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HARBINGERS

 

 

H A R B I N G E R S

 

HARBINGERS is the “what’s new” or content section of this web site and focuses on economic and other information and indicators. It is updated periodically for your information with current business cycle related economic events at the top. The beginning of each trend is designated in bold red. Your feedback is earnestly solicited.

It is important to include the usual warning that the following summaries of trends, data, and analysis are for your information. These summaries are based on reports from many sources and are not specific advice on anything. These summaries are based on what was and may still be occurring. These summaries are not guarantees of future performance. Regardless, it is hoped that you find this section informative.

THE PANIC OF 2008--From the late 1830s through the early 1900s, there were numerous banking panics in the U.S.  Typically these occurred when word spread that one or more banks in a community did not have enough reserves, that is cash or other assets such as gold or silver, on hand to meet demand. The banks' customers, depositors, rushed to the bank(s) in a panic to withdraw their funds, then rushed away from the banks until confidence returned. Many of these panics spread around the country and there was no Federal Reserve to intercede. Sometimes the results were rather abrupt declines in GDP lasting a year or more.

TODAY'S ROLE REVERSAL--In 2008 the banks, with new reserves supplied by the Federal government's Troubled Asset Relief Program (TARP), appear to be almost rushing in a panic away from their prospective customers...all the businesses and people who want to borrow. Panic or near-panic aptly describes the mood in Washington and on Wall Street in trying to deal with this financial crisis.   

POLITICAL ECONOMY--Normally economics determines politics and when the two conflict, economics usually prevails. The Panic of 2008 appears to be different in that political decisions are going to impact the economy for sometime to come. Among the main concerns are:

1) The enormous amount of debt being created and how it will be managed including future inflation. As the downturn accelerated during the last few months of 2008, tax revenues for the federal government started declining. Reports in March, 2009, show a significant decline in tax receipts for the U.S. Government. Two possible implications of this are:                                                                           A) This downturn may be deeper than "officially" anticipated;  and                                                                                   B) The federal deficit may remain larger for a longer time than originally anticipated. This suggests the possibility of another cycle of inflation followed by a Fed "induced" recession to "cure" the inflation (a la' late 1970s-early 1980s). Such inflation could start from an excessive expansion of the money supply to combat the Panic of 2008 and its aftermath. That could resurrect the commodity bull market that appears to have ended in late 2008.           (See COMMODITIES near the bottom of this link.)  

 2) Whether the social safety nets, bailouts, and other measures decided upon by the political process will actually do the economic jobs those measures are intended to do. This includes both the timeliness and quantity of these measures. For instance, banks have been reluctant to lend their bailout (TARP) reserves. Yet a major purpose of those funds is to promote borrowing (spending) by consumers and small businesses as well as to help prevent foreclosures.  

 3) Whether U.S. politicians opt for what will be perceived by the U.S.'s trading partners as protectionism.

 4) The increasing role of the Federal Government in the private sector. This portends a form of industrial policy.

 5) Will the public works or infrastructure improvements being planned, and which virtually all observers agree is needed, have effective quality controls in place for both the finished products (workmanship, materials, etc.) and the management of these projects (bidding process, etc.).   

 and

  6) That some of the stimulus spending is not set to start for many months or more. This suggests that either the delayed portion of the bill is not "true stimulus" (infrastructure spending and tax breaks being examples of "true stimulus"), that the stimulus package will not be sufficiently self-sustaining to keep a recovery going so a boost will be needed later, or there is not yet publicized thinking that this downturn is going to continue into 2010. There is also the risk--noted below under "Stimulus, etc."--that recessions have a habit of ending while efforts are still being made to fight them. This can have inflationary consequences.   

 WHAT'S NEXT--Long before the recession announcement was made in late 2008, and even before the Panic of 2008 began, many if not most Americans realized the country was in a significant economic downturn. However, this recession is different than any in at least 25 years (the recession of 1982) in that this one, like 1982's, is consumer led. The likelihood is pretty high that until a large part of the inventory of unsold homes are purchased, residential construction is going to remain very slow and that will keep a damper on overall economic recovery. 

WHERE DID ALL THE MONEY GO?--This was a common question during the Great Depression and is being asked again today. Part of the answer is to distinguish between MONEY, INCOME, & ASSETS--

  MONEY consists of cash and checks though for many purposes near monies such as savings accounts are also included. Loans are a major source of checking account balances. THUS, when banks do not lend for whatever reason(s), money supply does not grow as fast it would have otherwise.

  INCOME is the amount of all earnings.

  ASSETS other than money are items of value that are not money or near money and can be tangible, such as real estate, or intangible, such as stocks and bonds.

In most conversations as well as in some of the media, these three terms are used interchangeably. Generally, money disappears when checking and similar accounts are reduced. The reluctance of banks to lend can significantly reduce the growth in the money supply.

Simply put, the values of these non-money assets (see mortgages just below) are their market prices. When rising asset values (e.g.; the expected increase in the price of homes) are used in lieu of money, this is a form of leverage. Excessive leverage leads to financial bubbles. Usually bubbles burst with incredible speed and ferocity and the process of deleveraging abruptly begins. In essence, that is what precipitated the Panic of 2008 and it will take some time for people, businesses, and financial institutions to adjust to the realities of deleveraging. After that, though probably not "right after," a recovery should begin. 

MORTGAGES can be fine as assets. However, like anything else, when a lot of them are sold in bulk there are going to be some bad ones. A simplified analogy that comes to mind is that there are a few rotten apples near the bottom of every barrel that no one sees when they buy the barrel. A prospective buyer tries an apple off the top, discovers how good it is, buys the barrel, takes a few for himself then sells the remainder of the barrel at a profit to another apple lover. This process repeats while the rotting ones are spreading their rot. Suddenly someone realizes the barrel is full of rotting apples and refuses to buy it for anywhere near what the last buyer paid, so the price collapses and with it the value of the last apple lover's asset. Word of this spreads and soon all those who have barrels of apples discover the same problem with their barrels. In short order many people find themselves with declining asset values and realize they each have a loss on their apple investments.   

COMMODITIES---The 10 year bull market for commodity prices taken as an average appears to have ended. The Panic of 2008 and the accompanying worldwide recession have depressed demand for most commodities. However prices of some commodities are likely to remain volatile and not necessarily depressed by recent historic standards, as these prices continue responding to economic and other news. GOLD for instance, has a centuries long tradition of being a hedge against fear, uncertainty, and inflation, so will not necessarily follow other commodities down. (For more discussion of commodities, please see point 1B) above on the Panic of 2008 and also below several paragraphs on commodity price cycles.)

WEIGHTY RECESSION?--Many health experts fear that this recession will trigger even more obesity in Americans. As personal income declines, people look for ways to spend less and foods relatively high in fat and refined carbohydrates tend to be less expensive than healthier foods. McDonald's, for instance, appears to be continuing its "recession-proof" history. HOWEVER, health experts say there are some healthier solutions but those require consumers to do some research to take into account their individual circumstances.

GENDER BENDER--One of the consequences of the current recession is that both absolutely and proportionately men are bearing the vast majority of the brunt of the job layoffs. Enough of the brunt so that the number of women in the U.S. workforce may exceed the number of men for the first time in our country's history. This appears to be less a function of EEO than of where most of the layoffs are occurring. Manufacturing and construction are being hit very hard by layoffs. Both sectors account for lots of jobs and both are male dominated industries.

The social consequences of a majority of family breadwinners being women is unclear for at least a couple of reasons. One reason is that no one knows how long this trend will continue. How long this role reversal lasts will be very important in determining what the social consequences are. A second reason for the uncertainty is that assuming the recession deepens or spreads, layoffs will start occurring in other sectors of the economy where there are a lot more women who may be laid-off and that may have an offsetting impact.         

UPTURN IN EDUCATION, TRAINING, and LIBRARIES--Evidence suggests that in at least one respect the current downturn is like every downturn the U.S. economy has experienced starting at least as far back as the 1973-1975 downturn. That similarity is the large number of people engaging in constructive downtime management by furthering their education and training. Many study towards or achieve their GEDs (General Education Development), enroll in community colleges which tend to be more applied than academic, work towards other degrees or diplomas, or take other steps to assure that when employment picks up, they are prepared and qualified for new careers. 

Libraries, too, are noticing a significant increase in business. Americans continue looking for ways to pare costs without adding to the sacrifices they are already making. "Being there" for reading, information, and even computer usage will probably help libraries when they ask for tax increases after recovery begins.    

MALLED--One likely casualty of the recession and also of excessive expansion is shopping malls. A total of three new malls were opened in the U.S. since the beginning of 2005, and none of those were opened in 2007 or 2008. So 2009 begins with something over 19 square feet of shopping space for each American. Some experts figure this number needs to drop by a third for the amount of mall square footage to be sustainable. This is independent of the big box retailers with their freestanding stores. Regardless, if those experts are generally correct, retailing in the U.S. is about to undergo some dramatic changes.

DIFM--Many people are familiar with the acronym DIY for Do-It-Yourself. As the impact of the downturn continues, one would expect an increase in DIYers or at least in people trying to make repairs and improvements for themselves. Repairs are often cost effective ways of extending the useful life of objects from houses and cars on down the complexity scale. HOWEVER, for various reasons many of the repairs needed to extend the useful life of these objects are beyond DIY for the owners or users of those objects. These people realize that even though they can not make the needed repairs themselves, having a professional make the repairs is worth while. So a new acronym has cropped up for a growing group of customers who are helping the repair industry thrive in these difficult economic times:  DIFM or Do It For Me.  

A variation on DIY is GIY or Grow it Yourself. Gardening retailers that sell seeds for foods easy to grow at home (tomatoes are a favorite) are experiencing growing sales and profits. In April, 2009, many of these retailers are reordering the favorite fruits and vegetables of their customers. Some customers are even buying more flowers to help their gardens look better. 

STIMULUS, ETC--The '73-'75 and "81-'82 recessions have so far been the longest in the U.S's post World War II history, each at 16 months (respectively: Nov.,1973-Mar.,1975 and Jul.,1981-Nov., 1982). As the current downturn concludes its 15th month and shows no sign of ending, Congress passed and the President signed the much discussed stimulus bill (more formally known as H.R.1 or The American Recovery and Reinvestment Act of 2009).

One interesting note on recessions showing no sign of abating is that in his 1983 State of the Union address, President Reagan (long the opponent of more government action) made the following comment "We who are in government must take the lead in restoring the economy." At that point, the recession had been over for about two months but apparently there was not yet any evidence of that.                                  (Please also see point 6, above, under Political Economy.)    

STIMULUS guidelines are emerging on how state and local governments can spend their shares of the stimulus monies: The six rather broad categories of spending are:                                                                             EDUCATION                                                                               EMERGENCY SERVICES                                                                  ENERGY & ENVIRONMENTAL                                                              HEALTH CARE                                                         INFRASTRUCTURE                                                                 and                                                                                  JOB CREATION

Apparently each project must follow the infrastructure model or analogy and be "shovel ready" within 180 days of a project's application being submitted to the appropriate department.                                                 

Please check here regularly as this historic economic saga continues unfolding and also as new, other unrelated trends are added below. Current business cycle developments will be added above this paragraph and non-business cycle developments will be added below this paragraph with the most recent first. Thank you.

MARKETING MARCHES ON--Many business consultants and textbooks advice that firms should continue marketing during recessions. Two recent examples of this are:

TROPICANA--This division of PepsiCo repackage its Pure Premium products in January, 2009. Now in March after intense and negative consumer feedback, Tropicana is reverting back to its previous packaging. 

MARS CANDIES--Starting in late 2008 or early 2009, Mars candies will phase in new packaging for its products including M&M's and Skittles. The new packaging will show nutritional information, which is something Mars says it regards as important. Other Mars brands include Uncle Ben's Rice, though that new packaging may not take effect until sometime in 2010.

 

DE-GLOBALIZATION?--Not Quite. BUT the assumption of continued high costs for fuel and other transportation expenses does have American importers rethinking their supply chains. This is particularly true for products with long or multi-stop routes from their manufacturing site(s) to the U.S. Similar concerns are also occurring for strictly domestic products within the U.S.   

 

SOUTHWEST: AN EXAMPLE OF THE IMPORTANCE OF COMMODITIES AND HEDGING--The importance of all the space in this section of this web site devoted to market mechanisms and commodities might best be seen by Southwest Airlines. In mid-2008, virtually every commercial airline in this country was operating in the red despite many cost saving measures, great inconvenience to their customers, and various surcharges. Southwest may be the lone exception. Southwest was paying approximately $51 a barrel for petroleum when market prices were well over twice that. Southwest accomplished this by hedging (see just below). Southwest saved over $500 million in the second quarter of 2008 and as a result reported an income (net of special items) of approximately $120 Million. The fuel hedging made the difference between profit and loss.

HEDGING is basically buying contracts to purchase (or sell) something at a given price within a given time frame. The cost of that flexibility is relatively small.  

CERRRADO & EMBRAPA--The Cerrado is an area of Brazil that is larger than Alaska. Ten years ago the area was basically wilderness and its soil unsuited for agriculture. Then EMBRAPA, which might be called Brazil's Department of Agriculture, with some American help found ways to make the Cerrado's soil fertile. That agronomy plus a great growing climate has turned the Cerrado into a major supplier of corn, soybeans, and wheat. Many American family farmers operate farms in the Cerrado as well as their original family farms in the U.S. Their farms in the Cerrado are a few times or more larger than their America farms and generally more profitable. Some of the Cerrado's bountiful corn will be turned into ethanol. Of course the real profitability test will come when the commodity bull market runs its course and world grain prices drop.   

 

SLINKY--Over 300 Millions Slinky's have been produced since the first ones in late 1945. Yet the manufacturing process is essentially unchanged. 

 

HOW ECONOMIC THINGS WORK--"Out On The Farms," was an expression used by politicians, economists, and others who wanted to focus attention on what was happening in rural America. That was back when America had a significant but declining farm population. As America became less and less agrarian, that expression gradually disappeared. HOWEVER, what's happening out on the farms is very appropriate for much of what we see in the U.S. and other parts of the world in 2008:

The current commodity bull market (please see several paragraphs below) is being fueled in part by higher petroleum prices. Petroleum is essential to so many products, such as virtually all synthetic materials, in addition to fueling both transportation and equipment including farm machinery. This higher price for petroleum which is driven by worldwide demand for petroleum creates incentives for substitutes such as ethanol. Ethanol is--for now--made from corn. Corn is not only a basic grain for human consumption, it is also a very important ingredient in other foods, for instance feed for animals raised for slaughter. As the price of corn rises because of the greater demand for ethanol, farmers are encouraged to plant more corn and less of other products such as soybeans, which has numerous uses including bio-diesel. However, the worldwide demand for corn is rising faster than the global increase in the supply of corn. This results not only in the rising price of corn but also rising prices for the now lesser produced but still very important other crops. The cost of raising the animals is also increasing as is the cost of transporting everything. Foods seemingly not in this loop are also more expensive. One example is anything sweetened by "high fructose corn syrup." The result is inflation at the supermarkets as well as for everything made from a petroleum base. These cost get passed on generally and the result is the inflation Americans are now feeling.

This kind of cycle typically ends when markets self-correct imbalances in supply and demand. That process often involves many temporary corrections in both directions. Some of those can be very abrupt and steep in both direction before a somewhat longer lasting correction occurs.  For example, if the price of petroleum products, such as gasoline, rises too much or too fast, people and businesses will change their consumption habits to reduce their demand for petroleum products (e.g.; drive slower). Consequently, the price of petroleum and its derivative products will drop. As noted further below in the section on commodities, many of these price drops are temporary and higher prices may follow.

Depending on how numerous critical details play out, technology may prompt the end to this commodity bull market. Cellulose based ethanol will probably start becoming commercially available in the next ten years as will numerous other non-OPEC sources of petroleum and non-hydrocarbon fuels. Development of those alternatives is being accelerated because of the incentive provided by the higher petroleum prices.

An additional factor is China, the world's second largest consumer of petroleum. When the intense preparations for the 2008 Olympics are over, China's demand for petroleum may drop significantly at least for sometime. If rebuilding from the natural disasters in China and other parts of Asia gets moving, that could offset the decline in demand for petroleum caused by what will likely be the rather abrupt end of Olympic construction.     

NOTE: This analysis does not include the influence of either U.S. government policies, such as price supports for farmers to keep producing corn or the declining value of the dollar relative to other currencies.

 

EASY MONEY--Consumer advocates complain about "payday" loans and also about "instant money" loans from tax preparation services, to name just two well-publicized sources. Yet pawn shops which serve a similar purpose and charge very high interest rates have been around since ancient times. WHY? Because almost since the invention of money, people have had liquidity problems and have been willing to sell assets at deep discounts and go into debt to get through trying times.

 

SPEAKING OF ENGLISH--According to some reports, India has over 350 Million people who speak English. That's about 50 Million more people than live in the U.S., which is generally regarded as the world's largest English speaking country.

 

GENERATIONALLY SPEAKING--Most experts agree that for the U.S., Baby Boomers are those Americans born between 1946 and 1964. THE REASON FOR INCLUDING THIS IS BECAUSE experts differ on the range of birth years for Generation X and Generation Y (Gen X and Gen Y). AS USED HERE Gen Xers are those born between 1965 and 1982; Gen Yers are those born between 1983 and 1998. Millennials are those born from 1999 to some point not yet determined but very likely to be in the first decade of the 2000s. NOTE: Because the term millennial revolves around a specific point in time, the millennial generation will likely wind-up being closer to half the traditional nearly 20 year time span for a generation.

 

LEASING VANCE PACKARD--The Status Seekers by Vance Packard (1961) explored a nation thought to be obsessed with “Keeping up with the Joneses.”* Today a trend is for the more affluent--especially Gen Yers and younger Gen Xers--to not just keep up with the proverbial Jonses but to try to stay ahead of the Jonses.

To help people achieve this goal, some companies are now specializing in leasing products such as prestigious cars and designer clothes and accessories. The leases are typically fairly short-term. For instance, a lessee may have a few cars during a year; a woman may have a different designer purse and jewelry for each of several events. The leased products are usually not new except to the lessee. However, for a premium one can lease products that actually are new—-not just new to the lessee.

* FYI: The expression ”Keeping up with the Jonses” dates back nearly a hundred years. HOWEVER, the recognized behavior pattern dates back at least to the 1700s, and probably much farther back than that.

 

ENTREPRENEURSHIP--The above-noted Gen Yers and Gen Xers also have an increasing bent towards entrepreneurship. So far, an unusually high percent tend to be successful as entrepreneurs. This entrepreneurial trend is seen in both the large number of:

► Colleges and even some high schools offering courses in entrepreneurship

and

College and pre-college students profitably replicating the garage and dorm room start-up success stories of the past 25 years. While it is unreasonable to assume there are many Microsofts now being formed, there are a significant number of new firms making enough profit to provide (risk-adjusted) their founders with enough security that they do not seek what used to be perceived of as the security provided by large corporations.

One consequence of this trend towards entrepreneurship is that larger American businesses have a smaller pool of qualified Americans from which to fill critical positions. A common GenY view is that loyalty is a thing of the past so do not become dependent on a large corporation...be self-sufficient even with the risk that implies.

 

TWO NEW YORK CITIES--Imagine two New York Cities popping up every year. Approximately one percent of China's population moves from rural areas to urban areas each year. One percent of 1.3 Billion is 13 Million, roughly twice the population of New York City. With this kind of pressure and dynamic demographics, China is likely to be in for a lot of changes in how they "do things."

 

RE-OFF-SHORING--India, the country most Americans think of when "off-shoring" is mentioned is off-shoring some of its off-shoring jobs. There is evidence that India has reached a point of where it is not necessarily the low cost provider of services outsourced to it. To stay competitive with countries such as Vietnam, Indian firms outsource the work outsourced to them. As American firms discover this, they are pulling some of their contracts, primarily because the American firms fear loss of control.

 

DOPPLEGANERING—-A form of CULTURE JAMMING. Usually this is characterized by converting an ad or logo to some negative message about the item being advertised or represented. One actual example: A picture of a sickly Joe Camel in a hospital bed and the caption “Joe Chemo.” On the positive side, a brand is usually doppelganged only if it is strong.  

 

FARM SHORING (aka RURAL SOURCING)—-Companies that less than a decade ago were big on off-shoring or outsourcing to foreign countries are having second thoughts about those practices. For a combination of reasons including especially customers' dissatisfaction which leads to cost-ineffectiveness, companies are finding that some rural American communities do indeed have trainable, reasonably-priced work forces.

 

TRANSPORTAION—-Companies are rethinking the cost effectiveness of commercial air travel. Increased security measures add costs in terms of both time and money. Examples of such costs include not only the obvious periodically very pricey fuel, but also security surcharges (by whatever label is used). Alternatives for business travelers include:

1) For those whose employers can afford it, private jets. Leased private jets are a growing business.

2) A change in the break-even point where air travel is less cost-effective than ground transportation.  

and

3) Increased use of high-tech telecommunications for conferences, seminars, etc. that would formerly have been attended in person. Depending on fuel costs, this choice may face the slowest growth of the three. Simply put, it is very difficult to replace the critical human factor of private, face-to-face conversations.   

  

NURSING BOOMERS—-2006 is marking the first year Baby Boomers hit 60. So increasing demand for nursing homes and comparable facilities is an obvious trend to expect to continue for some years. HOWEVER, there is surprising evidence that instead of going to nursing homes, Boomers are turning their own homes into their nursing homes. Consequently:  

1) Health care providers, such as nurses, may have to be increasingly mobile. 

2) Demand for home health care products should continue to grow.                                                   

and                                                      

3) Demand for nursing home capacity may diminish in favor of modifying existing homes occupied by their Boomer owners. Modifications may include adding a groundfloor master bedroom and bathroom, closet space, and widening doorways to accommodate mobility aids, such as wheelchairs.    

 

LAT-—LIVING APART TOGETHER has been a growing demographic trend among both singles in a monogamous relationship and married couples is. The relationship continues but the partners live in their own dwelling units. This trend may start to reverse or at least diminish if there is a downturn--at least a severe one--in the economy.         

 

ARTIFICIAL SUN--During 2006, China is expected to start its experiment with an artificial sun. This is basically a self-sustaining fusion reactor. The reactor generates more tritium (a naturally occurring form of heavy hydrogen) than it consumes, thus becoming self-sustaining.

 

 COMMODITIES--Usually when commodities experience bull markets, equity markets go the other way. To be sure, commodity prices in commodity bull markets are subject to both individual variances from the overall trend and very substantial drops that may make it appear as though that overall bull market is over. It is also important to remember that both the supply of and demand for commodities are determined by global factors.  

Individual commodities have their own factors determining the supply of and demand for each commodity. Thus, each commodity operates as its own market within the overall commodity market. This is comparable to stocks tending to move as "sectors," and not necessarily as a single stock market. Often all are more or less in unison but many times that is not the case. For instance, just because a commodity price index is rising and the price of corn is rising, that does not mean the price of lead will rise.

Historically, about the time most commodity investors believe the overall bull market for commodities is over, the bull market surges up and prices approach or surpass their previous highs. The confusion occurs primarily because commodity price indices, like stock price indices, tend to move in patterns and there can be long declines and plateaus before another spike up. Almost concurrently with such commodity price behavior, equity markets may experience substantial increases that wind-up becoming “bear market traps.A bear market trap occurs when equity assets look like they are in a new bull market but are actually still in a longer term bear market.

There are explanations for all this which are not included here.

 HOWEVER CONSIDER THE PAST HUNDRED YEARS:

The last three commodity bull markets (shown in green below in Exhibit 1) have lasted 14-20 years. The current bull market (also in green) began in the late 1990s. So by this approach, it should last until at least through 2012.

EXHIBIT 1

COMMODITY PRICE CYCLES

1906-1923...........17 year commodity bull market

 

It was approximately 10 years from the 1923 commodity price peak to next commodity price trough

1933-1953...........20 year commodity bull market

 

It was approximately 15 years from the 1953 commodity price peak to the next commodity price trough

1968-1982...........14 year commodity bull market

 

It was 16 years from the last commodity price peak to the commodity price trough preceding the current commodity bull market.

1998-2008?..........10 year commodity bull market?... For commodity prices taken as an average, the Panic of 2008 (see above) and accompanying worldwide recession appear to have ended this commodity bull market. This is similar to the recessions of 1982 and 1923 ending those commodity bull markets.

HOWEVER, there are two caveats to consider: 1) Prices of some commodities are likely to remain volatile by responding to economic and other news. Precious metals and gems, especially gold, have a centuries old tradition of being wealth's safe haven in times of trouble, uncertainty, or inflation. Such troubles and uncertainties do exist now and likely will for at least the short-term. and  2) Referring to the discussion of the Panic of 2008 (above, near the beginning of this link) if inflation resumes, perhaps as a result of official policy, this commodity bull market will be seen as merely taken a respite and not as having ended. The respite and continuation of this commodity bull market would--from a statistical perspective--be more consistent with previous commodity bull markets than would be an end to this bull market after only 10 years.   

 

EXURBS—-are populated areas located beyond the traditional suburbs. Exurbs do not have the traditional center or focal point, so typically do not sprawl out from a center city. Demographically speaking, exurbs are the fastest growing areas of the U.S. This growth is regarded as important enough that in 2003, the U.S. Census Bureau designated some exurbs as Micropolitan Statistical Areas. This trend is already having more of an impact than is commonly realized on: where people live, where businesses locate, telecommunications, and politics.

 

PEDAGOGICAL PENDULUM--Remember the "free speech movement" from the Sixties? A number of the students involved in that movement became significant players in American academia, and their views have had a major influential on academic output. Now approximately 40 years later, many of those persons are retiring. Will they be replaced by individuals of similar or different persuasions? The answer will likely have a significant impact on the coming generation or more of American college students and how those students view both this country and the world. 

 

McPEACE--According to Thomas Friedman in his book The Lexus and The Olive Tree, no two countries that have McDonald's have been to war with each other after a McDonald's franchise was established in each country (civil wars and border conflicts excluded). Friedman's thesis, greatly compressed, is that by the time opposing nations have large enough middle classes to support McDonald's franchises, the "opportunity cost" of going to war is too high in each of those nations.

 

INTERNET GAMBLING--According to various sources, including Barron's and The New York Times, in 2004 Internet gaming worldwide was estimated at over $7 Billion, with approximately half coming from Americans. Yet Internet gambling remains illegal in the U.S. Thinking back to Prohibition, one might wonder for how long that pretty much unenforceable ban will continue. Since 1996, the number of web sites, all located outside the U.S., offering Internet gambling grew from 30 to roughly 1,800. Card games, such as poker and blackjack are currently the dominant type of Internet gambling. HOWEVER, just as technology played a major role in breaking down other barriers, so it is also making Internet gambling attractive to more than just card players. Slot machines are a prime example of that. When the objective is gambling, as opposed to the entertainment atmosphere of a casino, people will realize they have more money with which to gamble if they don't have to pay for gas, food, parking, and sometimes lodging. That could spell serious competition and diminished revenues for state lotteries as well as casinos.