|Mark's Market Blog|
6-16-13: Asia is the next problem?
by Mark Lawrence
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US consumer spending continues to rise, and initial jobless claims continue to fall. In spite of calls in the last few weeks for a big stock market correction by many, and perhaps a recession, the US consumer seems quite resilient and we seem to be on track for a good summer, economics-wise. I believe the stock market is most likely to resume moving upwards for a bit, a few weeks at least.
My favorite talking
hobbit head, Jim Rogers, was asked "How does it end in
Japan – in tears?" His answer, "Of course it does. Japan has a very serious problem. When we look back, Mr. Abe will have ruined Japan. Huge debt
levels, horrible demographics, they won't let in foreigners, the population is declining. Mr. Abe comes along and says he'll ruin the currency. It is a
disaster in the long term, and not guaranteed to work in the short term, either."
Standard and Poors, the credit rating agency that helped bring you the Great Recession, has removed the US from their Negative Outlook list and placed the US on their Stable list. This because tax receipts are increasing and the deficit is being reduced by perhaps as much as 20%. If bond prices drop and interest rates rise quickly, which today seems plausible, all this could get wiped out quickly. This is why the Fed won't let bond prices collapse.
A recent Pew survey found that 60% of Spaniards, 75% of Italians, 78% of Greeks and even 77% of the French believe that European integration has harmed their economies. We have a union with unelected officials, a central bank whose policies are perhaps in violation of some member's constitutions, and a populace that thinks the union is harming them. It's difficult right now to see the EU as being unconditionally stable.
The Census bureau released their 2012 estimates. White deaths exceeded white births; republicans are dying off. Of the 3143 counties in the US, 353 are now minority-majority. It's now estimated that whites will be below 50% in 2043. Minority children are 49.9% of all children under 5. 41% of black toddlers live in poverty, 32% of hispanic toddlers, 13% of whites, and 11% of asians. Focus in Washington is shifting from race, which the Supreme Court has more or less outlawed in programs, to income. Children from families with incomes under $20,000 have SAT scores that are about 140 points lower than children of families making more than $200,000. There's a proposed $1 per pack cigarette tax to pay for free preschool for children of families making under $48,000. Obviously spending money will close this SAT gap. Clearly the only issue for these poor minority children born to an unmarried uneducated teenage mother into a drug culture that disdains education is money. Oh well, the new tide is coming in, you can get into a boat or you can call spirits from the vasty deep.
It's always dangerous to predict the timing of a crash, but Argentina continues to look like a train wreck in the making. Due to capital controls and an artificial exchange rate for dollars that's off by at least 50%, Brazil and China, Argentina's last large trading / investing partners, are walking away. Argentines call this "fin del ciclo" - the end of the cycle, a uniquely Argentine notion that the economy and often the government must regularly implode to make way for something new. In the US some people stash gold coins under their beds; in Argentina they have suitcases of US dollars hidden away.
China continues to show signs of a slowdown, and recently even the World Bank got into the mix, forecasting a Chinese slowdown. China has a massive underground market in loans, some secured, some not. No one seems sure how big or how vulnerable, but perhaps soon we're going to find out. I expect China will find a way to weather this storm and return to growth, but this is going to be particularly hard on Australia, which looks to be at the end of a 21 year run of growth without a recession, due substantially to Chinese demand for Australian ores. Australia has a housing bubble that's just begging for a pin prick.
Steven Speilberg and George Lucas, both graduates of the USC film school, return to USC to speak pretty much every year. This year they spoke and said that Hollywood is now completely focused on $250m+ blockbusters and all but completely uninterested in smaller movies. It's their opinion that the biggest movies will become like Broadway plays: play for a year at a theater with ticket prices north of $100. They also said there would be a few misses in a row that would throw Hollywood's entire business model into question. Hollywood makes their money overseas now. Netflix has almost completely destroyed their income from DVD sales, and growth in US movie ticket sales was only 6% last year - meanwhile it was 36% in China, where 3-d and IMax are highly preferred. If you look at the highest grossing films of the last 30 years, what you see is hero movies (Harry Potter, Spider-man) and cartoons (Lion King, Shrek). The only exceptions to this in the top 50 films of the last 30 years are Titanic and the Da Vinci code. The days of acting are behind us, we now live in a CGI movie world where studios are interesting only in franchises, sequels, reboots. Of the top 50 grossing movies in the last 30 years, 38 are science fiction / fantasy / superheros, 8 are cartoons, 4 are everything else. If you're waiting for another Gone with the Wind or Lawrence of Arabia where people actually act, well, good luck. Basically modern movies are about people that one way or another can fly. It is noteworthy that the #1 grossing movie of all time is Gone with the Wind and #2 is Titanic, both exceptions to my rule. But next on the list are Avatar and Star Wars, more representative of the new reality.
New NFL rule: no more purses or diaper bags allowed into stadiums. Starting with the first pre-season games this August. So much for family-friendly entertainment. If you have an infant, you may purchase a transparent NFL small diaper bag and use that.
How the NSA does it: A rather technical paper written by Harvard graduate student Ronald Breiger almost 40 years ago shows some of the NSA's central techniques. Basically they make a huge table of people and groups. Your name is on this table. Groups are facebook groups, Tea party donors, clubs, anything that can be considered to have membership. By some straightforward math - matrix math - they can use this membership group to determine links between people and links between groups. Links between people are defined as the number of groups you have in common, links between groups are defined as the number of people they have in common. With a bit of relatively simple math and a supercomputer, in no time flat you can identify "central people." Suppose you want to meet someone. A central person is someone who very likely knows both you and that other person and can introduce you. Or central organizations, the ones that other organizations seem to grow from. The lesson here: if you want to keep a low profile, don't belong to a bunch of groups, don't get your name on donor lists for political parties. No doubt Google knows all this same math, but they use it to determine which ads you might like, which products you might buy.
How to communicate with someone else with maximum privacy:
Must-see Science TV: Here's a 3-d map presented in a 17 minute movie of our universe out to 120 million light years - about 1% of what we can see total with our telescopes. In other words, this is like being curious about the earth and seeing a detailed map of Colorado. In this presentation, each dot is a galaxy - each about 200 billion stars held together in a structure. There are lots of galaxies shown - this portion of the universe holds about 250,000 galaxies. Our current understanding is that many, perhaps most stars have planets. You can ask yourself while watching this video presentation of 1% of the visible universe, comprised of thousands of trillions of stars and their planets, if you really think it's likely that all this was created but life exists only on Earth. Carl Sagan used to say, "If it's just us, it seems like an awful waste of space."
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Revised Sunday, 16-Jun-2013 23:20:02 PDT