JS Global Macro Notes

Quote from deucy28:


My general sense, however, kjones, is that it does not make any difference if even a new president and administration does everything more right than an army of fairy godmothers. It is clear from the economics I have read for the last 7 years-- and especially now-- that should such a nice change in status occur, it will only slow the inevitable, continuing slide of degradation of quality of life (and security) in USA. The lucky ones will be the older of the baby boomers that may check out of planet earth before the meek behind them--the younger generations who were assigned that condition by leadership and those that voted that leadership into office--will inherit a very sad earth, that part of it called the USA. IMHO, the USA has crossed the Rubicon, never to be able to get back on the right side of the equation again. So from a relative perspective, enjoy your current condition you are complaining about kjones. Except for some relief from an energy boom (should there not be a government that squashes it), you are currently living the high life compared to what comes afterwards.
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I disagree with the finality of this viewpoint. It's true that, for many in the west, the outlook is getting bleaker. It is also true that the current up and coming generation (the one behind gen X) is coming into an extremely shitty situation.

Basically, it is the worst time ever to be middle of the road, average, or without exceptional skills.

But if you DO have exceptional skills - and that can extend to simply having more guts, drive, and determination than 90 percent of your peers - then I would argue the future is getting brighter, not dimmer.

Basically we are witnessing two powerful sea changes, thanks to the impact of technology, developing world competition, and the legacy impacts of accumulated debt:

- the 'average' indebted westerner is seeing their prospects dragged down, and the 'average' gen Y kid (or whatever it's called) is seeing their employment prospects deteriorate.

- BUT, at the same time, there has never been a better time to exploit cheap technology, start a business, explore opportunities abroad, or otherwise leverage the power of good ideas well executed.

Basically, for an extended period of time much of the west got a free ride on the benefits of an economic growth boom against a natural resource abundant backdrop in a limited area of the global economy. Now, global competition and advancing technology has eroded that free rider advantage. And of course, we are collectively about to pay the piper economically for decades of wasteful spending, bad policy, and boomer indebtedness.

If you're hoping for someone else to smooth your path, that is all terrible news. But if you carve your own path, there have never been more tools available... And the future is very bright...
 
I do appreciate the sentiment. I have a simple but effective business model but it'll take a bit to be able to execute.

There's a gas station near my house and since I go there nearly every day, I get to talking with one of the employees. It's one of those Indian family owned jobs so the guy I'm talking to is young twenties like myself, one day I asked him if he knew anywhere I might find some work, maybe if I could work at the gas station he said something along the lines of he would ask his uncle, who owns about ten of them.

Myself coming lineage of entrepreneurs and self made people, I ask how one comes to own a gas station, how exactly does it work.

I learned that without outright owning the land and building for around $1.5 million you can lease it for usually $120,000-$200,00 depending on the exact location and whatnot, usually you will net around the price of the lease in one or one and a half years, and the term structure being five years (usually), I had one of those light bulb moments.

A simple repetative lasting need at a decent low price that can grow exponentially year over year. People will buy gas during boom, bust, recession, anything short of nuclear war, and then maybe so too.

I appreciate the support, the mess of it all just gets to me sometimes.
 
Eloquently stated darkhorse. However, it addressed only a subset of a larger environment that kjones and I were posting about. Indeed yours addresses a different theme than the originator of this thread intended as defined on his (yours) originating post. I was visualizing a macro environment affecting, in the end, quality of life for everyone in our society as per the charter of your thread. Your statement relates to the "exceptional" and an individual or entrepreneur; bold minority mavericks among it.

(Also, a refinement on your use of the word "finality" in labeling my viewpoint. Finality works. Let me be more graphic with words like "mortality" and "fatality" within the context that we won't ever again see a quality of life from the Father Knows Best days on the other side of the river we crossed. My "crossing the Rubicon" was more than "we won't get it right again," or that we will forever be walking in place. Rather, my use of the phrase "continual decline in quality of life" gives a better vision of what being on this side of that river means for us: ever increasing our distance from the river and the shores on the other side from where we let better quality of life slip away. Hey, it is a more seasoned and more mature view than my original--three years ago--"hyper-inflation and hitting a brick wall." I think a "continual decline in quality of life" is more palatable and all encompassing of the spectrum of not-so-nice scenarios; at least the frog swimming in the continually increasing, heating pot of water will agree until it becomes too incapacitated to jump out of it. ) BTW: I acknowledge the problem with being a long term pessimist (enjoying our moments of success) is that few will socially engage him and there will be no one around in the end who remembers him, let alone provide accolades to him. That just comes with the real estate.

Back to your post:

"Carve your own path" is nice and do-able for that minority above the "90%" you refer to. It is the decline in quality of life in the society around that succeeding individual I was referring to . After my wife and I returned from a 1-month rented car travel through Spain and Portugal 3 1/2 years ago, we were charmed, and we resolved to sell our real estate and move there. But nagging me was the many educated, University graduates telling us when we had been there of 17% "official" unemployment while the U.S. was climbing toward 7%. Back at home again, I found a wonderfully gifted Spanish economist on the net whose archived and present essays of that time I read. His conclusion: "there will be no more Spain in 3 years." That was two years before the financial media started using the PIIGS acronym. So back then I asked my wife what would a truck load of our cash do for us in a black hole of a depression where there was no quality of life: nothing in the stores to buy; decaying infrastructure; nothing to pay teachers with; little first responder police or fire protection ? (Quality of Life issues) Are we currently on the edge of Great Recession that we just came out of in the U.S. ? The pundits say we are months away from slipping back into it. But maybe there will be a more confident outlook after the election. Great Depression developing after 3 or more additional per centages above from rates now on U.S. bonds that our creditors may demand ? But I will step away from that latter scenario, emphasizing I matured away from that scenario.

You are referring to this "time." I am referring to the current decline of an epoch.
"...never been a better time to ....start a business...." Maybe, but regardless how well the numerous resources exist that you describe are available for the entrepreneur, he/she must have an incentive great enough to overcome the current vision that one must leap frog over the current paralysis of business that prevents expansion while regulators will have years before they resolve a shitload of laws just crudely crafted (that they may not have read.....hehe) into regulations and restrictions on business . There is the additional burden Obama Care is about to put on it that currently equates to an unknown by business how badly it will become affected.

Your statement reflects on the comparative advantage that allowed our nation to grow. Then you address the current status of affairs that tragically and never had to be which anchors us. You are talking my book. I did not see you address the prospect of that disappearing. Now that would be a more head to head discussion with my earlier post.
 
I'm of thr opinion that controlled deflation would help out right now, if you can't increase income, reduce cost of goods to compensate, spur trade and thus hiring.
 
Quote from deucy28:


Your statement reflects on the comparative advantage that allowed our nation to grow. Then you address the current status of affairs that tragically and never had to be which anchors us. You are talking my book. I did not see you address the prospect of that disappearing. Now that would be a more head to head discussion with my earlier post.
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Well, to clarify, it wasn't my intent to directly challenge you. I more or less agree with much of what you say.

I do think, though, that the "winner take all" dynamic is a powerful one that will only accelerate in the coming years. It will shape many trends, and has significant investing implications. It is also good news for those who can get on the right side of it.
 
Quote from kjones5159:

I'm of thr opinion that controlled deflation would help out right now, if you can't increase income, reduce cost of goods to compensate, spur trade and thus hiring.
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In a way, this is what we are getting. As corporations reduce costs via more productivity from a smaller employee base, and better use of labor-saving technology, cost of goods goes down (apart from food and energy, a different story).

The problem with a potential deflationary cure is that mid-level wrench-turning type jobs are disappearing at a rapid rate - think assembly line workers replaced by robots - and the jobs materializing to take their place are typically at the lower end of the service industry and pay maybe half as much (or less). In spread terms, the bottom is falling out of the pay scale much faster than goods and services costs are falling. So the poverty / unaffordibility spread is widening.

A staggering percentage of Americans already rely on the state in some way shape or form. That percentage is likely to increase. The divide between haves and have nots is going to grow so wide in the coming years, even more redistribution from the state will be the only possible way to rectify it. I am not commenting on whether this is good or bad, moral or immoral, desirable or undesirable, only foreseeing an inevitable response to a growing problem.
 
Quote from kjones5159:

I'm of thr opinion that controlled deflation would help out right now, if you can't increase income, reduce cost of goods to compensate, spur trade and thus hiring.
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Oh my ! I need to become one of those in the 10% of the population...mustering resources and intellect with a web site to order fairy god mothers on demand, each with their specialty. MY cost of goods in that business would go out of sight if I find one with the ability to rheostat (meter) a contolled deflation.

I'm not trying to be flippant, kj. Your input is thoughtful and I think heartfelt. Any comments from me about economics would be amateurish; not always wrong but circumspect. From what I read, economists (Bernanke no exception) are scared EB (Evacuation of Bowels) of deflation. When he talks about "tools" the FED has, they are at a deficit for deflation. Much nastier to get its hands around than inflation. No effective speed bumps to slow a continued downward plunge.

One of my favorite econ talking heads John Mauldin is in front of the public a lot and accessible to it by email. He stated it is the most frequented question posed to him: what disaster will hit us first: deflation or inflation. His answer ? "YES !" We are on a razor's edge with a propensity to fall one way or the other. Which ever way it falls, the other will later occur, too. (Did I make your day ?) I infer from him it will occur organically or by way of a catalytic, exogenous event/events that will spin us initially into one or the other. Other econ folks I have seen on Bloomberg or CNBC or read about who get interviewed (with no hidden agenda or something to sell like gold) dodge or hedge with their answers.

BTW....I highly recommend Mauldin. He is the most read, having the most subscribers for free email of weekly essays. He is easy to read for the guy off the street and is one of the fastest ways to get and stay informed. A former best selling author, he published a book last year END GAME I read in December. The title is Armagedden-ish sounding, but that is not its meaning. He is referring to the end of a multi-decade super-cycle. If I could pass the magic wand and make everyone in our country informed on one thing, it would be, "this ain't no business recession cycle we are in, baby !" Both consumers and sovereigns have over-leveraged out their kazoo, and are paying the penalty as the pendulum must swing (by natural forces) in the other direction. All the government interference with natural science dealing with the saving of institutions (auto industry, banks, NATIONS, etc) kicks the can down the road and makes the inevitable fall to come that much more bigger. It is a boulder rolling down the hill, momentarily arrested by governments with props of sticks and little rock dams. One of the forces of this economic nature is that the reservoir behind the big boulder forced to stop momentarily, gets bigger such that when the crush comes (crushing the props and artificial dams) the deflation or inflation will sky rocket that much more ballistically severe. It will become manifested in deep depression, or hyper-inflation OR neither so drastically but characterized by one of them less severely over decades of dysfunctional economy. Japan has been in that funk for two decades. Did 'ja know Japan is in its own way as bad off as Greece ? As Mauldin says, it is a bug looking for a windshield. It's saving grace so far from becoming a Greece ? .... Its bond holders are not foreigners, but its own citizen/savers. To the extent its citizens are willing to NOT bring pressure on the government for a better, more appropriate yield the risk presents, they are saving their own asses by not allowing their government to crumble over the weight of the government's debt.

Sorry. I didn't mean to make a thesis. It just is my primal scream. If 10 more citizens become a bit more informed here, I am pleased. They will better enable themselves to make decisive steps for their families' future.
 
Quote from deucy28:

Oh my ! I need to become one of those in the 10% of the population...mustering resources and intellect with a web site to order fairy god mothers on demand, each with their specialty. MY cost of goods in that business would go out of sight if I find one with the ability to rheostat (meter) a contolled deflation.

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Was this meant to mock me or something? I'm not sure I get thr joke. I'll check out Mauldin. I'll be the first to tell you I'm just getting into economics and finance and all of it.

Oddly enough I became interested after the recent housing bubble popped, I didn't appreciate the power and influence of these forces. I looked at charts of the DJIA with amazement, seeing the 40% decline, and I thought to myself "if there is this kind of price movement, this is where the money is"

I became hooked.

I have no formal schooling or anything like thay although I'd love it, just not in the cards right now, the only knowledge I have is compiled from learning what I can from what I see in the news and books etc.

Any book recommendations would be appreciated. Any subject, markets or economics or whatever, I am a sponge.
 
Quote from darkhorse:

In spread terms, the bottom is falling out of the pay scale much faster than goods and services costs are falling. So the poverty / unaffordibility spread is widening.

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Wow ! That is a huge, well described, LARGE picture of current status ! You can include in the drop of wage scale: (1) underemployment (about the same thing, as skilled workers that are displaced into other and low paying jobs, and also recent school graduates in respectable majors being forced similarly into underemployment for what they are educated in and for what they are worth, not to mention their additional loss not being able to take on rookie work in what they were educated in and not then later getting elevated into respectable ranks of what their target career was going to be (a tragic loss) (2) unemployment.

As a spread trader, I really enjoy that metaphor ! Yes, some professionals call it a recession hammered by deflationary tendencies.

(I might be a little picky by re- labeling your point into the poverty / affordability spread. No big thing. We all understand, and it is just a great way of looking at it.)
 
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