Potential New Addition to Working Thoughts

A new blogger has come on board and it looks promising. Joe Nocera of the NY Times is now blogging and it is titled Executive Suite. I will give him a few weeks and then potentially add him to the “Blogs I like” section of my sidebar.

Baby Boomer Microbusinesses?

Brent Bowers, a former NY Times editor, wrote a piece for the NY Times on July 3rd called Early Retirees in New Ventures, Mostly for Fun that got me thinking about three year horizons.

If you are a baby boomer you are facing a changing world – politics are embracing a new era, the economy is US dominated but very much global,  and your family is grown up. But this isn’t a generation of people that just sit down. These are adventurers. These are intellectuals. These are artists. So, as documented by Mr. Bowers, I expect more and more people who qualify for senior tickets at the movies to start freelance companies. I wouldn’t be surprised if most are creative or artistic. Maybe some are connected to charities and maybe others are hair brained what ifs. What is important to consider is the mass rush of excitement. Excitement for new cameras, new software, new trips, and new relationships. These ventures are no risk wins for the US. Some will make it and others will not. Those that fail will have been short lived hobbies and those that succeed are cherries on top of a legacy already built.

If I’m a politician looking for means out of the economic slump, I would look to these people.

Happy 4th of July Weekend

Here is an excerpt from the Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

June 2008 Jobs Report and Wages

Here are the job market and compensation numbers for June 2008 (based on the job report):

Net loss of 62,000 jobs in the month (revised to a loss of 51,000)

  • May modified to a loss of 62,000 jobs (was estimated as a loss of 49,000) (revised again to a loss of 47,000 jobs in the July update)
  • Analysts expected a loss of 60,000
  • six straight months of job losses
  • For 2008, 438,000 jobs have been cut, an average of 73,000 a month

Unemployment rate remained at 5.5% 

  • Forecasters thought it would drop to 5.4%
  • Including the people that have stopped looking for work, the unemployment number is 9.7%
    • Up from 8.3% in May 2007
  • Goldman Sachs is forecasting a peak of 6.4% rate in late 2009, indicating the losses are only half way complete
  • The four-week moving average of initial jobless claims hit 390,500. 400,000 is a recession benchmark (380,000 is a good indicator as well)
    • 2003 was the last time this number surpassed 400,000

Specific Segment Job numbers:

  • Construction lost 43,000 jobs
    • Almost half coming from the home building segment
  • Retail lost 7,500
  • Professional and Business Services lost 51,000
  • Manufacturing lost 33,000 jobs
  • Education and Health Services added 29,000 jobs
  • Temp workers loss 30,000 jobs
  • Government sector added 29,000 jobs
  • Leisure and hospitality added 24,000
  • Administration workers and janitors lost 70,000

— The government added 29,000 jobs and the private sector lost 91,000 jobs —

Wage:

  • The seasonally adjusted average hourly wage increased 6 cents to $18.01
    • This is in-line with forecasts
    • Slowest increase since the start of 2006
  • Average hourly earnings over the past 12 months is 3.4%
    • Inflation is 4.5% over the same period
  • For rank and file workers, the 12 month growth of paychecks is 2.8%
  • The number of hours worked stayed the same from May

Notes:

  • GDP has to be around 2.5% growth for the generation of jobs.
    • The first quarter of the year saw a 1.0% growth.
    • This trend of meager growth is expected into 2009

Job Report Stats Summary

A Few Brain Stories plus one

About a month ago I posted an off target entry called A Few Brain Stories. I would like to add one more to that list.

The Itch by Atul Gawande in The New Yorker
Summary – Nerves that cause itching are different than those that feel for pain. The brain gets the signal in and reacts to it. Itching is one of the few actions that the mind can trigger just be thinking about it. And therein lies the story. The brain uses the memory component to interpret the data that comes in through the sensory system (seeing, hearing, touch, smell, and taste). The information that goes to the brain isn’t useful on it’s own. As the story goes on to tell, when the brain can’t get proper closure, the remnant memories continue to portray a feeling that isn’t actually a reaction to any external stimulus, such as something causing an itch.

Scratch your curiosity itch.

Forecasting Energy

There is evidence to predict the future –

  • Over an eight year period (2000-2007) the world’s usage of oil increased by almost 9 million barrels a day.
  • Over the same time period, non-OPEC countries have increased production of oil by 4 million barrels day – OPEC didn’t increase output.
  • Oil prices are at an all time high of $140.00
  • The value of the Dollar versus the Euro has dropped by 16% over the past year (that is pretty good return if you are a currency trader).
  • General Motors (GM) is now valued by their stock price at $6.47 billion – a 34 year low.
  • Toyota is valued at $162.6 billion.
  • Goldman Sachs analysts are reporting that another $65 billion in mortgage losses are still to come.
  • Since 2000 consumer debt has increased from $8 trillion to $14 trillion.

This tells me that the US consumer is unable to withstand price increases for items like oil. The old cliche rules – Necessity is the mother of invention.

  • Over the last year the number of wind turbines has doubled
  • SunPower investors has made a spin off company more valuable than the parent company – Cypress Semiconductor.
  • Twice as much ethanol is coming on board when the construction of new plants is completed.
  • Increased investments has led to recent improvements to efficiencies for solar panels, wind turbines, and storage batteries.

Why is this happening? Here are several excerpts I pulled from these three articles:

Oily Speculations by James Surowieki
What the Green Bubble Will Leave Behind by Daniel Gross
Anxious in America by Thomas Friedman

Given this history, and the fact that recent years have seen a huge flood of speculative money entering the commodity markets—assets in commodity indexes, by some calculations, increased twentyfold between 2003 and the spring of this year—it’s not unreasonable to wonder if there might be something nefarious behind the sharp run-up in oil prices. But there’s little convincing evidence that the oil market is being significantly manipulated. Whatever chicanery is occurring—and we can assume there is some—has only a marginal effect on prices at the pump.

But there’s also something else at work, which the oil guru Daniel Yergin calls a “shortage psychology.”

The price of oil—more than that of many other commodities—isn’t based solely on current supply and demand. It’s also based on people’s expectations about future supply and demand, because those expectations determine whether it makes sense for oil producers to sell their oil now or leave it in the ground and sell it later. Currently, the market is assuming that oil will become scarcer, and that global demand will keep rising, especially in rapidly developing countries like China and India. As a result, producers are asking very high prices to pump their oil.

Now, it could be that these assumptions are all wrong—that the supply of oil will not be constricted going forward, that concerns about the Middle East are exaggerated, and that higher prices will lead people to cut back on energy consumption, shrinking demand. In that case, oil would turn out to have been hugely overpriced. But that won’t be because of sinister speculators; it will be because oil producers and oil users collectively misread the future.

If this is the case, then the opportunity for new solutions in alternative energies would yield large margins. This opportunity would lead to another bubble.

During a bubble, investment is spurred by technological progress and new economic assumptions — in this case about the price of oil, climate change and the desire to curb carbon emissions.

Other posts on the subject:
Bubbles are Bursting
Energy Cost and Investment Prediction
Olympic Prediction