Relevant and even prescient commentary on news, politics and the economy.

Markets and Entrepreneurs

Which came first, the chicken or the egg?

That’s easy, First, there had to be a market. Without a market, no matter how good the idea, how well capitalized the enterprise, how competent the management team, or how skilled the workforce; there can be no business.

So, where do markets come from? Markets seem to come in three forms. They may be found in plain sight, they may be hidden in a forest of commerce, or they may be foreseen and realized only by people of exceptional vision. All three forms are available in a wide range of sizes.

Existing businesses, facing things like changing taste, obsolescence, … are obliged to always be looking for ways to expand their share of an existing market or for different markets to enter, and to always be on the lookout for new markets.

Entities and individuals considering starting a business might have a plan for capturing a share of an existing market, think that they have spotted a market not being well served, or have a new product idea that they believe will create a market.

So, how does this search for markets go down? Who are the diviners? A well-capitalized start-up will do market research; have a formal market survey done by professionals. Market Research is a highly developed science. The report will probably be highly confidential, provide great detail, and get really close to getting it all right. A Mom and Pop start-up may be more of the snoop, pry, and mostly dream type of survey. We see the Well-Heeled, the Mom and Pop, and everything between.

What do we call these entities and individuals, and everything between, that start up a business? If they start up another Mom and Pop Pizza Shop; maybe Pizza Shop Opener? Or foolish? Round Table Pizza Restaurant; Franchisee. What if they start up a business that no one had ever heard of before? One that will provide lots of new jobs and save the Nation’s economy?

What’s that sound? It’s a bird! It’s a plane! It’s an Entrepreneur! The Nightly News Readers on Cable TV casually toss off the word while affecting their knowledgeable airs. High School Business Academy Teachers always speak the word with a little excitement in their voices. Entrepreneur — a french word loosely translated — describing either a contractor or someone who undertakes doing something, or both…

Webster says: one who organizes, manages, and assumes the risks of a business or enterprise.

Wiki says:

a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome. … is a term applied to the type of personality who is willing to take upon herself or himself a new venture or enterprise and accepts full responsibility for the outcome.

And, yes, the two are not the same.

Or, … Jean Baptiste Say said, “one who undertakes an enterprise, especially a contractor, acting as intermediatory between capital and labour.” Or, … choose a level of personal, professional or financial risk to pursue opportunity.

Well that settles that.

Innovator, from Latin, not french, a term less often heard, might be easier to get a handle on.

Webster says, to innovate is to:

intransitive verb: to make changes: do something in a new way

transitive verb: to introduce as or as if new

Wiki says:

Innovators are the persons or organizations who are one of the first to introduce into reality something better than before.

An innovator innovates. Someone like an inventor, a researcher, a futurist, an idea man, … Got it!

Most Business Academy teachers don’t tell their students that SRO Hotels are full of entrepreneurs.; that being an entrepreneur is an extremely high-risk venture. That if the odds are one in a million of making a $million; don’t invest your life. In fact, don’t invest more than $1. That Jobs and Wozniak had a really big idea was much more important to Apple’s success than any willingness to risk it all. Musk has taken tremendous risks starting up Tesla, risk based on the considered conviction that electric cars were the future. Gates and Allen didn’t take the risk of starting Microsoft for the thrill of it. They did it because they, like Jobs, Wozniak, and Musk, were sure that they had glimpsed a future market. They saw the odds of success as being pretty good.

Which came first, the idea or the market?

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August jobs report: continued slow incremental progress

August jobs report: continued slow incremental progress

HEADLINES:

  • 1,371,000 million jobs gained. The gains since May total about 48% of the 22.1 million job losses in March and April. The alternate and more volatile measure in the household report was 3,756,000 jobs gained, which factors into the unemployment and underemployment rates below.
  • U3 unemployment rate fell -1.8% from 10.2% to 8.4%, compared with the January low of 3.5%.
  • U6 underemployment rate fell -2.3% from 16.5% to 14.2%, compared with the January low of 6.9%.
  • Those on temporary layoff decreased 3.1 million to 6.2 million.
  • Permanent job losers increased by 534,000 to 3.1 million.
  • June was revised downward by -10,000. July was also revised downward by -29,000 respectively, for a net loss of -39,000 jobs compared with previous reports.

Leading employment indicators of a slowdown or recession

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Initial and continuing claims: very slow “less worse” progress continues

Initial and continuing claims: very slow “less worse” progress continues

 

The continued good news in this Thursday morning’s jobless claims report is that the trend of “less worse” news is intact. But the improvement has slowed dramatically and is still at a level of about 150,000 higher than the worst weekly levels of the Great Recession.

On a non-seasonally adjusted basis, new jobless claims rose (slightly) by 7,591 from their pandemic low last week to 833,352. After seasonal adjustment (which is far less important than usual at this time), claims declined by 130,000 to 881,000, their “best” reading since the pandemic began. The 4-week moving average also declined to a new pandemic low of 991,750, its first reading under 1 million:

Continuing claims, on both an unadjusted and seasonally adjusted basis also continued to decline to new pandemic lows, by 765,644 to 13,104,366, and by 1,238,000 to 13,254,000 respectively:

 

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Should We Fear A Reappearance Of Inflation?

Should We Fear A Reappearance Of Inflation?

 In today’s Washington Post Robert J. Samuelson has raised the possibility that the Federal Reserve may be setting the US up for a reappearance of inflation.  He invoked the 1960s and 1970s when supposedly the Fed allowed inflation to get out of control out of a supposedly misguided effort to bring down unemployment by allowing successive small increases in inflation. Supposedly the newly released report on changed Fed policies may be taking us back to those bad old days, even though for now RJS admits that inflation is low, with expectations of inflation only at 1.34%.  How worried should we be?

OK, I am not going to say that a resurgence of inflation is impossible.  I can imagine it possibly resurging, with such a development perhaps being associated with a sharp decline of the US dollar, perhaps associated with a turn from its use as a reserve currency.  I do not see that happening immediately, but there is theoretical literature that suggests that such an event could happen rather suddenly at some point.  If so, then maybe it could happen.  Is the new Fed policy likely to bring this on?

I suppose one reason to be concerned is that the supposedly new policy approach has been rather opaque.  I have had trouble getting a clear picture what the changes are in the policy. The main reports have been relatively undramatic, basically an idea that at least through the next year there will be no interest rate increases.  Probably a bigger deal is that the Fed might tolerate inflation higher than the 2% targeted rate.

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DeJoy’s Fix for the Post Office: The Wrong Time, the Wrong Plan, the Wrong Man

PMG Louis DeJoy’s Fix for the Post Office, Mark Jamison, Save The Post Office, Aug. 29, 2020

After years of being a journalistic backwater the Postal Service is all over the news. From the usual contextually vacant reports about financial losses, we shifted to meaty and sometimes sensational coverage about the removal of Blue collections boxes and mail processing equipment at plants. There’s also the entrance of a new villain on the scene, Louis DeJoy, a wealthy Trump and Republican contributor with business interests and investments that coincide with the Postal Service.
Mr. DeJoy began his tenure as Postmaster General in June of this year after being named to the post by the Postal Board of Governors, which oversees postal operations. The Board is populated by a former RNC chair, a couple of investment bankers, the CEO of a public affairs and corporate advocacy consultancy, and a former CEO of various logistics and transportation companies that also specialized in mail consolidation, a form of outsourcing of mail processing.

Mr. DeJoy’s first couple of months have been eventful to say the least. His comments to the BOG at his first open session of the board on August 7th make clear that his intentions are to transform the Postal Service. Early in his remarks he says, “We are at the beginning of a transformative process. Our goal is to change and improve the Postal Service to better serve the American public, and I am excited about the opportunities ahead.” He proceeds to offer the usual professions of fealty to the ethic of service to the American, followed by the even more usual assertions about the dire straits the institution finds itself in.

Whatever he may say, it’s clear that Mr. DeJoy has entered the scene like a bull in a china shop. Within weeks of his taking office, there have been widespread reports of delays and service failures (which are backed up by internal USPS documents), news stories about Blue box removals, reports of mail processing equipment being removed, employee reports of mail left on docks or at carrier cases, and actions that seem to violate basic contractual provisions with the unions, causing the initiation of grievances as well as the breakdown of normal lines of communication between the APWU and L’Enfant Plaza. Mr. DeJoy seems to be moving full steam ahead at executing the expressed desires of the president for dismantling the USPS.

It’s fair to say that under DeJoy the Postal Service has lost any sense of urgency with respect to delivery of the mails. DeJoy seems to be taking his cue from the Wall Street manipulators who populate the BOG and hired DeJoy. He is in paring mode, sacrificing service and performance for operational reductions with questionable or at least unproven financial payoffs. This is especially damning during a pandemic and economic slowdown and certainly before an election, times when the postal network is more necessary and important than ever.

An article earlier this week in the Wall Street Journal suggests that DeJoy is actually doing the right things “to make the U.S. Postal Service’s operations more efficient,” but he may have picked the wrong time to get started on them.

But the problem is bigger than the timing. It’s always the wrong time for any plan that sacrifices service for “efficiency.” DeJoy’s plan is the wrong plan for saving the post office, and DeJoy is simply the wrong man for the job.

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Preserve the People’s Post Office: Let Us Do Meaningful Postal Reform

It is said the Postal Service is mired in debt, that it is unsustainable, a burden to the American people. This is the position of the current postmaster general, supported by the board of governors who hired him and by a treasury secretary who seems to be the chief architect of the current assault on a cherished national institution, goaded by a president who cares little for governing or the public welfare.

These claims are a lie, one that has been pushed repeatedly for at least fifty years by those who would steal an American asset and convert its public benefits into private profits.

If the Postal Service has large unfunded liabilities, it is as much because they have been defined as such by those who seek to look at this most American of institutions in a way that lays the most burdens upon its shoulders. The truth is that the Postal Service has incurred its liabilities in the service of a greater and necessary good. Far from being onerous and intractable, they are evidence of a skewed perspective, a perspective bent on being intentionally blind in furtherance of an ideology that denigrates and denies the validity and necessity of government.

If one begins with the premise that government is only a creator of debt, then the normative assumptions underlying the accounting systems designed to measure government will be weighted towards finding liability, not value.

The Postal Service has employed as many as 800,000 Americans gainfully in jobs that paid living wage and provided life-sustaining healthcare and secure retirements. These benefits rebound and reverberate through local economies, spreading both wealth and security. They have lifted many whose options were otherwise limited into productive middle-class lives while bringing communities together. And this has been done in the service of a noble and useful purpose, creating an essential infrastructure whose uses are limited only by a failure of imagination and political will.

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What is Looting?

“Looting is a natural response to the unnatural and inhuman society of commodity abundance.” — Guy Debord, “The Decline and Fall of the Spectacle-Commodity Economy.”

The photograph used in Andy Warhol’s 1964 print, “Race Riot” was taken by Charles Moore and was published in LIFE magazine in May of 1963. Warhol used it without permission and Moore sued. Eventually there was an out-of-court settlement. The scene depicted was not a “Race Riot” as Warhol’s presumably ironic title claimed. It was a police attack ordered by Police Commissioner “Bull” Connor on a nonviolent demonstration in Birmingham, Alabama.

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The long leading forecast for H1 2021 at Seeking Alpha

by New Deal democrat

The long leading forecast for H1 2021 at Seeking Alpha

It’s been a long time since I “officially” updated my primary set of long leading indicators, mainly because until it is brought under control the coronavirus pandemic renders other indicators moot.

But that is likely to change by sometime in spring next year, so it makes sense to see what the economy might look like right after that.

This post is posted at Seeking Alpha.

The outcome of the election, and the likely time by which a decent vaccine might become available factor importantly into this outlook.

As I commented in response to some pushback there, my thought process was generally as follows:

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An Increasing Anomaly In The US Balance Of Payments

An Increasing Anomaly In The US Balance Of Payments

 On Econbrowser Menzie Chinn has posted about an increase in the scale of US international net indebtedenss. Since the late 1980s the US has been a net debtor internationally, borrowing more from abroad then we are lending and investing there.  The increase in this net indebtedness has noticeably accelerated since our current POTUS took office, and especially this year.  The size of that net indebtedness has gone from about 40% of US GDP to somewhat more than 55%, a pretty substantial increase, given that we have been in this condition for over three decades and in three years by more than a third.  The fiscal stimulus of this year has definitely been overwhelmingly financed by foreign borrowing.

This increase in net indebtedness highlights a longstanding anomaly that now looks even more anomalous.  Even though the US has been a net debtor for over three decades, it has remained a positive net earner on capital income arising from all those international capital movements in and out of the US.  This is mostly measured by the primary income part of the international capital account, which last year was in surplus at a bit over $60 billion.  What is more curious is that this does not seem to have changed much at all over the last five years, some slight changes here and there, but mostly unchanged.  I confess to being mystified as to how an increase in net indebtedness by more than a third has led to essentially no change in the capital income payments situation.

 

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Watchdog asks postal regulator to seek USPS data on mail delays

Steve Hutkins on Mail Delays. At the end of this post, Steve issues a call to action. Perhaps, You may be able to help?

Today I (Steve) filed a motion with the Postal Regulatory Commission (PRC) asking it to ask the Postal Service to provide on-time delivery reports for the past several weeks. These reports would offer more transparency into postal operations and show just how much the mail has been slowing down since the Postmaster General implemented his transformation initiative.

The service performance reports show the percentage of the mail that met the Postal Service’s service standards, i.e., the expectations for how long it will take for each type of mail to be delivered. For First Class mail, the standard is 2 to 5 days; for third-class mail (Marketing Mail), the standard is 3 to 10 days. Generally speaking, about 85 to 95 percent of the mail meets these standards. The mail that fails to meet the standards is, by definition, delayed mail.

Due to changes at the Postal Service earlier this summer, on-time scores have declined significantly, as illustrated in this graph included in a USPS presentation to representatives of the mailing industry in August. On average, starting in July, on-time performance on First Class mail, for which the target is 96 percent, fell to about 79 recent. In some districts, scores fell to around 70 percent. (You can find more of these charts here and here. And a couple of days after this post was first published, even more charts were released; the official version on the House Oversight Committee’s website omits the Priority chart, perhaps because it’s considered more confidential.)


The service performance reports on which this chart is based contain scores for all the USPS districts in the country, so it’s possible to see where the most widespread delays are occurring. They also break down First Class mail into 2-day mail (local) and 3-5 day mail (regional and national). The reports also indicate how much mail was one day late, two days late, etc. In other words, they provide a fairly complete picture of mail delays.

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