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Friday, July 12, 2002


The last of the chain of dead men walking who have been heroically propping up a fissured US economy during the last half year appears to have taken a hit. hardly surprising really given all the confidence shaking news that's been going the rounds from Wall Street and elsewhere recently, including the less than clear business conduct sheets of both president and vice-president. One things for sure, with all the money that went into profit boosting in the last few years, you would have to be extremely optimistic to believe that the outlook for profits during the next couple was likely to be spectacular.

U.S. consumer sentiment tumbled in early July as a stock market drubbing that took major indexes to multi-year lows roused Americans' fears for the future but failed to shake their assessment of the current situation. The University of Michigan's preliminary consumer sentiment index fell to its lowest level since November 2001 in July, down to 86.5 from 92.4 in June, market sources said on Friday.

"The drop overall has negative implications for consumer spending as it is being paired with indications for sluggish employment and income growth," said Paul Ferley, assistant chief economist at Bank of Montreal/Harris Bank.The preliminary current conditions index, which tracks consumers' views about their present financial situation, fell only slightly, to 99.0 in early July from 99.5 in June. The expectations index, meanwhile, which measures attitudes about the 12 months ahead, plunged to 78.5 in early July from 87.9 in June. That was also the lowest level for this subcomponent since November.

"The survey is telling us a story of the stock market decline contributing to the souring of consumer attitudes about the future, with survey respondents acknowledging that the economic reality on the ground is still decent," said Anthony Karydakis, senior financial economist at Banc One Capital Markets in Chicago.
Source: Yahoo News

Thursday, July 11, 2002


If all the news on the way up the ninetees boom was good, now, on the way down it's mainly bad. The latest downgrading of GM is another example of negative feedback, as lower stock values drain money from pension funds.

General Motors Corp. stock was downgraded for a second straight day Thursday. UBS Warburg's decision to downgrade the stock from "buy" to "hold" came a day after Banc of America switched GM to "market perform" from "buy."

UBS Warburg said its move was based on concern over GM's pension liability. "The pension fund poses two major risks — mandatory funding requirements and a hit to expected earnings," said the report written by UBS Warburg analysts Saul Rubin and Mark Doehla.
Source: Yahoo News

On Double Dip Business Bound
Stephen Roach described on his Global Forum piece yesterday that talk of a double dip has become almost boring, yet another big yawn. In a piece called Double Dip Tedium cellebrating the sixth month anniversary of his call he casts a wayward eye over the US economic prospects:

It’s coming up on the six-month anniversary of my widely despised double-dip call (see my 6 January 2002 dispatch, "Double Dip Alert"). For a while, it seemed as if nothing could be further from the truth. After all, the US economy is now reported to have surged at a 6.1% annual rate in the first quarter of this year. Stubborn to the end, I argued that this growth spike was distorted by a post-September 11 bounce-back and was not indicative of the underlying -- and still fragile -- state of economic activity in the United States. I stand by that view today and still worry that the US economy is exceedingly vulnerable to a recessionary relapse in the second half of this year.

Try as I might, I must confess that I can’t come up with a new and decisive wrinkle to this nightmare........

Sunday, July 07, 2002


This time in a Scifi chat about singularity. On one view the term "singularity" refers to the geometric rate of the growth of technology and the idea that this growth will lead to a superhuman machine that will far exceed the human intellect, but Kurzweil has his own interpretation:

RayKurzweil: I think it would first make sense to discuss what the Singularity is. The definition offered at the beginning of this chat is one view, but there are others.

Gardner: Go for it.

RayKurzweil: I think that once a nonbiological intelligence (i.e., a machine) reaches human intelligence in its diverse dimensions, it will necessarily soar past it because (i) computational and communication power will continue to grow exponentially, (ii) machines can master information with far greater capacity and accuracy already and most importantly, machines can share their knowledge. We don't have quick downloading ports on our neurotransmitter concentration patterns, or interneuronal connection patterns. Machines will.RayKurzweil: if we can combine strong AI, nanotechnology and other exponential trends, technology will appear to tear the fabric of human understanding by around the mid 2040s by my estimation. However,

RayKurzweil: the event horizon of the Singularity can be compared to the concept of Singularity in physics. As one gets near a black hole, what appears to be an event horizon from outside the black hole appears differently from inside. The same will be true of this historical Singularity. Once we get there, if one is not crushed by it (which will require merging with the technology), then it will not appear to be a rip in the fabric, one will be able to keep up with it.

Gardner: Seems unlikely to me that EVERYONE will have an equal capacity for keeping up with it. There are people today who have trouble keeping up even with the 20th Century, like the Amish.

RayKurzweil: The Amish seem to fit in well. I could think of other examples of people who would like to turn the clock back.

Gardner: Many. So won't the same be true during the Singularity?

RayKurzweil: But in terms of opportunity, this is the have-have not issue. Keep in mind that because of what I call the "law of accelerating returns," technology starts out unaffordable, becomes merely expensive, then inexpensive, then free.

Vernor Vinge: True, but the better analogy is across the entire kingdom of life

Gardner: How do you mean that, Vernor?

RayKurzweil: We can imagine some bacteria discussing the pros and cons of evolving into more advanced species like humans. There might be some strong arguments against doing so.....If bacteria could talk,of course.

Gardner: From the bacterias point of view, they might be right.
Source: SCIFI.COM (Thanks to Cory Doctorow)

Keep sockin it to them Ray lad!

Along, probably, with tens of other telephone operators around the world, Telefonica here in Spain have been shelling out millions, in conjunction with the major Spanish banks, on a sure bet for the future; the mobile phone as a payment system node.

Now news from America, together with buzz from SE Asia generally, shows how this is unlikely to be the case. The prototype for the improved technology come from motorwat toll-booth rapid pass technology. Just wheel your trolley on through!

The freezing of mobile technology development due to the heavy indebtedness of the Telecoms means they are about to be overtaken by just about everyone else in the business.Still, my favourite idea for the future remains that of mobile bar code comparisons; flashing your mobile up against a product to discover where you can find it cheaper, and then going to the section manager to look for a better price armed with the evidence. After all we don't want to waste precious time and shoe leather, now do we?

From gas stations to grocery stores to fast-food chains, merchants are experimenting with payment systems for a harried marketplace. Using radio frequency identification — or RFID — the systems automatically identify customers, who have set up credit or debit accounts with the issuer, and charge them for their purchases.

The RFID payment systems are similar in some ways to stored-value cards and the programmable "smart cards" used by Starbucks and a growing number of merchants. Those cards automatically deduct money for purchases from prepaid accounts or charge them to a personal account.

But RFID systems are much faster than other types of payment. There is no fumbling through a wallet, no punching in personal identification numbers, no signatures — and, most certainly, no Web browsing. All that is needed is a tiny device called a transponder that might hang on a customer's key chain and is waved in front of an electronic reader like a magic wand.

"Mobile commerce" once conjured up visions of the masses buying movie tickets and all sorts of merchandise on the go from their cellphones. But that vision, like so many overblown Internet expectations, never quite materialized. The high-speed wireless technology needed for such transactions has been slow to reach the market, mainly because it is so expensive. Cellphones, with their tiny keypads, have proved too cumbersome for much more than talking.
Source: New York Times

One more big step for humanity (no more mindless queuing in the supermarket), and one small step for the encroaching singularity.

Every job has its downside, and making and managing money is no different from the rest. What I fail to understand is how people were able to convince themselves there wouldn't be a downside. But it does make you wonder if it is all worth it. Maybe one day they will explain the pro's and con's to the rest of us.

It is hardly surprising that in the current economy, financiers are seeking psychological counseling or pharmaceutical solace. Many firms bring in psychologists as consultants for money managers, but so far the companies do not appear to be ordering their employees to seek help. Some traders, themselves, however, feel the need. Their turn to therapy is a little like struggling athletes who seek out sports psychologists to improve their game. One trader, speaking only on the condition of anonymity, said he went to a therapist to overcome his love/hate relationship to risk.

The trend of seeking therapy springs from two distinct schools of psychology that flourished during the boom. One is behavioral finance, which studies the irrational choices most investors make. Behavioral economists like Richard H. Thaler of the University of Chicago have set up mutual funds based on their insights into market psychology. The other is wealth therapy psychologists like Suze Ormond ("The Courage to Be Rich," Riverhead Books, 1999), who help clients cope emotionally and practically with windfall wealth.

Now that the bubble has burst, investors are not seeking the courage to be poor.

Patients want their heads examined to regain their wealth.Treatment varies. Dr. Geist, the psychotherapist and financial adviser, holds 50-minute sessions with individual clients. Van K. Tharp, a psychologist and "stock-trading coach," who 10 years ago founded The International Institute of Trading Mastery Inc. in the Research Triangle town of Cary, N.C., holds workshops and sells books and tapes. Until he got too busy, Dr. Tharp said, he could do psychological evaluations based on a lengthy questionnaire and a 10-minute phone consultation.
Source: New York Times


The NYT has just given Wolfram an interview. Either you can see all this as the greatest exercise in self-publicity in history, or you can accept that despite the arrogance, despite the infantilism, and despite the failure to recognize others who have something to say on the subject, this show is going to run and run, because, at the bottom line, there is something really, really interesting. And whether he's right or wrong, I kinda agree with this:

I'm probably more nervous about people trying to apply what I've done in the book too quickly, rather than too slowly. It would be bizarre if my attempts to sort of change the direction of quite a bit of science were, you know, immediately absorbed and understood by people who had spent decades working in some different direction. In academia, there is this common statement: New ideas have either been done before, or they're wrong, or both. And it's kind of charming to me that people send mail about some things in my book, say, ''We've said this before.''
But I don't think they've understood what I've said. In fact, if they did understand, their first response would be, ''That can't be right.'' People's responses are being documented in a very obvious way. There are newsgroups and postings. I find it rather interesting. But so far, I'm just collecting the data. The thing one learns about the history of science is that these things take awhile. And one waits.
Source: New York Times:


The Economist is rightly worried again about the impact of the present bear market, but the background thinking needs to get a bit clearer why the problem in Japan has gone as it has.

Stockmarkets around the world are unusually jumpy, with dramatic falls in share prices followed by sudden recoveries. But the underlying trend still seems to be down, raising fears that the global economic recovery could yet be undermined.THESE are not times for nervous investors. The recent sharp fluctuations in the world’s stockmarkets have brought the doom-mongers out in force. They point to the relentless downward slide in share values since their peak in 2000 in America, earlier in London and more than a decade ago in Japan. The collapse in share prices has sent many investors scurrying for cover in safer assets like bank deposits or bricks and mortar; and workers due to retire have begun to worry about the safety of their pension funds. Stockmarket volatility has been matched by swings in currency values—if there’s panic around, foreign-exchange dealers don’t like to be left out.

The market hysteria, coupled with a relentless air of gloom among many in the financial and corporate sectors, is enough to make even the most balanced economist pause for thought. Long-time market observers know things are rarely as bad as they seem—but could the current bear market be one of the exceptions?
So far, the bear market has not had too dramatic an impact on America’s admittedly modest recovery this year. The data is mixed, and there are still worries about business investment levels—which Mr Greenspan regards as key to a sustained upturn—and about wobbly consumer confidence. But unemployment has not risen as far as some had forecast—not yet, at any rate—and labour market figures released on July 3rd showed a further fall in initial unemployment claims from those who have recently lost their jobs.

For those determined to look on the black side, though, the spectre of Japan looms large. In late 1989, the Nikkei share index peaked at almost 40,000: the ensuing collapse was swift—within three years the index had fallen to less than half that, and it hovered around that level for the best part of a decade before plunging again in the middle of last year. Most worrying of all, for those now watching the decline of American shares, the Japanese economy has been in the doldrums ever since its share bubble burst.
Source: The Economist


The Italian mystery deepens. Now it seems we're using Enron style special purpose vehicles to move debt off balance sheet to meet EU stability pact requirements:

Italy and the European Union Commission clashed Thursday over controversial accounting practices, another sign of increasing tensions over Europe's strict budget rules.

Like other European countries, Italy has promised to balance its budget by 2003 and has been leveraging state-owned assets to help it reach its goal. Wednesday, the Commission's statistics arm, Eurostat, outlawed this practice, ruling that borrowings secured on future government revenues can no longer be pushed off the national balance sheet.Under the Italian financing program, Rome parked state assets such as real estate and lottery revenues in special-purpose vehicles, which then issued debt. Since the government didn't issue the bonds itself, the debt didn't end up in the national accounts and inflate the deficit.
Source: Yahoo News

Now if Italy had a nicely balanced population structure, then probably none of this would matter. But this isn't the case, so one day this debt is going to make itself felt on balance-sheet, and then this particular bubble is going to burst. Don't say you haven't been warned.

Incidentally, following the story I blogged earlier this week, Italy's Interior Minister has now resigned following his comments that the assasinated government economic adviser was a pain in the neck. I don't really know what the definition of a 'banana republic' really is, but if there was such a thing would the current Italian administration fit the description?