australian economic boom, that as we all know is a primarily a resources based expansion, is just how little follow through activity has flowed to the real economy. I had regularly talked to the man on the street these past two years and not once was I given the feeling that thing’s were as great as the resource driven recovery headlines would have us believe.

I understand that the high Australian dollar does not help common perceptions of prosperity as it hits the exporters very hard, notably the wine business, that is in a terrible state. The flip side makes imports cheap but you would not think so looking at the dismal retail sales over the past 18 months.

Local economic commentators talk over and over about how lucky the ‘lucky country’ is, and make ’ other countries would love to have our problems’ type comments. This worries me as I see the ‘luck’ as being a one product, or in this case, a one economic resource type boom. We know who the driver is and I prefer not to comment on when China will ‘stop’ buying Australian minerals.

All I know is that when China stops then Australia will not just stop, it will crash.

Kim Robert Rampling,
Gisborne, New Zealand.

Jon Parker

Jan. 9, 2011, 7:01 p.m.

Evelyn’s forecasts may have been useful to you, but her science is not very good.  You quoted:

“Volcanic ash screens out incoming temperature, cooling the air below. This lowers air pressures which, in turn, changes wind patterns. In particular, in polar regions it appears to weaken the Arctic Oscillation winds. When the Arctic Oscillation turns negative, that is, when the winds weaken, the cold air normally trapped around the North Pole surges south.”

Ash does not screen out ‘temperature’, it screens out the suns radiation which allows the air to cool more.  Further, cool air is more dense, so the pressure would be greater as noted in the quote below. From NOAA and the National Snow and Ice Data Center:

“The strongly negative North Atlantic Oscillator (NAO) is back again this winter.  High pressure has replaced low pressure over the North Pole.  This strongly negative NAO has continued into December, and we are on course to have a top-five most extreme December NAO. Cold air is once again spilling southwards into the Eastern U.S. And Europe, bringing record cold and fierce snowstorms. At the same time, warm air is flowing into the Arctic to replace the cold air spilling south–temperatures averaged more than 10°C (18°F) above average over much of Greenland so far this month.”

“The low ice conditions in December occurred in conjunction with above-average air temperatures in regions where ice would normally expand at this time of year. Air temperatures over eastern Siberia were 6 to 10 degrees Celsius (11 to 18 degrees Fahrenheit) above normal in December. Over the eastern Canadian Arctic Archipelago, Baffin Bay/Davis Strait and Hudson Bay, temperatures were at least 6 degrees Celsius (11 degrees Fahrenheit) higher than average. Southern Baffin Island had the largest anomalies, with temperatures over 10 degrees Celsius (18 degrees Fahrenheit) higher than normal. By sharp contrast, temperatures were lower than average (4 to 7 degrees Celsius, 7 to 13 degrees Fahrenheit) over the Alaska-Yukon border, north-central Eurasia, and Scandinavia.
The warm temperatures in December came from two sources: unfrozen areas of the ocean continued to release heat to the atmosphere, and an unusual circulation pattern brought warm air into the Arctic from the south. Although the air temperatures were still below freezing on average, the additional ocean and atmospheric heat slowed ice growth.”

http://nsidc.org/arcticseaicenews/index.html

I really like your letter and have been a reader for a long time.  Your forecasts have been thorough and good.

Arthir Dodge

Jan. 9, 2011, 5:21 p.m.

weather - -Browning     similar in results but differing methodology is Piers Corbyn in England who forecast the cold and the floods