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| 2010-08-25 09:21 |
GIVE UP THE IDEOLOGICAL DREAM ... DO NO (MORE) HARM
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The market is something akin to autopilot. With regular investors on the sidelines with their own cash, or shipping
money and responsibility to a fund manager, the human element is dissipating in the stock market. What's happening in that void is program trading and
machines are taking over. You know, the more I think about this the more it seems that if any of those apocalyptic movies like "Blade Runner" or
"Terminator" were to come true, the machines wouldn't attack us physically at first, it would be through our wallets and pocketbooks. We have
abdicated our fiscal health to machines programmed to react to all the nuances of trading.
The first time I heard Donald Fagen's "IGY" I fell in love with the song and its
lyrics, but as I've gotten older and a little wiser the message strikes me as the anthem for those that would like to shift the nation from capitalism
to a one-world utopia. What makes that world work is we don't strive anymore. It works because we don't. Just think, wind and sun power everything and
other people think for you:
"You'll be a witness to that game of chance in the sky
You know we've got to win
Here at home we'll play
in the city
Powered by the sun"
As we play, machines will make all the big decisions because they've been programmed by fellows that
probably won Nobel Prizes and support the notion of redistribution of wealth and social justice:
"A just machine to make big
decisions
Programmed by fellows with compassion and vision
We'll be clean when their work is done
We'll be eternally free yes and eternally
young"
The thing is the creation of wealth and profit-driven motivation is what makes everyone's life better.
In many ways, what
we are seeing in America is an attempt to put the economy on autopilot, which to me says the President has more or less given up on the notion we can
take our nation to another level.
It's about now divvying up the spoils and letting scientists and compassionate economists seal the deal. It
sounds nice to many people. But it's not nice in any way. Adam Smith saw this a long time ago when he wrote about free markets: "the uniform,
constant, and uninterrupted effort of every man to better his condition." I'm not familiar with Margaret Mead's work, but I bet anthropologists would
come to the same conclusion. Man has an innate need to strive for better and greater, while collecting shining babbles along the way is great,
too.
Yesterday the machines actually didn't go haywire but I think it's because a few humans came to the conclusion the housing data, as ugly
as it was, maybe marked an artificial low created by government intervention. On that note I received a great email on yesterday's report on the FDA
wanting more power. I say great because it's from someone in the mix and knows better than anyone in New York or Washington.
Dear
Charles,
"It was a great morning here in fly-over country until I found you admitting to some kind of chicanery. I have the Outlook on my
computer set to show a bit of each email in addition to the subject and sender. It doesn't, however, show fonts or other emphases, so the words are
printed out for literal interpretation. And your WStreet Market Commentary email showed:
"ANOTHER AGENCY FAILURE, ANOTHER EXCUSE, AND ANOTHER
POWER GRAB By Charles Payne, CEO & Principal Analyst"
I couldn't wait to open the thing to see what power grab you were
undertaking.
All kidding aside, the issue of food safety is a serious one and shouldn't be left to politicians with no background in the
industry. (Perhaps akin to the dilemma of a President with no background in management.)
I occasionally lecture at the local college (North
Dakota State University) on the opportunities and problems associated with mega-farms. The groups I talk with are usually made up of 60 to 70 percent
people with some kind of farming background, and the rest from a more urban background.
Most of the discussion on mega-farming comes down to
energy intensive techniques vs. labor intensive techniques, and that gets expressed in everything from farmers' markets to transportation to
fertilizers and monocultures. And, the inexperienced urbanites response to the issues is usually that all of the problems created by the energy
intensive techniques would be successfully addressed by a farmers' market type of solution. (Don't get me wrong here - I love farmers' markets and the
products I get there.)
The problem is that we can't feed everyone in a farmers' market economy. And, I can usually convince doubting
urbanites of that with about ten minutes of video showing three scenes. The first scene is a potato harvesting operation where the grower is filling a
truck box with 35,000 pounds of potatoes every six minutes. All day long. The second scene is a corn harvesting operation where the grower is
harvesting thousands of acres. His combines are cutting a swath a mile long before turning around and coming back. All day long. The third scene is a
crowded city of New York. Or Paris or Tokyo. And these people eat. All day long.
You can't connect the dots between the first two scenes and
the last scene in a farmers' market economy, you need massive storage, processing and transportation systems to make the distribution work and feed
all these people. And, if you have food in these quantities being stored, processed, transported, and sold at the end of the line, you are going to
have multiple opportunities for other flora and fauna to partake in it as well (bacteria, rodents, fungi), and the end consumer wants to be protected
from the impact of these other diners.
A politician directing a bureaucrat without practical experience in that chain of processes can't
possibly understand the problems, or effectively deal with them. A market economy monitored by the media can possibly deal with these issues, and we
would be better off with that model.
And, as to the pricing discussion in your editorial, yes - food safety will cost something. The change
from a hypothetical 100% farmers market supply chain to a mega-farm supply chain will be a cost reduction to the end user, but some cost needs to be
added back into the system to address food-safety issues. It should still be a significant bargain compared to the other
alternatives.
Regards,
Keith Nilson
President
Crary Industries - a manufacturer and seller of mega farm equipment that makes mega
farms work better (that's not our motto, just a disclaimer indicating that I have an axe to grind on this issue)"
The emails are better
and better every day; you guys rock...please keep them coming.
Do No Harm
On the topic of machines doing
everything for us, we need to remind politicians of the laws that Isaac Asimov came up with for robots.
1. A robot may not injure a human being
or, through inaction, allow a human being to come to harm.
2. A robot must obey any orders given to it by human beings, except where such orders
would conflict with the first law.
3. A robot must protect its own existence as long as such protection does not conflict with the first and second
law.
I agree Republicans need to articulate a message, but right now I would be happy stopping a government that's violating all the Laws of
Robots.
Economic Data
Durable Goods
Today we got a bit of negative news coming from manufactured
durable goods. Total new orders in July increased 0.3% MOM after decreasing 0.1% in the prior month, but it was lower than the consensus estimate
calling for a 3.0% rise. Excluding transportation, new orders decreased by 3.8%, lower than the consensus estimate calling for a 0.5% rise. Moreover,
non-defense capital goods, excluding aircraft, decreased 8.0%, after increasing 3.6% in the prior month.
* Headline durable goods: +0.3%;
consensus +2.8%
* Ex. transportation durable goods: -3.8%; consensus +0.5%
Overall, the results were not very encouraging, particularly since these gauges
tend to be leading indicators of the broader economy. It was particularly concerning to see that non-defense capital goods, excluding aircraft,
decreased by 8.0%, making a sharp turnaround after two months of healthy growth. A sharp reduction in capital spending could be signaling a general
slowdown down the road.
Final Note
We are looking for new home sales data due out at 10:00 am today to surprise to the
upside. Overall, however, this may be a middle of the road session given the many conflicting reads on the economy that are prevalent.
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