11 January 2021

1) Boeing Aircraft Co. has reached a $2.5 billion dollar agreement to settle the criminal charge that it defrauded the U.S. government by concealing information about the troubled 737 MAX. This is the ill-fated jet airliner involved in two fatal crashes that killed 346 people. The airline manufacturer entered into a deferred prosecution agreement and in turn, the Justice Department will dismiss the charge against Boeing. This settlement caps a two-year criminal investigation into the two MAX crashes. This settlement will have no bearing on any pending civil litigation. In addition, Boeing will pay a $243.6 million criminal penalty. With the penalty and the fund for relatives, Boeing says it expects to pay an additional $743.6 million dollars for the fourth quarter of 2020.

2) The cryptocurrency Bitcoin is at an all-time high in 2021, one coin now worth $36,000. It has doubled its value in 30 days. Bitcoin is the first and biggest cryptocurrency, which started up in January 2009, and eleven years after its invention, the total value of all Bitcoins in the world is around $359 billion. The Bitcoins are long, unbreakable codes stored in clouds or computers. Bitcoins were invented at the height of the 2008-9 financial crisis. The idea is a type of money that didn’t depend on the traditional banking systems. Cryptocurrency is popular in countries with inflation.

3) Venture capital backed companies in the United States raised nearly $130 billion dollars last year, setting a record despite the COVID-19 pandemic, up 14% from 2019, while the number of deals is down 9% to 6,022. The so-called mega-rounds, which are deals that are $100 million dollars or higher, also hit a record amount and number, with $63 billion dollars raised in 318 deals. However, there is a big drop in the very early stage investment called the seed money stage. The trend of big investments doesn’t look like it will slow in 2021 as there is a lot of capital chasing investments. It’s expected that 2021 is going to be a banner year for many tech companies.

4) Stock market closings for – 8 JAN 21:

Dow 31,097.97 up by 56.84
Nasdaq 13,201.98 up by 134.50
S&P 500 3,824.68 up by 20.89

10 Year Yield: up at 1.10%

Oil: up at $52.73

2 December 2020

1) Orders for long-lasting goods, such as computers and military weapons, rose again in October by 1.3%. Additionally business investment increased for the sixth straight month, despite the question if manufacturers will escape the effects of the coronavirus outbreak. The surge in orders was driven by Pentagon spending, so if defense spending is excluded, orders rose a modest 0.2%. The demand for computers and related products has increased during the pandemic, from so many people working from home and needing upgraded equipment. Orders for new cars and trucks declined 3.2%, but new jobless claims rose for the second week in a row to a five-week high, pointing to an increase in layoffs. Manufacturers are less likely to be affected since they have more control over their work environments.

2) The U.S. has added 10,000 ‘budget dollar retail outlets’ since 2001, but some towns and cities are trying to push back. This is becoming a common story. A dollar store opens up in an economically depressed area, with little for healthy and affordable food options, sometimes with the help of local tax incentives. It advertises hard-to-beat low prices but it offers little in terms of fresh produce and nutritious item . . . further trapping residents in a cycle of poverty and ill-health. Since 2001, outlets of Dollar General and Dollar Tree (which bought Family Dollar in 2015) have grown from 20,000 to 30,000 in number, the number of dollar-store outlets nationwide now exceeds Walmart and McDonalds put together, and they’re still growing at a breakneck pace. This raises questions of poor nutrition in neighborhoods with limited full service food retailers. So now, communities are standing up saying that while the dollar stores may be good in the short term, in the long term there are serious disadvantages.

3) American bank profits were significantly higher in the third quarter than the first half of 2020, but still lags behind 2019 levels. Their profits jumped 173% in the third quarter, but that amount is still 10.7% lower than 2019 levels, with about half of banks reporting lower profits than a year prior. The banking industry is well capitalized with ample liquidity and so far has weathered the economic effects of the pandemic. An explosion in bank deposits drove profits up, but that appears to have now slowed.

4) Stock market closings for – 1 DEC 20:
Dow 29,823.92 up by 185.28
Nasdaq 12,355.11 up by 156.37
S&P 500 3,662.45 up by 40.82
10 Year Yield: up at 0.93%
Oil: down at $44.36

15 April 2020

1) A second round of layoffs is starting, the first being workers at restaurants, malls and hotels, most of them lower skill levels, but now it’s higher skilled jobs threatened. Those higher skilled jobs had seemed secure, however the ‘work at home’ people are seeing layoffs and furloughs to add to the unemployed numbers. Jobs such as corporate lawyers, government workers and managers are seeing the pink slip with a threat of a prolonged labor downturn in 2007-09 recession. Economist anticipated that 14.4 million jobs will be lost in coming months, raising the unemployment rate to 13% for June. Already, 17 million Americans have been laid off, with estimates of 27.9 million jobs to be lost. The information businesses are being hit, with revenues not sufficient to pay electric bills for servers and computers to host web sites. Even large law firms catering to the corporate world are having significant layoffs. State and local governments employ 20 million people, but as tax revenues drop, they too are faced with reducing employees. Analysts consider it will take 5 1/2 years for the labor market to recover.

2) Boeing, the airline manufacture, is further suffering business setbacks with the cancellation of orders for 150 jets in March. This is a result of a near total halt in demand for air travel because of the coronavirus pandemic. There are now nearly 14,000 jets parked by airlines around the world. Boeing did report new orders for 31 aircraft in March. While Boeing still has a backlog of orders for about 5,000 jets, there are fears that delivery will be deferred which will further add to Boeing’s financial woes.

3) The IMF (International Monetary Fund) is predicting that the Great Lockdown recession will be the worst in almost a century, warning the world economy’s contraction and recovery will be worst than anticipated. The IMF estimates the global gross domestic product will shrink 3% this year, compared to a 3.3% growth in January. This will dwarf the 0.1% contraction in the 2009 financial crisis. These forecast dashing any hopes for a V-shaped economic rebound after the virus subsides, with a commutative loss of global GDP of this and next year, of about $9 trillion dollars. Economic damage is driven by how long the virus remains a major threat.

4) Stock market closings for – 14 APR 20:

Dow 23,949.76 up 558.99
Nasdaq 8,515.74 up 323.32
S&P 500 2,846.06 up 84.43

10 Year Yield: unchanged at 0.75%

Oil: down at $20.82

Why Manufacturing Left America: The Real Reason for the Demise of Manufacturing in America

006-abandoned-buildings

By: James Lyman BSAE, BSEE, MSSM

Economic & Finance Report

Candidates are promising the American electorate, that they will restore the middle class of America, by returning manufacturing with its multitude of jobs A return to the glory days for workers after World War II. Of course, they make no mention just how they intend to do this, no indication they have the necessary understanding of the problem needed to accomplish this. If queried why manufacturing left America in the first place, they will most certainly answer with the well know myth that cheap foreign labor drew all those good jobs away to foreign shores, leaving millions of Americans with poor prospects for their futures. Another example of how very little real understanding our leadership has of the world they live in. So if you have a desire to truly understand a significant component of the American economy, and are willing to take a few minutes to read (not skim) through this, then hold on tight, cause here we go! One of the great Allied secret weapons of WWII was a branch of mathematics called operations research. These analytic techniques allowed the Allies to optimize their weapons and strategies, thereby reducing demands on manufacturing and resources, an all too important factor in modern warfare. For example, if you are bombing a submerging U-boat, what is the optimum spacing to drop your depth charges to maximize you chances of destroying it?

One young officer made his bones doing operations research for the Army Air Force, then went on to Ford Motor Co., and later brought these analytic methods to the Pentagon. His name was Robert McNamara. The value of operations research so well demonstrated, business schools started teaching it to all those returning veterans with their GI bills. In turn, these graduates, with these new skills, went off into American business, which after the war, was mainly manufacturing. Time marched on, with those business graduates working their way up corporate ladders, so by the early sixties, they had risen to positions of influence. They were then able to apply their analytical skills of operations research to the manufacturing operations of their businesses. Prior to that, manufacturing had been judged by its gross profit margin, that is, the difference between monies going into the process, verse monies coming out. The classic black box, where the expenses where subtracted from the revenue. By this simple method, manufacturing had gross profit margins competitive with other American business, so board of directors thought they were doing just fine. In actuality, manufacturing is really a circulating chain of money, both in assets and cash, with a time value of that money (interest that could be earned). Manufacturing is a high capitalization endeavor (as well as farming/ranching), so when this chain of money was accounted for, they found that they were getting only 5%, 3%, 1½% . . . or even ½% return on their money (investment). They found that manufacturing really wasn’t that good an investment or rather a way to make money.

Now knowing what a rotten business techniques to develop strategies to break that circulating chain of money, and maximize how much cash could be pull out to reinvest in higher paying endeavors. Then they went to their board of directors and showed them how little money they were actually making, as well as a plan to stop that manufacturing, pull out as much money as possible, to reinvest in the high returns of the new shopping centers, strip centers, franchised restaurants and stores& in other words, the emerging hyper consumerism economy. First in trickles, then in streams, the money flowed out of manufacturing, until the economic shocks of the 1973 oil crises started the rust belt crumbling, and a flood of money left manufacturing. With the problems exposed by the rust belt, Washington decided the solution was the new service economy (hyper consumerism) and so heartily encourage businesses to abandon manufacturing, and an economy based on creating real material wealth, to one dependent on the economic multiplier effect of circulating money. Never mind that modern wars are fought and won . . . or lost in the factories. This is why the North defeated the South. (For our middle east military operations, we’ve had to purchase such basics as small arms ammunition from foreign countries.) Manufacturing left America not because of cheap foreign labor, but because it’s a poor way to make money. It takes a lot of money to start a manufacturing operation (high capitalization), and in return you make less money than if you invested in something else. It’s the same for farming and ranching. The demise of the small family farm was for the same reason– a low return on a large capital investment. Cheap labor was available in the southern states, but manufacturing didn’t migrate there. This is because traditional manufacturing requires a large pool of highly skill labor, the machinists to do the actual manufacturing. This is why manufacturing remained centered principally in the north eastern United States, but at the same time business was abandoning manufacturing, robot machinists were coming into being. The required skill level was dropping drastically, so foreign investors no longer needed that large pool of skilled labor. They could now build manufacturing plants in far away foreign countries using that very cheap and unskilled labor, with robots to replace those high paying skilled people. No matter how much cheaper their labor, until they had the robot technology, they couldn’t build manufacturing businesses.

American ex manufacturers were not concerned about all this, they just wanted out of manufacture, to make oodles of money outside the realm of factories. Needless to say, any claims by any candidates, of how they intend to bring manufacturing and jobs back to America are completely bogus. They have absolutely no power over the forces determining such actions and decisions. And even if they do manage to bring back some amount of manufacturing, the robot technology has continued advancing at a breakneck speed, so most of those jobs would be low end, low paying jobs that anyone without any skill or education can do. The one thing that really bothers me, is that no one seems to be aware of the true reason for the demise of manufacturing . . . most crucially, those who we elect to govern us. And this gives us a window into why so many problems of America go unanswered, for how can one possibly address problems without first having some real understanding of that problem? They can’t!

Conclusion! These promises to restore the vigor of America’s economy are just nonsense, for you can’t control that which you have no real understanding of.

What I’m Telling the Kiddis: Advice for the Youth of America in a New World and Economy

 

computer room

By: James Lyman BSAE, BSEE, MSSM

Economic & Finance Report

You may wonder what advice to America’s youth has to do with economics and finance.  Quite simply, any change to the environment will have some effect on the nation’s economy, and my advice goes to the heart of that change.  The explosive growth of technology, and what can be done with automation, is changing the environment at an ever increasing amount.  The great tragedy I see unfolding today is the middle, highschool and college students are preparing themselves for the world of their parents and my generation.  A world that no loner exists!

 

That’s why I tell kids that the true measure of an education is the ability to understand the world you live in, and in the twenty-first century, that means having the sciences and mathematics.  If you don’t have the mathematics and sciences, then you don’t have an education, no matter how much paper you have to hang on the wall, or how prestigious it is.  More comes from mastering science and math than a mastery of specialized knowledge, for one gains the intellectual skills of rational thinking, analysis, problem solving, planning and organizing.  Right now, half the graduates of science and engineering majors never work a day in their fields of study.  Not that they don’t get jobs . . . they do, for these are the people that corporations know they need to survive and prosper in the twenty-first century.

 

I tell them to forget about what is written on that degree, that once they are out in the work force, they will be surprised, if not shocked, how many people are working at something different from what is written on their degree.  They need to take as much mathematics and science that they can, but also they need to take as stiff a curriculum as they can possibly choke down.  Your college program is more than just acquiring knowledge . . . you’re also proving yourself.  Just like a little African boy who must go out with a couple three spears and a shield to single handedly kill a lion or tiger, to prove himself a man, a warrior and be accepted by his people, so must today’s youth.  Although most students don’t realize it, that’s exactly what they are doing with their college work.  Now if they go out and kill the neighbor’s cat (philosophy , education, history, counseling, ect.), then no one is going to think much of them.  You have to kill the lion, the tiger or such.  You don’t prove anything with a mickey-mouse program.

 

You continually see this with the 20% plus unemployed or underemployed for new college graduates.  In one recent year, Texas universities graduated 5,000 psychology majors, but there was only ten psychology based jobs available.  For years I have witnessed new graduates with weak degrees going out into the job market only to find they have nothing marketable, who then elect to return to the universities and pursue the law.  The market for lawyers is now so saturated that only 20% to 50% of new graduates can actually find a job as a lawyer.  For instance, the sister of the movie actress Sandra Bullock is a lawyer, but manages a restaurant in Austin.  In my youth, that was a job for highschool graduates

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For my generation (started college 1967), the average American changed career fields three times over their lifetime.  For today’s youth I can easily seeing them having to change five, six even seven or more times during their working lifetime.  In order for them to successfully do this, they need the strong foundation that comes from those math and science course, and those who don’t have that foundation will find it more and more difficult not to be abandoned and left behind.  Technology displacement is no longer some poor slob standing on a factory production line waiting to be replaced by a machine.  That’s past tense and already largely done.  Looking at news stories during this recession, there have been a number of six figure income people who have been laid off.  Where once they could have a new job in a few days to a few weeks, they have gone months, even years with little prospects.  Just Google these three words . . . IBM, Watson and Jeopardy . . . you’ll find a revolution in artificial intelligence, and it’s already commercially available for practicing medicine.

 

Several years ago we were visiting my sister-in-law, and happened to be watching the national news when there was an announcement that one of the large hi-tech corporations was laying off 5,000, 15,000 or something like that people.  My sister-in-law exclaimed, “Why do they do that?  They’ll just have to hire them back!  Who’s going to do the work!!”, and I explained that with modern computer and communications technology, the remaining workers will do the work.  That not only can they do the work, but most likely will do it better, faster and more efficiently.  That all those jobs were gone forever, and more importantly, as technology continues to advance, this will happen again and again over the economy and the business environment.  Today, the question isn’t about getting a job after graduating, it’s about getting jobs for the next forty to fifty years as technology continues to advance and displace working people.

 

As in the past, advancements of technology has forced higher and higher levels of educations, consequently the whole fabric of our economy is continually changing.  You only have to look at the second half of the nineteenth century, and each quarter of the twentieth century to see this, with each quarter significantly changed from the previous one.  Not only does today’s business find the market different, but as technology continues to displace people, they will increasingly be left to support an ever expanding burden of obsolete people unable to make contributions to society.  If left to continue as-is, this burden will continue to weigh down the economy, pulling it and business down just as with English socialism in the fifties and sixties where business and the educated abandoned England for other countries.  It was called the Great Brain Drain of Britain.

 

The world is moving forward, advancing technologically every day, and those who fail to advance, for what ever reason, get dropped off and left behind.

In Ten Years … All the Teachers will be Gone ATS- The Next Coming Computer-Internet Revolution

technology revolution

ATS- The Next Coming Computer-Internet Revolution

Economic & Finance Report

By : James Lymon BSAE, BSEE, MSSM

For many long years, e-learning has been the seemingly unfulfilled promise that is finally arriving.  It is slowly seeping into the general classrooms, starting from the top in the collegian arena, but making steady progress down the pyramid of the American education system.  You may remember about two years ago, news stories about a teacher in Illinois who got transferred from a highschool where she had taught for years, to a middle school.  She then brought suit against the school district claiming she was allergic to children, trying to force her return to the highschool.  I heard only one report that gave the crucial fact of the case.  A language teacher of French and Spanish, she had been displaced by technology- the highschool deciding to teach languages over the internet. 

 

Colleges and universities have become rife with online courses as institutions seek ways to reduce their operating cost, with claims that 40% of college courses are now online.  Some universities have degree programs obtainable exclusively online, students never stepping foot on a campus.  And we can expect the same thing to happen in public schools as they too seek ways to reduce their operating cost.  But ATS promises to give more than cost savings, for the system can easily be designed to adjust the amount of teaching to individual students, making it something of a tutor.  So if a student is good in math, but has trouble with English, then the system automatically spends more instruction time on English and less on math.  This allows each student to progress at their own pace.  Using a Socratic emulator of continual question-answers, ATS holds the attention of a student, thus being far more effective at teaching than the traditional mass lecture system.  By using a series of questions, the machine leads the student back and forth over a concept or principle until the student discovers it, and self discovery is the best way to learn.  You always remember what you discovered for yourself.

 

Nevertheless, there is a ton of money to be made, just as with previous computer/internet revolutions.  And whoever gets there first will have a licences to print money.  The problem is no longer the technology, it’s now a marketing problem.  Once the marketing model of cable and satellite television is adopted, then the market will take off like the proverbial scalded cat.  When a sales rep can go into a school board and say, “Clear everything out of your classrooms.  Save it, give it away, burn it, sell it, store it . . . make fish blinds out of it . . . we don’t care!  We will come in, set up our individual integrated learning stations, cubicles and chairs, each with a computer and video screen.  Then wire each together to local servers and monitor computers for room monitors, and connect the system to the internet … and it wont cost you one red cent.  And while you are now paying $750, $950 or $1150 per student, per course, per semester, we will charge you $250, $350 or $450 per student, per course, per semester.”  Once the courses are built, there will only be some small software maintenance cost and with furniture and computer equipment good for at least ten years, the breakeven should come quickly, meaning the cost to the schools can only come down more.

 

In new product development, the domineering question for marketing success is the unfulfilled need- what need is there for a product that people are willing to spend their money on to fulfill this perceived need.  Therefore, the question for ATS as a viable product is exactly what is the unfulfilled need to be fulfill?  To answer quite frankly, if not brutally, it’s years of chronic nonperformance of America’s public schools, as typified by America’s ranking of academic achievement relative to other western nations.  These numbers are so often quoted in news reports that I won’t bother giving specific numbers, other than America ranks in the mid twenties to the thirties with other developed nations. 

 

Today, the first 12 years of school are largely a waste, graduates simply unable to get a job because they are so poorly educated, while job nonperformance (the teachers) has always been a major incentive for automation.  When an industry can’t get a job or task done correctly and in a timely manner, business starts looking for a machine that can.  This nonperformance is the unfulfilled need of the market.

 

Another factor is the staggering cost which several states are now suffering, which has reached the point where state governments are looking for any means of relief.  States are facing financial crisis in part because of their expensive, yet ineffective school systems swallowing up scare dollars.  More and more states are desperately looking for any solution from their fiscal dilemma, leaving state legislators facing money shortages and threats of having to raise taxes again.  That’s when they start looking for any solutions that will get voters off their backs.

                        .

As is so often the case with government institutions, they have forgotten the golden rule of the marketplace:

 

Take care of your customer or somebody else will

 

This market is over primed and ready for exploitation as few markets have ever been.  It’s the 1848 Sutter’s Mill, waiting for someone with “pick and shovel” (resources) to see the yellow glint of gold in the stream, then just start shoveling it out.  It’s the 49’ers Gold Rush of the twenty-first century, with ATS not only doing the job cheaper, but doing it much better.

Somebody is going to get very, very rich!

 

 

HEWLETT PACKARD WILL BE SPLITTING INTO TWO COMPANIES…..COME NOV. 1, 2015

HP hewlett packard

By: Economic & Finance Report

Hewlett  Packard one of the biggest technology and computer companies will soon have divided into two separate entities. The completion is supposed to take place November 1, 2015. The company will be a computer company and the other entity will be its printer company.

HP Enterprise will be raking in somewhere around $58 billion in revenue because of the split, whill HP Inc, will see around the $57 billion mark in revenue sales.

HP board approved of the demerger in the beginning of October and the markets rallied in favor of the demerger of the two divisions (printer unit and pc unit).  HP stocks have been taking a hit the last few years because of certain improprieties  in its business model, so dividing the company maybe suitable for long run performance. -SB