bizzXceleration: Performance, Value and Profit

We'd say it was time for reality to be even more fully reflected in the markets but there seems to be some major difficulty in finding it recently. IOHO, while stocks are indeed at historic low prices as are valuations (PE's), the full extent of the downturn and the duration of credit market un-raveling has yet  to be fully reflected in stock prices. Bottomline if indeed you're cash-heavy and have a Buffett-like horizon this might be a time to start getting back into the market. On the other hand if you got caught flat-footed we hope you seized the opportunities of these last several aborted rallies to get into cash and re-position yourself. The time to start doing that of course was much earlier in the year but the number of folks who took that advice is vanishingly small. The number who find themselves in heart-rending positions as the result of trying to ride out a traditional buy-n-hold strategy seems to be the vast majority. It's time for Triage. But by and large we stand by our last posts on the market situation and strategic outlook (The 1,000 Yard Stare: Beyond Terminal PTSD in the Markets,Whistling Past the Graveyard: Market Assessment and Outlook).

Current Situation:  Trapped in the Box

At the right is a chart from the weekend showing what we think is the trading range we're in while we have the bear rally vs economic realities, whatever they might be, debates. Sorry for the smaller size but we wanted to add one from yesterday and needed some room. In any case notice that the bottom of the box got busted pretty bad before Thanksgiving (black irony indeed) saw us crawl back into the bottom area. The question is are we still likely to get a "real" bear rally ? Our answer is we don't think so though anything's possible. But as the economy becomes percievably weaker and weaker so nobody can miss it or ignore the liklihood goes down.

Current Situation: Down the Downchannel

Instead we'd like to point out that we seem to have established a pretty stepp downtrend channel where we're getting mini-bear rallies that fade away at lower highs and lower lows. Like we said we may still get a bear rally but at best it'll be trapped in the box, the bottom portion. Seeing 1000 on the SP500 seems problematic at best to us. More likely we'll continue to trash around with this descending pattern until we get a real breakdown.

Triage and LT Perspectives

If you take nothing else away from this post watch this interview with Jeremy Grantham of GMO. It is apparantly the only one he's ever given, at least so far. He's a well-known value investor who's been negative for years because of over-leveraged markets built on poor foundations. Now he's finding that for the first time there are "incredibly" cheap opportunities. He also admits that the chances of the markets going down another 20-30% are still significant. As you can tell from the accompany chart that's a view we agree with. But his other major point is also correct - we're being presented or are going to be presented with once in a lifetime buying opportunities. Just not yet.

So skim the readings and bear that in mind and start triaging if you haven't already done so. What needs to be sedated and abanoned because in the brave new world there's no hope of recovery, what needs to be done to save those savable and worth saving.What can be left on it's own and ridden thru the crisis. And most importantly what should you start looking at. The answer to that is good companies who are well positioned to gain strategic advantages in the long-run. Finding them will be the challenge. 

Continue reading "Time for Triage: What Bear Rally ?" »

Posted by dblwyo at 06:55 AM | Permalink | Comments (0)

As we're all coming to realize and grasp this evolving downturn is going to be longer and more severe than has been anticipated (t's Back: Welcome to the Downturn for Real, Storm Flags Flying: State of the Evolving Downturn). And it's coupled with the most severe breakdown and evolving re-structuring of credit markets and the Finance Industry since the 1930s. After all when you have a strongly conservative Republican administration calling for a major regulatory overhaul with the charge being led by an ex-CEO of Goldman Sachs the world is indeed changing. Another meme that has long bitten the dust is the "de-coupling" notion where the US economy wasn't the engine. Instead we're rapidly moving beyond "re-coupling" back to the future where Europe and Japan are accelerating into their own more severe downturns themselves; which are moving faster than the schadenfreudish were thinking as little as a few weeks ago. The final notion that's biting the dust, big time, is that the emerging markets aren't going to get hurt.

The Re-Balancing of the World 

In fact they're already hurting, the pain is likely to get worse and as it does structural fragilities and weaknesses are being exposed, tested and run a risk of failure.(Commandos mop up last of Mumbai militants ) But there's something likely to emerge out of this even more profound. As investors and stakeholders you should care about the metastasizing worldwide downturn in any case. But four factors will take this out of the realm of the "ordinary" and change the structural patterns we've gotten used to in the last several years, essentially since China's accession to the WTO. First declining import demand, especially for oil and consumer goods, will severely damage the economies of the emerging countries. Second, albeit on an individual basis, each of the major BRICs has internal economic problems that are being exacerbated. Third these strains will threaten the socionomic stability of several of the BRICs, particularly (in order) Russia, China and India. Brazil seems to be as exposed but has pursued a more balanced development strategy but will nonetheless be strained. And fourth - there will emerge a major re-balancing of the nature of the world economy which will impact us all for a long time. Our chosen proxy for beginning to grasp these changes is the market indices for the major bricks. The accompanying chart shows the US, Brazil (Bovespa), China (Shanghai) and Russia for the last five years. Notice that they all are now, largely, popped bubbles but there are vast differences. Brazil has held onto some serious gains while China really hasn't and Russia is back where it was three years ago with worse to come.

Differential Impacts

After the break the readings provide a decent survey of the worldwide economic news from the last couple of weeks - not necessarily the most current but the most recent is simply worse and worsening. In the developed world (the G8-1, now that Russia is a pariah) Europe and Japan are entering severe downturns rapidly, the world's major central banks have abruptly shifted policy and started trying to pump up their respective economies and both are trying to pull together significant stimulus packages. In Europe that last is proving difficult because of coordination problems.

Russia despite its' posturings was entirely dependent on oil and commodity revenues which are dropping rapidly and dramatically. The same impacts will occur for the major oil-exporting countries which means that the ME and Gulf countries are rapidly shifting into low gear or possibly worse. The accompany chart of long-term oil prices from a month ago highlights the l.t. trend and our guesstimated target prices. The great irony here is that we had an enormous runup in prices because supply exceeded demand, real prices were low and, as a result, the industries seriously under-invested in capital expansion and capacity growth in the '90s. When globalization took off we abruptly shifted into demand being greater than supply and a whole raft of new projects were scheduled to come on line to grow capacity. At $85/barrel most of the non-traditional alternatives are uneconomic - which means that they're suffering. At $55/barrel much of the expanded production from existing fields and the development of new ones is halted. The end result is that in 2-3 years we will return to shortfall conditions and start the whole vicious cycle all over again.

The situation in China is vastly different. First off they built an export-led economy and as developed country consumers and other developing countries cut back they are being hurt. Beyond that growth led to rapidly growing costs in the major exporting regions and low to non-existent profits. As a result many previously profitable exporters are going out of business and laying off vast numbers of workers. While Chinese growth may drop to "only" 7-8% in the next couple of years you need to recall that they must have growth of 6-7% to stay even with labor force growth and shifts of the rural framing population into more modern jobs. Without that safety the stability of the country comes under increasing strain. At a third level the recent product quality problems combined with rising costs is changing the economics of Chinese exporters drastically and causing foreign investors to shift new investments to other regions and countries. The bloom is really off the rose. India, as the recent terrorist attacks show, is experiencing similar problems. Brazil has a more balanced economy as well as being relative energy independent and not dependent on commodity exports as much; though it's exports of agricultural products and iron ore are dropping and the agricultural sector can't finance itself because of the credit crisis. All in all not a pretty picture.

The final "big picture" shift will be that the US and other developed countries will be shifting from over-consumption to an increased emphasis on saving. Which means that long-term structural demand for exporters from the BRICs will, at best, not grow at the same rates. That will have profound impacts not only on these domestic economies but on worldwide capital flows. Please read Will Dollar Lose Global Reserve Currency Status? for a fuller discussion of this critical long-term shift and, more importantly, really think about it. The world as we grew to know will NOT be the same after we get thru this current collections of crisis. And, as Brad Setser says, if you read nothing else read the World Bank's most recent quarterly report on China for a fuller appreciation (If you only read one thing on China this fall …).

Continue reading "Fragilities Exposed: Downturn, World Economy and Re-Balancing" »

Posted by dblwyo at 03:20 AM | Permalink | Comments (0)

In some ways it almost seems moot to review the economic data - one of the things we constantly examine for its' own sake AND because it defines the context for business performance - given that all the things we habitually talk about are now showing up in the headlines. We should also note that this is, to a large extent, becoming a macro-topdown driven business environment. In other words this tsunamic surge is one of the two most important things that businesses need to be concerned with. The other major concern is the number of businesses caught flat-footed, ill-prepared and as a result are about to do some really stupid things reactively rather than because they've thought it thru. As Warren said - we're going to find out who's been swimming naked (a lot we guess); and we're then going to find out who's smart enough and fast enough to get back under the water or find a suit. The good news, such as it is, is that this downturn will be longer and deeper than anybody is preparing for yet BUT IT WON'T BE ANOTHER DEPRESSION. Sailors have something called the Beaufort Scale to help them report, analyze and prepare for storms. Right now we're headed into a Force 7 storm and will likely to be in a Force 10 ultimately. But not a Force 12+. Look it up - the descriptions are pretty apt IOHO.

Retail Sales

There's lots of economic data we could review but we're going to focus on a critical one - real retail sales (hattip WSJ btw - first they started using YoY data and then they started using real YoY data. Outstanding). You'll find after the break a rather extensive collection of readings on the that and other current economic data. In the first panel the monthly data back to Jan00 shows what we've been warning about for months, but only if you really focus on the inflation-adjusted data. The slowmotion slowdown is clear but crossing the tipping point to a downturn began shows up in late '07 in the real data but only in Q3 for the nominal. The second panel shows quarterly data YoY back to '92 and mostly reinforces that message with an additional caveat/observation,  really important one. We're now well below the worst prior downturns since '90 and headed lower.

Strategic Situation

To come back to the economic Beaufort Scale take a look at this graphic which shows five alternative pathways that we could take. The "purple" one was the fantasies of a short, shallow downturn being floated last winter and even spring by the business press and CNBC talking heads which is now deader than a doornail. The important thing to note though is that the economic data at the time told us it was nonsense but everybody ignored it. The other dead alternative is the catastrophic downturn - though admittedly there's still some chance of a tipover if something real goes kablooie. By and large we think that's been avoided though when Paulson panicked in Sep. he had damm good reason. What we're really debating is the yellow vs black lines with a region of uncertainty between them.

There are two key critical factors (which are extensively covered in the reading excerpts after the break).

1. Credit Markets - can we keep the wheels on the wagon and begin to unfreeze credit. While it's slowly creaking back into motion it's still not doing very well. On the other hand we'd have to say that compared to what happened and what could have we're actually doing wonderfully well.

2. Fiscal Policy - everybody forgets that this last downturn was shallow only because the Housing ATM let mortgage equity subsidize consumption. For the record we all benefited from the financial legerdemain besides just the direct beneficiaries. Otherwise we'd have had a much more severe, longer-lasting downturn in '01. Especially coming off the collapse of the Tech Bubble. That could have triggered a depression in itself. The ATM kicked in $300B/quarter or more for several years so a multi-year $600-800B stimulus package is not out of line to get the economy back on track.

In other words keep your eye on the new econ team and what gets thru Congress, hopefully asap. All our lives depend on it. 

Continue reading "Storm Flags Flying: State of the Evolving Downturn" »

Posted by dblwyo at 05:59 PM | Permalink | Comments (1)

Well time to pick up the discussion on the state of the economy; and if you've been playing along with us here last Friday's GDP numbers are no particular surprise. You may recall our mentioning (graphically) the slowmotion slowdown devolving into a tipping point turnover ?? We won't review those posts but will dive right into these and try and sketch things out for you. But first a little light relief - instead of Apocalypse Now we bring you Collapse Now with Col. Ben taking the role of Col. Duval. The dual problem with that sort of black humor is we've been warning about the situation for so long our innate reaction is "so what" but judging from the casual strangers we find weeping in airports 98% of the population is beyond surprised.

Which leads us right to the charts and numbers. First off the bad news - in our judgment this recession which we're really starting to enter will be longer and deeper than anticipated by almost everybody. Worse, some joking aside, most folks - especially business decision-makers - are getting caught more flat-footed than they should be. Think of it as Darwinian filtration in action except it'll take a lot of innocents with the idioten.

Q3 GDP Results

 Starting with the basics this charts shows YoY changes in GDP, Consumption (PCE) and Employment back to 1980 and there's a lot of nuanced information buried in it. Have a drink and let's talk. Normally we don't run back this far as it's hard to see that Consumption went in the tank at this scale. But that immediately sets up our next point about the length and duration of the on-coming recession. Notice that the slowmotion slowdown tipped over in Q407 for Consumption but GDP had been holding up and has now followed over the cliff. Further notice that, as long advertised, Employment took a long time to build, peaked quick and low compared to prior recoveries and has been deteriorating for quite a while. And we're still early days yet - in our judgment this will be drawn out and deeper than anticipated.

Business Decelerations

If you look at harbingers of future growth, i.e. business spending it's just beginning to tip over; which is what you'd normally expect give the lags between different parts of the business cycle. The 800lb. canary here is Industrial Production which has tipped over rather quickly and abruptly - based on the most recent data. Now aggregate investment has been dropping for a while because of problems with Real Estate and Housing; what this tells us is that capital spending (& hiring) are about to slow; perhaps sharply in the months ahead.

Future Demand

You may recall our mentioning occasionally that the best indicator of future demand was the sum of the changes in real wages and employment. On this chart you can see how closely PCE is correlated with W+E and how consumption drives the economy. Now take a look at how the W+E curve is doing - looks like an Acapulco cliff diver to me. Now put the pieces together - if future consumer demand is about to take one in the neck AND employment has yet to really turn over what does that tell us about the future path of the economy ?

The answer is left as a take-home exercise of the student (HINT: can you spell longer and deeper ?). As usual if you care to continue reading you'll find an eclectic set of excerpts on the state of the economy that highlight some of these points. And perhaps might serve to crib your answers from if we haven't been clear enough.

The good news, btw and it is indeed good, is that while this will be worse than anything we've seen since 1980 we don't expect it to significantly worse than that or 1975. In other words we've been here before. And this most certainly is not the beginnings of another Great Depression. Someday we'll post those charts for compare and contrast but trust us - when aggregate GDP drops by over 25% in three years and when it takes almost a decade for aggregate growth to get back to breakeven a few measley % points of downturn are nothing. 

Continue reading "It's Back: Welcome to the Downturn for Real" »

Posted by dblwyo at 11:19 PM | Permalink | Comments (0)

The graphic is from a WW2 combat artist and was painted in the immediate, we mean immediate, aftermath of a major German shelling of the beachhead when the survivors crawled up out of their holes and were staring dazedly at the few scrawny trees that survived in the devastated landscape. You can't quite look into their eyes but for many people that's not necessary - they just need to look into the mirror. After a few e-mail and other exchanges my take would be that there are a lot of Market PTSD (that's post-traumatic stress disorder, shell-shock, battle-fatigue, etc.) sufferers out there who are still wondering what hit them. And where about to pull the plug on their 401Ks last Mon. when they got the biggest surge in DJ history....and almost panicked several times during the week. Yet for the week the markets had one of their best weeks ever. The question is, now what ?

Intermediate Market Appreciation

 Well take a look at the accompanying composite chart for an intermediate-term appreciation. Appreciation is a pun since we're using it in the military intelligence sense of assessment as well as the normal psychological one - in this case ironically. The top shows a 1YR daily and shows how a continued downtrend metastasized into a completely unexpected collapse. A collapse compressed into basically a week when what normally takes months and years happened in a few days. Anybody who's feeling a little PTSD'd comes by it fairly and honestly.

The second sub-chart looks at the last six months so you can see some more of the detail. First off notice how abrupt the collapse was. But not, and more importantly and hopefully, notice that it appears to be arrested. If the credit markets continue to unfreeze so that they begin operating normally then we're likely to get some sort of bear market rally here. Which'll pick up some momentum if the indices breaks back above the blue downtrend line. Whether that happens depends on no more black swans and the dawning grasp of the painful economic futures not overwhelming the "theoretical" under-valued present. Yeah, right !

Long-term Appreciation

If we get a rally it's strength and duration will be driven by fundamentals - that is what are the expectations for the worsening economic and earning situations and how well is that yet factored into the marekts ? We suspect that the grasp is enormously improved but still hasn't sunk in as yet. In fact for a downturn that's been clearly visible for months and has recently accelerated the deeply surprising, one might almost say appalling, thing is the apparant lack of grasp of most business managements about the situation. And as a result the surreal earnings outlooks we're still seeing. In this longer-term chart the SP500 is shown since 1980. The recent downturn has busted the long-term trend pretty badly (the diagonal blue line) so the question becomes where does it stop ? Well the horizontal blue lines show two areas of resistance - the '02 lows and the pre-'95 high before we got so much bubblicious over-optimism. It certainly wouldn't be surprising to retest those lows in the 800 region nor eve, given the likely severities of the economic downturn, those of the 500 region. Reinforcing that is the natural speed limits shown in the green (the Fibonacci limits). If we get a bear rally with some legs it might run thru the rest of the year but early in '09 the depth of the downturn will be clearer and then we should tip back over and more than likely at least head for the area of resistance around 650 +/- 50.

Depending on what you want to do in terms of risk acceptance and work you can play the rally up and down or look for re-positioning and re-structuring. If you're a long-term investor who doesn't want to spend several hours a week working on this - not necessarily a wise choice IOHO in a market described as all too likely to rip your face off - use the rally to head for cash, s.t. bond funds and dividend paying stocks, preferably preferred shares which have amazing yields right now.

But here's something to keep in mind - some of the best companies in the world are at multi-generational low prices. And if our prognostications are anywhere near accurate, are likely to go quite a bit lower. As Warren Buffett has pointed out you're not going to see bargains like these again in your lifetimes. Start preparing to take advantage. That and other very good advice is presented in the readings excerpts. We strongly recommend - if you have any interest whatsoever in your own retirement situation - clicking on thru and reading most of these excerpts in full. Especially Jim Jubak's ! 

Continue reading "The 1,000 Yard Stare: Beyond Terminal PTSD in the Markets" »

Posted by dblwyo at 09:34 AM | Permalink | Comments (0)

After arresting its' precipitous collapse on the backs of coordinated worldwide policy interventions

the markets gave up those gains and seems schizophrenic and paranoid. As it should be. Schizoid because it hasn't got a clear picture of where the economy is headed and paranoid because it suspects, correctly, that we're just seeing the start of the pain. What's stunningly surprising to us is how badly this economic pain, which has been clearly visible in the data and charts for a long-time, was anticipated. And how badly prepared almost everybody is. Including supposedly deeply informed observers, not just the usual talking heads. On the other hand there are some deeply informed observers who have been sounding the appropriate alarms for some time and who have, on balance, proven correct time and again. The accompanying Rose interviews are worth your time to put a lot of this in perspective. There are several questions that you, and most, should have in mind.

Policy, Economy, Markets, Outlook 

1. Intervention - will the coordinated interventions stop the collapse ? We'd almost say absolutely but nothing is guaranteed. That said this is a pretty complete toolkit, it's worked before and the level of international collaboration is unprecedented. All of this is stark contrast to the situation in the '30s where policy-makers did everything completely wrong.

2. Economy - which doesn't mean we aren't in for some protracted pain. This is likely to go on for two years and lead to a weak economy for a considerable time after that. It is likely to be as severe as the downturn in 1980 at least. Unemployment might rise to 8% or more...but then again back in the day that was an improvement.

3. Markets - still aren't adequately adjusted to reality but are getting there. We're likely to see a bear rally if the credit markets return to normal. There are certainly plenty of talking heads who are still too complacent. But then the pain, as the deeper economic realities sink into the headlines, are liable to lead to a market decline lasting thru '09 and into '10.

Take another look at the conceptual graphic of the Business Cycle - it's intended to help you frame the situation. This is like watching a giant wave build up offshore - the surprise is not that it turns into huge surf crashing on the beech. The surprise is the folks standing there watching it believing it won't happen. 

Alternatives and Liklihoods 

The world has changed in many ways and there are going to be new long-term structural shifts as consumers shift into saving more, financial industry de-leveraging continues to work out and companies adjust to this brave new world. Get over it. Or better put the sooner you get over it and re-orient yourself the better able you'll be to cope. But one way or another you will get over it. MUCH easier said than done I know full well. Hopefully by sorting the chaos, filtering and giving you some tools to help turn it into real information we'll all find some ground to stand on.

People can cope with emergencies and surprises, even the most drastic, when they have some clear understanding of what's going on. And some framework to make their decisions around. Right now many are still in shock and numb fugue as the result of the near-collapse of the markets. If we can get them stabilized then we will fight thru this.

The chart shows four alternative scenarios for GDP future growth paths. NONE of them is anywhere near as bad as the Great Depression, which would be completely off the chart. What the recent policy actions do is make it highly likely that the worst two won't come to pass. What we want is to get as close to the better two as possible. Which in turn is going to be dependent on government fiscal policy and continued support of the markets. The difference is going to lie between returning to the sustained malaise of the '70s or pulling ourselves up by our bootstraps ala the '80s - only this time with some good sense instead of voodoo economics and self-delusion.

Continue reading "As Ye Sow...Policy vs Economy vs Markets" »

Posted by dblwyo at 09:26 AM | Permalink | Comments (0)

I haven't drawn attention to the fact that we run two blogs - this one business and economics and another on public affairs. Now that we're in a position where it's difficult, to say the least to seperate the two and we're headed into tonight's last debate let me point you at the following excerpt (if you follow the URL pointer you can see the entire thing along with the accompanying readings that compare and contrast the two candidates approachs and economic teams).

This builds on the short paragraph in our last post here by sketching in some detail what we think a total, integrated and comprehensive economic strategy should be.

Populist Panderings, the Candidates and Real Solutions

Comprehensive & Strategic Economic Program

Given all that what should we be doing - and therefore what should be looking for in tonight's debate. Well two things. One as close to this outline as possible and two minimal populist pandering, bearing in mind "nobody can handle the truth". That said in both his acceptance speech and the last debate Barry basically walked right down our reccy's while Johnboy appears to be improvising as he goes and throwing out one offs - not an integrated program. You might/ought/should invest the time to listen to this interview very carefully - from the guy who's called it for three years now !

Nouriel Roubini, New York University, Economics Professor Nouriel Roubini, an economist who predicted the depth and magnitude of the current financial situation before the decline of Bear Sterns, discusses the indicators he saw and his recommendations for stemming the financial downturn.

Step 1: Get Credit Flowing Again - we've been discussing this almost exclusively for the last several posts. While it's still very early days yet we think that the basic elements are in place and being acted on as rapidly as possible.

Step 2: "FIX" Housing - we're not going to get the economy back on it's feet while Housing continues to drag so much. At the same time too many people bought too many houses for unsupportable prices with funny money. Until prices come down significantly MORE it won't start self-correcting. In other words we need for the homeowners and the lenders to take another 15% haircut, write it off and re-negotiate the loans to something more sensible. And it'll need a serious institutional framework.

Step 3: Major Fiscal Stimulus - the last so-called recovery was put together on the Housing ATM and was pumping $500-700B/year into the economy at least. The economy will fall into a major serious recession unless we stimulate it and that stimulus needs to be of the same order of magnitude. This also needs to be quick, targeted and temporary - not another political boondoggle (fat chance I know but....). Tax cuts won't do it. On the other hand the impact on the deficit is irrelevant for a lot of reasons (still be low as a % of GDP, worse w/o stimulus). Things like extended unemployment benefits, more rebates, and direct spending programs fit the bill. Lots of very...y good economists like Larry Summers have tabled excellent proposals (btw - Barry's econ team is non-pareil and Larry's on it. See below). 

Step 4: Infrastructure Investment -the US has let it's electrical, waterway and transportation infrastructures deteriorate to the point of...well never mind. A massive decade long infrastructure rebuilding project would see us get new electrical grids, new highways and transportation systems and possibly new power plants and alternative energy supplies. This would have the benefit of providing enormous fiscal stimulus, i.e. creating jobs and making a major long-term investment for things we know how to do. BtW - major sidebar. The long boom of the '80s and '90s was primarily built around two things. Supply side is utter nonsense. Reagan got it going the old-fashioned way with deficit spending and Clinton got lucky and also cut the defense budget. Bingo, that's it.

Step 5: Strategic Investment (Energy, Biosystems, Materials) - we need new industries and we need to get off of our oil dependencies. There's things we can do in each and both. For example by increasing conservation as well as mandating enormously higher mileage thru better materials and engineering we could get a huge jump for the next ten years. Then we need to build new power plants, particularly nuclear, we need to open up our own offshore deepwater to oil exploration and we need more refineries. That all togeter takes us into the next decade. Beyond that we need some major alternatives - and don't believe 'em. We don't have the knowledge or technology do magic yet. For example we should really be heavily emphasizing coal but need major new technology not the Rube Goldberg fixes running around. So a concerted national effort (does the word Manhattan Project ring any bells) to create major new energy sources and technologies would stimulate the economy, create new industries and provide us several paths to the future.

Combine that we major parallel investments in new life sciences and materials, both because they offer the best hopes for the Next Big Things and because they are synergistic with energy investments. For example if we pie-in-the-sky about Fusion we need the new materials for the reactor vessels. Or new lightweight composites for high-temperature turbines. Similarly new bio-sciences offer up their own benefits not least of which is designed alternative energy crops as well as way to control and manage environmental problems. The real beauty of this is that it doesn't take a lot now because it's all at early stages.

Step 6 - Education Investment: the decline in average income is due more to natural evolutionary shifts in the kinds of labor demanded by an increasingly technical economy. When the US Economy really started on its' accelerated path after the turn of the 19thC few know that a key ingredient was the widespread development of high-schools and the resultant upgrading of the skills and knowledge of the population. Education is the co-dependent imperative along with creating new industries IMHO. (Readings(Education): the Single Most Important Domestic Policy Issue) 

 So there you have it in a nutshell :) A complete now to futures strategic economic policy recommendation. Believe it or not it's at least a decent strawman based on reality, the ways things actually work instead of fantasies and offers some real benefits. Test it against the candidates if you like. The results might be interesting ! The guy you want to vote for is the one that comes closet to ticking off this strategic agenda, doesn't offer up utter unsinn (German for nonsense and Supply Side III more than qualifies), has the best team and sounds like he's got a better grasp. We highly recommend you at least skim the readings to get a feel for how they stack up therein. And also to help you decide on where you think economic policy lies on the importance spectrum. We happen to think it is the sine qua non and will dominate the next Presidential term and outweigh almost any other issue short of a major shooting war.

Posted by dblwyo at 07:12 PM | Permalink | Comments (0)