Sunday, February 27, 2011

Waiting Lists For German Cars

[b]Audi Buyers Wait Months as Factories Struggle to Keep Up With Orders[/b]
By Cornelius Rahn

[quote]Audi AG buyers must wait an average of three to four months for cars like the $52,700 A6 sedan as the company runs factories at full steam in an effort to keep pace with record demand, sales chief Peter Schwarzenbauer said.

Customers at BMW, the world’s biggest luxury-car maker, must wait as many as three months for most models and as long as six months for the overhauled X3 sport-utility vehicle, said Birgit Hiller, a spokeswoman for the Munich-based company.

My comments:  No discount selling for them.  Want a German luxury car?  Put your non-refundable deposit down now, pay full retail, or above retail price, and wait 3 months.  Oh ya, and suck up to the sales staff at the garage.  Actually this attitude is how our estate agents were so successful over the last decade. 

In the depths of the great recession Mercedes had slow sales on some of their cars.  So they did the typical Germanic response and [i]raised[/i] prices.  Sales picked right back up.

Real capitalism versus 'debtalism'

Agree 100%. Real capitalism.. the successfl kind is what Germany is doing. Gradual but relentless build up of industrial capital. You take out bank credit to expand productive capital, then use that capital to pay off the loans. Over time you get a whole fleet of capital plants.

And re-investing profits into more capital plant and capital in the form of research and development.

What I see in the US And UK is what I call 'debtalism'. Loading every company and person's balance sheets up with debt. So more and more of the revenues are going to simply pay interest on debt. And making it a ponzi by inflating asset prices with all this debt, so on paper there is a lot of 'capital'.

One path is the virtuous path to wealth. It takes a lot of hard work and a lot of time to build up. One is the get-rich-quick plan. Flip-this-house is a lot easier than build this house.

Saturday, February 26, 2011

Uk Leaders Nearing Zugzwang?

Its remarkable how the USA and the UK economies have diverged recently.  In the USA which allowed the housing collapse, inflation is at ~1%.  It is hovering at the 50 year low.  This after QE 1, and half way through QE 2.0.. and of course lowering interest rates to 0-0.25%, and running a budget deficit of 12% of gdp.  In addition the USA also has some nice GDP growth right now, running at around 3%. 
If needs be the federal reserve and treasury in the USA have huge room left to print and borrow money.  Like well into the trillions of dollars of room.  (Which they will need a lot of money to bail out states, and keep unemployment benefits going, and throw in some stimulus)

Meanwhile in the UK things really are looking bleak.  ~4% inflation right now, with it rising.  The economy shrinking at ~1% a year.  If inflation does keep rising the government will have to take steps to reign it in.. except they are in zugzwang, they can't reign it in, because the country is on the edge of a loan default death trap.   

Flashback early 2009.. Why I supported Brown's massive printing, was I noted if we allowed a cascading default on the loans, the UK economy would definately collapse.  See what happened with Ireland when they chose that path, and because they don't have a central bank to print the difference.  Meanwhile if we printed it *might* still lead to a collapse but the immediate collapse was avoided.  Then in the intervening time carry out a massive systemic reform.  (which not even the slightest reforms have been made).  The Coalition is instead debating mandating more gender equality on corporate boards.   

But now they face a dangerous situation.  If they keep printing now inflation could blow out of control.  If they don't keep printing, the falling economic activity would lead to a cascading default on loans.  I think in that situation the government will have to keep printing.. even if inflation was running at 30% a year.  This would inflate away the debts, and inflate away the pension promises.  (just lie about the real inflation for the purposes of indexing.)

Thursday, February 24, 2011

Some thoughts on automated checkout machines

On of the things with the automated checkouts is they are available all the time. A human worker works 40 hours a week. But these stores are ofen open 7am to 10pm, 7 days a week.. or 105 hours a week. The human worker also has sick leave, 2 weeks a year, vacations, probably 4 weeks a year, maternity leave, statuatory holidays off. And then there is the growing long term disabilities.

And even when you get the human worker to work, getting them to actually work is hard. Its amazing to go into stores with long queues and seemingy tons of staff working, but only a couple at the till. Working at the till taking customers one after another is hard, so employees find a million reasons to not be at the till while they are there.

Meanwhile I've seen stores now with 8 automated checkout lanes(2 batches of 4). 7 out of 8 were operational. One down due to 'technical difficulties.'

This is a huge selling feature for stores, if you know when you go there there will be little to no wait time. Whereas some stores I've seen it is like a 15 minute wait at times to actually pay for what you chose.

Yes most retail chains either have to get big and offer everything like the big boxes, or go down to the big boxes.  Either way we end up with the vast majority of volume going through big boxes.

The automted checkouts give Tescos and friends a big advantage as its capital investment.  If a company has 1,000 stores and plans to install an average of 4 automated checkouts per store, that is 4,000 units.  Now economies of scale in rolling out these things come into play.  They can even test upgrades at a few locations and see how things work.  Say the units are £100,000 each time 4,000 units, that is a £400 million order.

It is the industrialization of retail.  Automated warehousing and automated shelf stacking are further out but coming.  Another thing is ordering, they already have what they are selling linked up in the human tills computer scanning system.  So the system can see what is selling faster and automatically place orders for more. 

And of course using intelligent software to figure out pricing on the fly. 

Saturday, February 19, 2011

How cheap things can be with mega scale production

In Britain some scientists were attempting 'pedal powered' electricity for workplaces.  And attaching it to exercise for a healthier workforce.  If you look what an average man can sustain in terms of output, it is around 150 watts per hour, over an 8 hour day.

So over a 40 hour work week the person could output 6 kilowatt/hours.  The average price of electricity in the United States is 10 cents a kilowatt hour.  So after a week's worth of output the person could collect 60 cents.  Of course the actual wholesale price of electricity is cheaper still, more like 3 cents a kwh. 

So the person could wholesale their weeks work for 18 cents. 

This also shows how idiotic the idea is that we could return to an animal and human powered world.   

My advice to average IQ young people

A common denominator in the plan of public servants on very generous pensions, boomers who made stupid gains on their houses, bankers with their loans..

Is that the younger generations will have to work and produce wealth for decades, while all those people will take the vast majority of that production for themselves.  It is all essentially promises to pay themselves based on the future production of young people.  Pensions are numbers in an actuaries account right now, housing equity is on paper. 

That young person working hard at Tescos for neo-slave wages.. supports a whole host of parasites who are making money off their labour.  From the shareholders in the company, to the sales taxes, property taxes, fees and so on that go to support wealthy government workers, to the bankers loans to Tescos.

My advice to young people is simply drop out, unless they really make it worth your while to go into work.  And not promises of maybe future good opportunities, or good pensions 30 years from now.. I am talking some real money on the table - today.  Otherwise go on benefits, have a bunch of children, enjoy life, like public parks, friends, time with the children.  In 100 years no one is going to care less if a young woman was an assistant manager at some douche bag company.. but her great grand children will remember her.

This attitude of demanding to make it worth my while, or I take my ball home has served me well in life.  Its the opposite of the beta-desperation-pity attitude. 

Productivity and real median income

An argument is that baby boomers were an exceptional period where the middle classes did well, but now we are returning to a historical norm of most people being impovershed and a few super rich people. 

Its rational that the boomers would live a lot better than previous generations. Because between the late 1800's and the 1960's there was a 10X improvement in productivity. Combustion engines for farm combines and transportation.. electricity.. mass industrial production were some of the big advances.

As that good post said since 1980 even at a ~1.8% a year productivity improvement which led to a 70% improvement in productivity in that time. Not as fast as during the first half of the twentieth century.. but still constant respectable progress. Just look at steel mills, container ports, automobile production, data handling progress over the last 30 years for examples.

So today's young should be earning 70% more in real income than their parents at the same age. All else being equal, (like the richest 1% still getting the same percentage of the national income).

Instead today's young are only making 50% of what their parents did in real terms. And falling fast.

Friday, February 18, 2011

Las Vegas Sands plans €15bn gambling hub in Spain

Spain's economy has been handed a welcome vote of confidence after US casino operator Las Vegas Sands revealed plans to build a €15bn (£12.6bn) Iberian gambling hub that could create as many as 180,000 jobs.

Is this part of the turn in Spain's economy. Now we're talking some real money.

A couple months back Spain also told its green energy companies and investors it won't be paying the rate it contractually agreed to for solar and wind generation. Some multinationals stand to lose basically billions of euros worth on those deals.

Greece is also showing signs of turning the corner. They made some huge deals with the Chinese state owned companies on shipping deals. The Chinese see that Greece can be used as a entry point for masses of product moving into Southeast Europe and also as a trans-shipment port to move Chinese goods into the Mediterranian countries.

The Greeks were talking about selling their ports and rail corporatiosn to the Chinese state owned companies. And the Chinese talking about expanding that infrastructure and setting up a network of warehouses and trucking points within Greece.

Wednesday, February 16, 2011

Prediction for jobs over the decade in the UK and solutions

Not enough work to go around.. and the rare time when there is actually demand for something, like beautiful new clusters of condo towers in London, the society is almost violently opposed to allowing it to go forward.  Construction being one of the last bastions where lots of human labour is needed.  It won't be automated for some time to come. 

My estimate is over the next 10 years the employment in Britain will decline by 5 million.  From 29 million to 24 million. 

Society needs an answer to this growing problem.  The elites response so far has been to deny there is a problem.  There are a number of possible solutions:

-Mass public works, from picking up litter to tending gardens in parks, to artwork, to infrastructure - I think this is what New Labour effectively did with the non-jobs.  Except instead of positive things, they added people to watch the CCTV cameras, and people to watch the people watching the CCTV monitors.

-the French solution of shorter working weeks, longer vacations, earlier retirements

-my personal favorite of a citizen's dividend so people can have their basic living costs met and try out ideas for extra cash

Tuesday, February 15, 2011

German industrial corporations

Look at these big companies from wikipedia:

Siemens:  405,000 employees   75 billion euros revenue
VW:  368,000      100 billion euros
BASF:  104,000   50 billion

Daimler:  256,000  78 billion
BMW:  96,000  50 billion
e.on:  88,000  81 billion

RWE:  70,000  47 billion
Bayer:  108,000  31 billion
ThyssenKrup:  177,000  42 billion

Between these 9 they have 1,670,000 employees and 554 billion Euros in revenue.

Saturday, February 12, 2011

Egypt's development under Mubarak

I do not believe Hosni Mubarak was that bad of a leader. Egypt was showing steady development. The statistic I follow most is electrical production. Britain's stagnation in living standards over the last 30 years has been met with a stagnation in electrical production. In 1980 when Hosni Mubarak came to power Egypt produced 18 billion kilowatt hours a year. Britain was a world leader at the time in electricit and produced 264 billion kwh a year.

By 2008 Egyptian power production has risen to 123 billion kwh. A 680% increase since 1980. British power production had risen to 361 billion kwh

Another statistic is life expectancy.  On this front Egypt went from a life expectancy of 56.6 years in 1980 to 70.1 years in 2008.  Nearing first world levels.

The population of the nation increased from 44.4 million in 1980 to 82.9 million in 2009.

This rise in population meant that the per capita electrical consumption increase was 364% over his 30 year reign.

Friday, February 11, 2011

99% Of New Us Residential Mortgage Approvals Are Going Direct To Govt Sponsored Entities

y comments:  It had to move from the private players to the state.  As technology makes more and more people obselete for employment it is getting riskier and riskier to make loans to individuals.  The only way would be much higher interest rates charged to individuals to compensate for the risk.  Which would cause a much larger fall than we've already seen in house prices.

The big banks already are getting out of the mortgage game in most industrial nations.  The new game is all about big time corporate lending.  While incomes of your average person are unstable and flimsly, a comany like Coca Cola you can lend billions to.  If you look in detail at the big banks balance sheets, mortgages are a shrinking part of the total. 

The other one banks are getting fed up with is consumer credit.  Its a small and shrinking part of their books as well.  I wouldn't be surprised to see the big banks practically get right out of consumer credit over the coming decades.  Leave it to little fish at scam interest rates.

Otoh say its a big oil company looking at spending £5 billion pounds developing an oil field complex in Ghana.  Then the banks are interested and the company has real collateral to back it up, and stability of income. 
If you inspect the recent earnings disclosure from the largest US banks, what you find is that 99% or more of new residential loan originations are going into either FHA, Fannie Mae or Freddie Mac subsidized risk buckets. There is minimal private mortgage origination and private securitizations are non-existent, thus one wonders about the happy atmosphere at the Asset Securitization Forum Convention in Orlando. What's more, even though the overall mortgage loan market continues to shrink, the balance sheets of Fannie and Freddie are growing, especially loans held for the portfolio. In the case of Fannie, to over $400 billion at Q3 2010 vs. $250 billion at the end of 2009. The defaulted loans are held at cost, BTW.

Much of this increase in the size of Fannie's balance sheet is repurchased defaulted loans from securitization trusts, grim evidence of the generosity of Secretary Geithner in letting Bank of America ("BAC"/Q3 2010 Stress Rating: "C") off the hook for mere single digit billions in terms of loan repurchase liabilities. The taxpayer will have to pay the cost of this gift to BAC shareholders, with interest. But excluding this inflow of financial detrius, the balance sheets of the zombie GSEs would be shrinking on ebbing industry new loan origination volume. The run-off from existing RMBS portfolios is so brisk, we hear in the servicing channel, that a prolonged drop in new origination volumes could see the mortgage sector shrink dramatically in 2011 and 2012, this as loan repurchase volumes hopefully slow.

Thursday, February 10, 2011

How much room the US has to bail out states

What determines the limit is when the printing and borrowing of the federal state reach a point where inflation starts going beyond the normal range. What happens in normal times is 80-90% of the credit expansion is through the private sector. So the federal government cannot borrow too much without driving up rates.. and at the same time with the expansion in the private sector there is juicy new revenues coming in that smooth over any problems.

For bailing out states it looks to me like there is no limit anytime soon for the federal government. Because in the USA the states only have a total of 1.1 trillion in debt. The federal government has other bigger concerns for the deficit, it looks like it will run like 2 trillion just this year.

Because economic growth and technological progress is an exponential function, there is going to be more and more room to print each year. The US government wants the private sector to pick up and take things on its own, and then bring down the deficit when the private sector is flying high. As long as the problem is just a private sector deleveraging as the root of the problem, then the situation is always under control.

However it appears to me this crisis will seperate the men from the boys. Like Britain is trying to use the same strategy as America and the EU, but we are seeing UK inflation is creeping up, nearing getting out of contol. That is when you start asking is this more than just a private sector deleveraging? A good example to clearly show it is Zimbabwe. That nation took away the farms from the white Rhodesians, and over the following decade it led to a greater than 80% decline in food production. The country's main export. If the money supply even remained the same, but production hugely fell there has to be inflation. Same amount of money chasing less goods.

Thats what scares me about the UK, our business and government leaders have chased so much production out of the country, that it can be that same amount of money chasing less goods.

The US has a further advantage, in that so many nations purposely buy US dollars to prop up the dollar and build reserves. So that could be one change, if in the future nations turn away from the US dollar, the US would be in a much tougher situation.

In the case that a nation is having inflation getting out of hand, and there is defaults going on.. then it has no choice but to let defaults go forward.. and make cuts. Probably would never happen in a democratic society though, no politician is going to deliver painful cuts to anyone. The Tories show that clearly, running and elected on a cutting campaign, and still not going to do it. So the likely case then is either partial default, turn to the IMF, or hyperinflation.

Thursday, February 3, 2011

Don't belive the Peak theories.

Peak oil, peak gas, peak uranium, peak phosphate, peak lithium, peak coal, peak food, etc.. they are popular online theories, but they are consistently wrong.  Basically they make a fundamental mistake in the idea that using today's technology extraction will peak by such and such a date.  Which is often true, for example in oil if the industry was still using technology from 1980 and only developing the type of fields developed in 1980, production probably would have peaked in about the year 2000.

So lets look at oil..

Global bpd production in 1980:  63.9 million
1990:  66.3 million
2000:  77.7 million
2009:  84.3 million

Does that look like its peaking?  I see solidly rising production. 

What about natural gas, there has been quite a bit of fear in the UK about the future of natural gas, because in many ways it is the primary energy source of our nation now.  It fuels 40% or more of electric generation and heats a growing percentage of houses.

Global output in trillion cubic feet:
1980:  53.3
1990:  73.7
2000:  88.3
2009:  106.4

Again I'm not seeing any peak there.  Instead solidly rising production.  What I do see is elites telling the average person to accept a much lower standard of living because allegedly teh world is running out resources.  (while the same elites live a bizarrely extravagant lifestyle).