As I've stated several times we're rebudgeting across all of our businesses in 2008 - reducing cap ex and head count plans. IT will be a significant victim of these cuts.
In certain sectors of IT, you have to really grow in unit volume to offset the perpetual decline in ASPs. This has long been seen in an area like PC hardware (the latest computer that I'm buying costs $449 and is terrific) and is - with the effect of open source - hitting large areas of software like database products (where something really powerful like mySQL is free).
IT purchases is not much of an indicator. Most of it is a function of IT employment - more IT staff you have more bullshit stuff you buy, that's how it goes. When it hits the fan staff goes first then purchases.
This, as we here at CR knew for sometime now, calls into question every analyst quoted or featured in the mainstream media for the last twelve months declaring that tech was immune from the credit crisis, this was always complete bullshit.
As was the decoupling theory, as are the consensus estimates for 7% eps growth this year, it is past time that we parade every one of these assholes back out on stage and play clips of the proclamations that tech is immune, that eps growth will maintain an upward trajectory, and for God's sake physically remove Cramer from the air.
The Nasdaq is currently 14% or more negative for 08, 50% below its 2000 high, and the assholes were out in full force pushing extreme valuations and the thought that it is prudent to purchase "overvalued" tech stocks because they will become more overvalued and were immune.
When it hits the fan v, I look at my CAPX budget first and slash...no new machines, monitors, laptops, etc. Software upgrades go, and all purchases over X dollars are personally approved by me. When I have to chop staff, I know who can go, as good managers always keep some deadwood around so when the CFO wants staff reductions, you can still function effectively. And hiring gets frozen. If someone leaves, they may not be replaced.
Contrary to popular belief, we do not sit in our offices plotting who can be laid off. That is very disruptive, and should only be used as a last resort. It also implies poor planning.
As an example, when I was drawing up the 2008 budget with the CFO, I actually slashed hiring pretty severely for 2008 as we knew it was going to be a challenging year. If I did a good job, I shouldn't have to let anyone go, and just leave positions open until things look up either later in the year or in 2009.
What if it's not just a "mild recession"? Remember all the prior forecasts ASSUMING that the subprime problem would be contained. That housing will bounce back. That the consumer will stay strong. That the CRE market would be immune. etc, etc, etc.
I'm sure the next phase of forcast will be based on the assumption that we will not enter another great depression.
If you follow the semiconductor equipment sector, they are already seeing a slowdown in orders and the leading company in that industry just laid off 1000 workers last month.
I think they have started to read CR and have made adjustments to their fairy tale forcasts.
I agree with 100% with
risk capital | 02.10.08 - 8:18 pm
" As was the decoupling theory, as are the consensus estimates for 7% eps growth this year, it is past time that we parade every one of these assholes back out on stage and play clips of the proclamations that tech is immune, that eps growth will maintain an upward trajectory, and for God's sake physically remove Cramer from the air."
If I did a good job, I shouldn't have to let anyone go
Well Ipodius, i will not be the one to blame you... This is just the way it works, first headcount is frozin, second there is attrition and third you know it's not what you want to do. Your mileage may vary based on industry though. I am talking more of a pattern for Fortune 100 or 50.
True dat v. We're purely technology. But if I were at a bank where we had just slashed 80% of our mortgage lending business, it would ripple through to IT as the support staff for them wouldn't be needed and we'd re-purpose things so that equipment purchases would be down.
I think these scenarios is what is reflected in the surveys.
Ipodius - I suppose laptops can add up to high end storage which was mentioned in another reply. I don't know, I was simply saying that first CapEx with 5 years of ammortization accumulates and then someone notices that there is a good deal of OpEx which can be cut. Anyway, I think we are on the same page and I it's getting late for me. Cheers!
I ordered a notebook computer on 2/5, and they said estimated ship date was 2/29 (!). It shipped today. Perhaps they are not so backlogged these days? Similar thing happened with a server machine I bought a couple months ago.
Y'all need to relax. John Chambers said just last week that this is nothing more than a "speed bump". Of course, the last time he said something like that, it was January 2001...
In Silicon Valley North, I just interviewed a pretty senior guy who was looking for work because his (sexy, ex-stanford) company just lost all its bank customers.
Schadenfreude is way less fun when the bad stuff is happening to you. I expect my corporate half to suffer, as our largest customers are in the financial services industry and venture capital bankrolls things. Faces have gotten a little grim there.
Fortunately, I still have 3 academic halves to fall back on, but they collectively don't pay as much as the single corporate part-time position. Oh well -- I consider it a risk premium...
I wouldn't begin to know how to tease out the chicken/egg on this, but when the MSM starts shouting "recession", doesn't that kinda deliver one up on a platter?
It goes back to that Shiller on Bloomberg video CR had up a week ago. He said he worried about consumer confidence, you know, that if it starts to slide . . . I don't think he really finished the thought, but I think it would go something like how do you get it back?
This doesn't surprise me one bit... Latest & greatest in IT increasingly provides a diminishing return. Its now what you do with what you have not getting the latest and greatest before your competition does. The apps themselves are marginally advantageous.
IT is a commodity like gas, electricity & water. You have to have it but don't need the fluff. You buy for replacement or for increase in 'consumption' not for the 'buzz' anymore - that was so 1990s.
IT producers need to structure their business based on this 'new' reality - not wishing the past will come back. If they do they'll be fine, if they don't they'll be 'surprised' again and again.
Coincidentally, money.com seems to have been hacked and is now redirecting to Quantcast - Home Working in the security & identity management segment of IT, simple and cheap always win. They just won again.
Energy & energy-related infrastructure will definitely be a driver of future growth. IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF. "Necessity is the mother of invention", no? We need new forms of energy, and those in turn will require whole new modes of transportation & distribution.
The upside here is that such work will require all skill levels, and a majority of the work will have to be performed within the states. Heck, it'll be local to everyone.
Energy & energy-related infrastructure will definitely be a driver of future growth. IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF.
We're slightly increasing CapEx over 2007 - with a focus solely on getting more efficiencies out of existing processes. Some software primarily, and if needed, additional hardware (but only if needed). If it's not reducing labor housrs and costs - we're not looking to buy it.
IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF.
Possibly. That's what Matt Simmons has been stumping for, for several years. Simmons
But the big 'opportunities' and all the low fruit will be in actual low-tech conservation. You know, growing food locally, telecommuting, or carpooling, bicycles... rebuilding rail, shipping infrastructure... and downtowns.
On these points, right winger Simmons agrees with lefty 'doomer' James (clusterf**cknation) Kunstler. Clusterfuck Nation by Jim Kunstler
Neither one thinks any of this will be easy. Simmons says Americans will bite the bullet on oil prices, but will freak out when spot shortages arrive. Kunstler thinks an 'Apollo moonshot' type of program is doomed to complete failure.
Suburbs? The home building industry as 'engine of recovery?' Neither one thinks this is remotely possible, nor an intelligent use of time or money.
Just FYI.
Yeah, my niece was telling me proudly about their "buy" of this. I just asked how many and breathed a sign of relief when she said 15 ( it was so oversubscribed that's all the retail allotment was ). She can afford to learn a lesson on 15 shares I reckon - a much more persuasive one than any I can deliver.
Yes, I've read both Simmons & Kunstler. To be specific, Kunstler believes any attempt to maintain an automotive-oriented society will ultimately fail. He may be correct; the world may ultimately be a much smaller place.
Have you read "The Party's Over"? Heinberg does a great job of detailing the history of the world vis-a-vis energy. Heinberg, Kunstler and others have shown that there really are no challengers to oil on a pure EROE basis.
Personally, I'm more optimistic, er, hopeful. I believe petroleum products have made it too easy for too long, and that the next generation of energy technology hasn't yet been discovered because the need simply hasn't been as pressing as it will soon be.
Credit Woes May Widen
A widening array of financial-market problems threatens to trigger a new wave of the global credit crunch, extending it far beyond the risky mortgages that have already cost banks and investors more than $100 billion in losses, and potentially bruising the U.S. economy.
Asian markets must be reading Geoff & my WSJ posts.
Japan is so upset that they are taking the day off. The other markets have put on their swim fins and snorkels. Maybe they will find pennies down by the drain in the deep end.
TJ&thebear:
Thanks, I have read 'Party's Over'. I AM an optimist, too. I think Kunstler's version of the future is essentially correct, but I don't think it's 'The End'.
Did you ever read 'The Hirsch Report?' The report said that there were alternatives to oil, but that they'd be expensive, and take years to implement... 10 - 15 years of 'economic hardship', if we waited until the oil peak occurred.
Since theoildrum.com puts the peak at 2005 - 2006, it'll be interesting to see what we invest in first.... energy, or more housing.
No, not read the Hirsch report, but I have seen excerpts. Timeframe sounds correct to me. People don't realize how long it's taken to build the whole petroleum infrastructure we already have. It's going to be the mother of all rude awakenings, isn't it?
What scares me is the fact that wars are typically fought over access to resources. The future could get really ugly, really fast.
p.s.: Plus it's a minimally clever variation on the title of the old TV show with the hunky truck driver constantly surrounded by gorgeous chicks (and a monkey).
tj, one man's duality is another man's schizophrenia, but, hey, given the description of conjure bag, I'd say you're still on the healthy side of the line.
That WSJ article is not at all surprising. Why would anyone want to trade cash for the kind of paper the banks are trying to unload?
I'll only get really concerned if the U.S. Treasury holds an auction and no one bids.
Even if we realize tomorrow that we have to do something, the bureaucratic and regulatory inertia was stop everything for years.
In 1989, there was an earthquake in San Francisco. Part of the Bay Bridge fell down. Every knows that it has to be replaced. After 17+ years, they still haven't finished the replacement. No one in our country knows how to get anything done any longer, but we can organize meetings, planning sessions, and circle-jerks.
If the energy projects are outside the US, the Chinese will handle it. They have the dollars to pay for it; we have deficits. Foreign governments know that if they do any deal with any US entity, it will come with all sorts strings attached. They know that the Chinese aren't so picky.
LOL! Yeah, back in 2002 the burgeoning housing bubble (coming so soon after dotcom) led me to do a little reading, and THAT put me onto the contrarian blogosphere, and well... the rest is history. I thought I was a pretty well-informed guy, but I was utterly clueless. Needless to say, I didn't like what I learned, and thus the inner bear started growling and hasn't stopped since.
This is not good news for the (few?) remaining zombie companies from the tech bubble, and the no-business-model companies that have been launched since.
Don't get me wrong. Lots of great innovative and amazing companies have been created as a result of the last two bubbles. That's one benefit of bubbles -- some crazy ideas turn out to be pure genius.
However, lots of crazy stupid ideas also get funded and survive off the speculative frenzy. For a while, that is. These young companies are good, dependable consumers of IT products, until they're gone.
I'm not familiar with Schumpter or his economic theories, but according to the link, he read Nietzsche, who popularized the notion that man could creatively destruct himself into an ubermensch, so I am familiar with the concept.
Norka,
High net worth investors have borrowed money from banks to buy Reliance Power IPO. Margin + IPO price cost them Rs 600/share. The stock is trading at 425. Foreign investors are fleeing and high net worth investors are getting screwed.
Now they say the 'fundamental value' of the stock is 300/share. Go figure.
I've read the party's over, also high noon for natural gas, and a few others.
I'm very pessimistic for this century. I am convinced by the end of it the population bubble will be mostly deflated.
In the near term though, I think there is an important question to ask: When will 5% of the worlds population(the US) stop using 25% of the worlds petroleum production?
I think a large drop in US consumption of fossil fuels will occur during this down-cycle, caused by a reversal of US borrowing, likely coincident with a currency/debt crisis. The adjustment for the economy will be severe, and the recovery will be far off.
When will 5% of the worlds population(the US) stop using 25% of the worlds petroleum production?
I think you're probably correct that U.S. consumption of fossil fuels will drop during this part of the cycle for simple economic reasons. People will conserve oil to conserve dollars.
But the reality is that the fossil fuel producers have not wanted the U.S. to diminish its consumption. It's their bread, butter, cake and icing all at one time and they love selling the stuff to the tune of 90MM bbls/day.
Price has not been an object until now, as shown by the move from $10/bbl to $100/bbl in a decade. I don't think price becomes a real problem in the U.S. until $200/bbl.
It will have to be a shortage, a cut off, lines at the pump, the true political effects of peak oil, to get the average American's attention.
The next 10 to 20 years will definitely be interesting, but I'm fervently hoping that the intervening years will prove the folly of so many things -- fiat currencies, nanny governments, oil dependence, etc. -- that we'll clean house and come out so much stronger on the other side. You know, the old Phoenix "rising from the ashes" thing.
Unfortunately, human nature never changes, so we seem doomed to repeat the same mistakes over and over again.
US refining capacity is tight. They have been running flat-out with deferred maintenance for years.
If Venezuela's Citco refineries (accidentally on purpose due to the ExxonMobil spat) have turn around problems this spring, we might get your gas lines.
As a newly-minted CS grad I didn't have any great expectations for the 90s so I went off to Japan in the summer of 1992, expertly missing the great dotcom boom and jumping right into Japan's "Lost Decade".
I've been back for going on 8 years now, and I don't have any idea what to expect for the remainder of this decade let alone the 2010s.
We talk of capital destruction but the capital from the Bush economy is still out there...Here's a chart showing savings essentially doubling from $2T to $4T over the Bush years.
Basically I think as long as we sock it to the rich we'll make it through the next 20 years A-OK. They've profitted immensely from the previous 20+ so they can certainly start/resume "sharing the wealth" to keep this country in one piece and moving forward.
I agree that current oil prices aren't extremely high or damaging to the economy. A lot of that is just the result of them coming from such low prices, and pretty high and steady inflation.
Higher oil prices are(would have been) good for society in the long term.
It's not going to be too terribly long before there is some significant supply disruptions. They will likely be isolated to certain geographical regions, or countries.
With a shrinking economy and growing debt backing the us dollar, it's only a matter of time before it demands significant less oil on the global markets.
Even ignoring the current/debt aspect, there is a lot to be worried about wrt the regional production we rely on, such as the oil and natural gas coming from canada and mexico. Mexicos production is declining very quickly, and North American natural gas production will be going into significant decline long before enough LNG infrastructure has been developed to take it's place, even if the global production is there to supply it.
NorkaWest re If the energy projects are outside the US, the Chinese will handle it.
I'm not so sure about that. The U.S. still has tremendous energy related experience and processes to offer. But that won't be our salvation in the sense that trading dependence on foreign oil for dependence on foreign LNG leaves us in the same place.
I really hope we do have an Apollo type commitment to renewable energy projects inside the U.S. together with increased R&D into alternate forms of liquid energy (other than ethanol). It's the only logical answer for the long term.
(I know . . . in the long term we're all dead anyway . . . but presumably there will be other Americans here then.)
I totally agree with you. I'm all about quality not quantity. I somewhat look forward to the challenges that are coming, but am sad for the suffering that so many will experience, but like you say, that is unavoidable human nature.
NorkaWest, I'd like to see Chavez cut off the tankers to the U.S. It would wake up a few folks around here and probably create additional political instability in Venezuela.
As far as actual supply, though, oil is still fungible world wide. If he directs tankers elsewhere, other tankers will come to the U.S.
There's no doubt we're at peak oil, but production has not yet begun its inexorable drop off and, with the world's economies all slowing somewhat, the producers will have an incentive to keep supplies flowing.
"Basically I think as long as we sock it to the rich we'll make it through the next 20 years A-OK. They've profitted immensely from the previous 20+ so they can certainly start/resume "sharing the wealth" to keep this country in one piece and moving forward."
That's the kind of thinking I'd like to hear more of!
Back in the Sixties, less than one percent of the population controlled 20 percent of the wealth. Now it controls over 40.... I think they can sink back to 20 percent without undue trauma.
Yes, raise taxes... but also enforce the others the way they ought to be. Knew a corporate tax auditor for the IRS, and he told me about all the dodges corporations use to hide income; since they know the IRS has limited manpower. And hit those American corporations who dodge US corp. taxes with a Cayman Island dropbox.
As for IT.... I keep thinking that one of these days, some cash-strapped state will decided to save money by going open-source for desktop software. And they'll put together a standard distribution for the OS and interface and apps... and other people will start to use it... and suddenly Microsoft and even Apple find their revenue stream shrinking.
I was with Sohio in the late 1970s when we finished the Trans Alaska Pipeline to Prudhoe Bay and an international company that found and developed Columbia's Cano Limon field. In the 1980s, most of the people who completed these projects left the energy industry.
I am not confident that American energy companies still have the institutional knowledge to complete a large number of this large projects. Also, what institutional knowledge and experience remains is getting long in the tooth and ready to retire.
did i read incorrectly or was the sensex off 5%? India is what the rogue trader/emergency rate cut story going a few sunday nights ago.
oh yeah back to the topic
back in the day here's how i learnt to look at it
y=c+i+g+nx
c is stagnant or slumping
nx is negative, but turning positive
g is growing
i is stagnant to declining
my guess is domestic investment and growing exports (while reducing imports) is the trick to get the US out of the slump. now how the rest of the world responds, ya got me!
No... Maybe start by eliminating the government sanctioned monopolies, stop building so many weapons and sending them overseas, stop policing the world, stop subsidizing "growth", etc. Cut unneeded(and especially immoral) spending before ever raising taxes.
NorkaWest, yes, it's true that a lot of experienced people have been lost (thanks to the booms and busts) and many more will be gone soon. Hopefully the generation behind them has learned something.
At least everyone agrees there are no more 20Bbbl fields like Prudhoe Bay to be found.
tj, yes, Simmons has been right on for a long time, educating even the industry about reality, and especially in poking through the obscurity of the state of the Saudi fields.
For the first half of this decade I was virtually 100% in energy. I'm not now, though I fondly remember a big chunk of CHK at $2.20 and even more WMB at $1.37. Those were table pounding buys. I always follow PTEN these days, but never pull the trigger.
My company has cut IT spending since the second half of 07. For the first time in a number of years, I have had to delay upgrades/software/purchases of various kinds. I can definitely say hiring's been suspended as well.
Simmons decline charts correspond to what the geologies were showing me when I was with the oil companies.
Recently, there was a big fight about drilling in ANWR. What no one mentioned was that Prudhoe Bay and Kuparek fields are declining. If we do not find new sources of oil to run through the Trans Alaska Pipeline, the the pipeline will become uneconomic. The oil companies are legally required to rip out the pipeline when they are done.
If we decide later to develop fields on Alaska's North Slope, it will be uneconomic to rebuild the pipeline to get the oil to market.
Bob Dobbs wrote: Back in the Sixties, less than one percent of the population controlled 20 percent of the wealth. Now it controls over 40.... [...] Yes, raise taxes...
Bob, that 1% doesn't pay taxes...they'd appreciate the help preventing others from joining their group.
Although I'm definitely of a libertarian bent, some of these $100M+ types seem to be just begging for a tax hike. Heck, they're paying a lower rate than I am!!! I'm just hoping that Obama draws the line above my income.
"No... Maybe start by eliminating the government sanctioned monopolies, stop building so many weapons and sending them overseas, stop policing the world, stop subsidizing "growth", etc. Cut unneeded(and especially immoral) spending before ever raising taxes."
I'd drink to most of that... but frankly, in the short run... raising taxes might be easier. While you gradually work on all the rest.
I'd like to think we could get support to cut the defense budget and reign in adventurism overseas, but it'll be awhile before the public will buy it. Especially with the kind of employment the industry still supports.
I think you've hit a very important nerve that I'd like to expand on.
If we get a severe recession, possibly global, based on contraction of credit and negative sentiment, it could prevent a lot of energy related investment that we drastically need to cushion the effects of peak oil, making the decline much steeper then it might have been.
I wholeheartedly agree that the distribution of wealth is a major problem and needs to be dealt with. I think before worrying about taxes we need to stop giving away so much to the top 1% through the fiat system of money.
man that WMB buy was a good call but risky. in the aftermath of the enron bust, WMB was selling off their 'non-core' assets left and right, raising cash. It even got to the point they had to get a $1Billion loan from Buffet at 18% or 20% for a 1 year term(collateralized by some asset he would like). yeah, gutsy, but buying there when it was below 2 bucks has paid off handsomely. good call!
NorkaWest, the Pipeline is an interesting world in its own right. I gather you've followed it over the years.
I understand maintenance is running about $100M/yr these days which seems awfully expensive, but understandable given the age of the pipes and pumps and the brutal weather conditions.
I have no problem drilling in ANWR and think that if it ever comes down to drill there or rip out the pipe, the people will go with drilling.
Completely agree that it will never be built again. I'm still amazed that it was ever done in the first place.
Not to toot my own horn, but I made much the same point a few days back on Winter Watch:
OIL: Were past the production peak, and prices are unlikely to drop more than 20% from here. Precipitously declining supply combined with increasing domestic demand within the producing countries pretty much guarantees that. Any demand destruction due to economic slowdown will be more than offset by the decreased exploration accompanying that slowdown, too.
stinky, those events happened at the same time. The loan and the sale of the Mid-American Pipeline brought the price up to $1.37 and I decided it wouldn't fail and it was essential.
I still have my GO WMB T-shirt and wear it once in a while, though no one understands the Band of Fools ball cap. You had to be on the Yahoo board in those days.
i lived in tulsa and may '99 the williams tower downtown had a big '50' on the building at night by lighting up the right windows of the building. broadcasting to all their stock price ah, what a true decimation that was. what a fall and i knew many who lost jobs during the dot com bust and thereafter.
yeah that buffett put helped them get lean and mean again, true that. now i'm in oklahoma city and everyone and their dog works for CHK or is subcontracted out thru them. what a crazy few years...
Energy & energy-related infrastructure will definitely be a driver of future growth. IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF.
tj & the bear
With roll/roll solar, what infrastructure is needed beyond 2 way metering and dc/ac converters? The future is distributed power. Once nanosolar can scale up production, with sufficient market penetration peak load generation during the summer goes bye bye.
Between solar, wind, constructed wetlands and the desalinization technique developed by New Mexico St U, I can live completely off the grid on an island in the Bahamas, or Mexico, or wherever I want near a body of water below the 43rd parallel with all mod cons.
It got built originally by Congress passing legislation telling environmentalists and the EPA to "Shut up and just build it".
It will never happen again.
I wasted a year of my life trying to get a pipeline built to move Alaskan oil to refineries in the Midwest. It never got built so we shipped the oil to Japan.
If given the choice between living through that frustration again or retiring, I would choose early retirement and move to Costa Rica. Cost of living is reasonable there. People are nice too.
I suspect that many of my former colleagues would make similar decisions.
Renault will offer a small number of electric models of existing vehicles, like the Megane sedan, at prices roughly comparable to gasoline models. The batteries will come from Mr. Agassi. The tax breaks for clean electric vehicles, which Israel promises to keep until at least 2015, will make the cars cheaper to consumers than gasoline-engine cars. Youll be able to get a nice, high-end car at a price roughly half that of the gasoline model today, Mr. Agassi said.
FYI for anyone still up... in Simmon's book, "Twilight in the Desert" he shows many graphs detailing the depletion of all the known 'supergiant' fields.
Prudhoe Bay is 70 percent gone.
And... open source software for schools and municipalities, to save money? Excellent!! Of course, we won't do that unless we have to.
We'll have to.
"As for IT.... I keep thinking that one of these days, some cash-strapped state will decided to save money by going open-source for desktop software. And they'll put together a standard distribution for the OS and interface and apps... and other people will start to use it."
Bob Dobbs, I'm with you. I think governments and companies could save a tremendous amount of money using open source alternatives.
Typical worker monkey sitting at his XP desktop, running spreadsheets and doing web-based database stuff could just as easily be running an Ubuntu desktop, with Firefox and OpenOffice, running free email clients and servers, and Java or whatever, connected to a Linux server with apache+php, MySQL, samba, you-name-it.
I could go on a long diatribe at this point, but suffice it to say that those of us who have switched to Linux/OSS are mighty glad we did, and can appreciated the many benefits such a switch provides.
Good plan, but the fly in the ointment is that most IT professionals are Microsoft monkeys. Give them MS stuff, they know which levers to hit in order to get a banana. Give them Linux and they are lost.
Ubuntu on a old Soni Vaio laptop is sweet and an interesting project.
In highschool, a foreign exchange student and I set up a computer lab in an unused classroom using redhat linux 5.2 on recycled "old" computers donated to the schools.
They were never used of course, even though the majority of the kids at the school had very little experience with computers, due to only a couple computer related classes offered. Only the occasional paper had to be typed at the library, where there were less than 20 computers, for a school with 1500 people.
Point being that the ability has been there, but decisions are made. Even in the future there may be just as much increase in the use of pirated software compared to use of open source software. Personally I could care less if that's what people choose, let them use that proprietary crap(granted there are a few gems).
Saving money using open source software won't be much of a win for the economy as a whole, since it will result in less computer programming jobs while only saving marginal costs for most businesses, though I agree with it for other reasons.
"Saving money using open source software won't be much of a win for the economy as a whole,.."
IMHO, the economy is best served when people don't worry about the "economy as a whole", rather when they look after themselves with productive self-interest. Unless, of course, you are talking about an economy of the Marx/Engels variety.
That was my point, that productive self interest may choose pirated software over open source, with the income to the software companies declining either way. I think open source is great, and in the long term much more "efficient" in the economic sense that proprietary, but that doesn't provide unneeded jobs.
I think there is a vast overcapacity of human labor, with a looming shortage of resources. Much of the economy now is government mandated unproductive low-middle wage jobs. Airport security is my best example. There's a lot of things that are good for society, but bad for what we call our economy.
I'm certainly not suggesting that the government should try to manage any of it, we can see how well that has worked in the past.
Hello. Small OT. I hope no one minds. I figure 3:10 am I may not irk people.
The comments about energy related business being the new drivers of the economy led to a question.
Due to Pisspoor persoanl decision making skills I am a bit behind the curve. Nearing 40 and facing a dilemma those half my age face. I have an opportunity to go to school. Community college, two year or less.
Any ideas which direction I should look for a degree/certificate that will lead to decent employment? Not saying it right, sorry.
Not asking what to take, but guidance and suggestions where to look to decide. This is it, after this schooling the rest will be a class here and there.
Veering back on topic:
Right now I work in a factory that supplies some automotive and some construction and some pool liner.
Bonus is not happening this year, lay-offs have started and expenses are looked at harshly. I think this year is going to be a wild and crazy ride.
Odd, I finally pull my head out of my butt, claw my way from mentally ill homeless woman to mildly eccentric factory worker and the world is going pffft. sigh. I think I will miss health insurance most of all, after the paycheck.
i'm 2/3 your age, but the 'educated' friends of mine who are doing well and would likely do well even in a bad national downturn are in engineering, accounting, and medical technology.
If reading this blog says anything, it's that there are a lot of different opinions. You might as well take something you enjoy learning about,.... Or consider something to do with real estate. By the time you finish there won't be anywhere for it to go but up:)
I hear from a friend at Bloomberg, that they have a hiring freeze there, and are not selling leases on many terminals. I suppose if Wall Street is sliming down, they just don't need all them anymore.
I hear you about learing what interests you. Tomorrow I am beginning my research. Google is my friend. Just killing some time at work and threw the question out.
Many things interest me. I need to narrow it down and come out the other side with a marketable certificate that will lead to a stable job that will enable me to support my family. If I need to balance out interests vs economics, I need to plan before I use the money I have saved for school. No financial aid, totally out of pocket. Proud of that actually, but makes it a bit more...ruthlessly practical when it comes time to choose. No majoring in pottery then crossing my fingers at graduation. heehehehehe.
Regarding IT professionals as Microsoft monkeys, some here may recall when IBM reigned over business computing and the bullet-proof choice for purchasing managers was to spec big blue's hardware and software.
Don't know if open source will play David to the MS Goliath, but it wouldn't be the first time.
Does anyone here remember that great heir apparent to Prudhoe Bay, the Mukluk formation? This find was supposed to be the great new North Slope elephant field back in the early 1980s. Yeah, I thought so. What happens if ANWR turns out the same?
I shorted CSCO last week.
As I've stated several times we're rebudgeting across all of our businesses in 2008 - reducing cap ex and head count plans. IT will be a significant victim of these cuts.
CIO used to mean "Career is over." You get promoted and then a year later you are shown the door.
Last year was the first time I bought a large order of PC's and had the price go up after the bid had expired.
Vista, MS OS used to drive hardware purchases to run the bloatware. We have decided not to use Vista so the pressure for hardware is less.
Networks drive a lot of purchases. I don't see any pressure there. Probably because we will switch from MS and Novell to some flavor of Unix/Linux.
In certain sectors of IT, you have to really grow in unit volume to offset the perpetual decline in ASPs. This has long been seen in an area like PC hardware (the latest computer that I'm buying costs $449 and is terrific) and is - with the effect of open source - hitting large areas of software like database products (where something really powerful like mySQL is free).
IT purchases is not much of an indicator. Most of it is a function of IT employment - more IT staff you have more bullshit stuff you buy, that's how it goes. When it hits the fan staff goes first then purchases.
This, as we here at CR knew for sometime now, calls into question every analyst quoted or featured in the mainstream media for the last twelve months declaring that tech was immune from the credit crisis, this was always complete bullshit.
As was the decoupling theory, as are the consensus estimates for 7% eps growth this year, it is past time that we parade every one of these assholes back out on stage and play clips of the proclamations that tech is immune, that eps growth will maintain an upward trajectory, and for God's sake physically remove Cramer from the air.
The Nasdaq is currently 14% or more negative for 08, 50% below its 2000 high, and the assholes were out in full force pushing extreme valuations and the thought that it is prudent to purchase "overvalued" tech stocks because they will become more overvalued and were immune.
When it hits the fan v, I look at my CAPX budget first and slash...no new machines, monitors, laptops, etc. Software upgrades go, and all purchases over X dollars are personally approved by me. When I have to chop staff, I know who can go, as good managers always keep some deadwood around so when the CFO wants staff reductions, you can still function effectively. And hiring gets frozen. If someone leaves, they may not be replaced.
Contrary to popular belief, we do not sit in our offices plotting who can be laid off. That is very disruptive, and should only be used as a last resort. It also implies poor planning.
As an example, when I was drawing up the 2008 budget with the CFO, I actually slashed hiring pretty severely for 2008 as we knew it was going to be a challenging year. If I did a good job, I shouldn't have to let anyone go, and just leave positions open until things look up either later in the year or in 2009.
"Our forecast is premised on a mild recession".
What if it's not just a "mild recession"? Remember all the prior forecasts ASSUMING that the subprime problem would be contained. That housing will bounce back. That the consumer will stay strong. That the CRE market would be immune. etc, etc, etc.
I'm sure the next phase of forcast will be based on the assumption that we will not enter another great depression.
If you follow the semiconductor equipment sector, they are already seeing a slowdown in orders and the leading company in that industry just laid off 1000 workers last month.
I think they have started to read CR and have made adjustments to their fairy tale forcasts.
I agree with 100% with
risk capital | 02.10.08 - 8:18 pm
" As was the decoupling theory, as are the consensus estimates for 7% eps growth this year, it is past time that we parade every one of these assholes back out on stage and play clips of the proclamations that tech is immune, that eps growth will maintain an upward trajectory, and for God's sake physically remove Cramer from the air."
Well Ipodius, i will not be the one to blame you... This is just the way it works, first headcount is frozin, second there is attrition and third you know it's not what you want to do. Your mileage may vary based on industry though. I am talking more of a pattern for Fortune 100 or 50.
You gotta read this spoof. It's really funny.
The Spoof : FDIC Begins "Death Watch" of US Banks, Plans to Lower Insurance to $10,000 and Give Vouchers for Hamburgers or Tacos funny satire story
True dat v. We're purely technology. But if I were at a bank where we had just slashed 80% of our mortgage lending business, it would ripple through to IT as the support staff for them wouldn't be needed and we'd re-purpose things so that equipment purchases would be down.
I think these scenarios is what is reflected in the surveys.
Ipodius - I suppose laptops can add up to high end storage which was mentioned in another reply. I don't know, I was simply saying that first CapEx with 5 years of ammortization accumulates and then someone notices that there is a good deal of OpEx which can be cut. Anyway, I think we are on the same page and I it's getting late for me. Cheers!
I ordered a notebook computer on 2/5, and they said estimated ship date was 2/29 (!). It shipped today. Perhaps they are not so backlogged these days? Similar thing happened with a server machine I bought a couple months ago.
Y'all need to relax. John Chambers said just last week that this is nothing more than a "speed bump". Of course, the last time he said something like that, it was January 2001...
In Silicon Valley North, I just interviewed a pretty senior guy who was looking for work because his (sexy, ex-stanford) company just lost all its bank customers.
Cheers,
prat
Why are they saying they are cutting, I dont get the dis-connect: Econbrowser: No-doc loans
They need to look at better data!
Schadenfreude is way less fun when the bad stuff is happening to you. I expect my corporate half to suffer, as our largest customers are in the financial services industry and venture capital bankrolls things. Faces have gotten a little grim there.
Fortunately, I still have 3 academic halves to fall back on, but they collectively don't pay as much as the single corporate part-time position. Oh well -- I consider it a risk premium...
Which industries? Banking? Retail? Home building?
My company is the opposite. We will be increasing spending in IT. Probably because we are going to beat last years revenues by at least 10% in 2008.
Go energy.
Yes. Energy has serious momentum. Jobwise it helps, but inflation wise it hurts. So, is it a wash?
Ok Housing is off the table, what is on the table to stimulate our economy?
Apologies if this has already been mentioned, but check out this article from the Sunday SF Chronicle:
http://tinyurl.com/yqzs2x
"Recession threat makes many more cautious"
Noe Valley resident Evan Graner, 31, isn't going out on the town as often as he used to, using the money he saves to pay down debt.
Regnaldo Woods, 20, better known as YQ, has stopped buying fast food so he can help his mother with mortgage payments on their Daly City home.
I wouldn't begin to know how to tease out the chicken/egg on this, but when the MSM starts shouting "recession", doesn't that kinda deliver one up on a platter?
It goes back to that Shiller on Bloomberg video CR had up a week ago. He said he worried about consumer confidence, you know, that if it starts to slide . . . I don't think he really finished the thought, but I think it would go something like how do you get it back?
Elvis,
Inflation?
Dunno. Most contracts we are executing now have been in a backlog for a year or two.
We'll be doing just fine for at least 3-4 years (yes, we have that many bookings)...even if we don't get a single new contract from now.
IMO, we will be seeing deflation as the debt and subsequent money derived from said debt evaporates from the multi-trillion $ housing bubble.
Fine by me as I am positioned in cash and metals. My family business owns millions of pounds of all sorts of scrap and prices are going up UP and UP!
IT Spending Forecasts Cut
This doesn't surprise me one bit... Latest & greatest in IT increasingly provides a diminishing return. Its now what you do with what you have not getting the latest and greatest before your competition does. The apps themselves are marginally advantageous.
IT is a commodity like gas, electricity & water. You have to have it but don't need the fluff. You buy for replacement or for increase in 'consumption' not for the 'buzz' anymore - that was so 1990s.
IT producers need to structure their business based on this 'new' reality - not wishing the past will come back. If they do they'll be fine, if they don't they'll be 'surprised' again and again.
Coincidentally, money.com seems to have been hacked and is now redirecting to Quantcast - Home Working in the security & identity management segment of IT, simple and cheap always win. They just won again.
Does this forecast include the impact of the stimulus package to be signed next week?
Energy & energy-related infrastructure will definitely be a driver of future growth. IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF. "Necessity is the mother of invention", no? We need new forms of energy, and those in turn will require whole new modes of transportation & distribution.
The upside here is that such work will require all skill levels, and a majority of the work will have to be performed within the states. Heck, it'll be local to everyone.
Energy & energy-related infrastructure will definitely be a driver of future growth. IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF.
I agree.
Time to check on the Indian markets again.
http://tinyurl.com/2wqce8
Still pre-open.
We're slightly increasing CapEx over 2007 - with a focus solely on getting more efficiencies out of existing processes. Some software primarily, and if needed, additional hardware (but only if needed). If it's not reducing labor housrs and costs - we're not looking to buy it.
dd
Reliance Electric IPO is below offering price.
Sensex down over 250
IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF.
Possibly. That's what Matt Simmons has been stumping for, for several years.
Simmons
But the big 'opportunities' and all the low fruit will be in actual low-tech conservation. You know, growing food locally, telecommuting, or carpooling, bicycles... rebuilding rail, shipping infrastructure... and downtowns.
On these points, right winger Simmons agrees with lefty 'doomer' James (clusterf**cknation) Kunstler.
Clusterfuck Nation by Jim Kunstler
Neither one thinks any of this will be easy. Simmons says Americans will bite the bullet on oil prices, but will freak out when spot shortages arrive. Kunstler thinks an 'Apollo moonshot' type of program is doomed to complete failure.
Suburbs? The home building industry as 'engine of recovery?' Neither one thinks this is remotely possible, nor an intelligent use of time or money.
Just FYI.
RE: Reliance Power IPO
Yeah, my niece was telling me proudly about their "buy" of this. I just asked how many and breathed a sign of relief when she said 15 ( it was so oversubscribed that's all the retail allotment was ). She can afford to learn a lesson on 15 shares I reckon - a much more persuasive one than any I can deliver.
-K
Yossarian,
Yes, I've read both Simmons & Kunstler. To be specific, Kunstler believes any attempt to maintain an automotive-oriented society will ultimately fail. He may be correct; the world may ultimately be a much smaller place.
Have you read "The Party's Over"? Heinberg does a great job of detailing the history of the world vis-a-vis energy. Heinberg, Kunstler and others have shown that there really are no challengers to oil on a pure EROE basis.
Personally, I'm more optimistic, er, hopeful. I believe petroleum products have made it too easy for too long, and that the next generation of energy technology hasn't yet been discovered because the need simply hasn't been as pressing as it will soon be.
More good news from WSJ:
Credit Woes May Widen
A widening array of financial-market problems threatens to trigger a new wave of the global credit crunch, extending it far beyond the risky mortgages that have already cost banks and investors more than $100 billion in losses, and potentially bruising the U.S. economy.
New Hitches In Markets May Widen Credit Woes - WSJ.com
NW
Here we go again, but Japan is 50% overvalued; what do you expect?
Nikkei 225\t13,017.24\t-189.91
FT.com / Companies / European companies - Kerviel’s lawyer accuses SocGen of complicity
Sacre bleu -- Kerviel accuses Socgen of being fully complicit in his trade. Shocking. Kudos to rich and other posters here for calling this one too.
OT : rate cuts and the law of unintended consequences. You really gotta love it :
New Hitches In Markets May Widen Credit Woes - WSJ.com
NorkaWest you beat me to it!
India police: Terror attack on Bombay Stock Exchange foiled
Asian markets must be reading Geoff & my WSJ posts.
Japan is so upset that they are taking the day off. The other markets have put on their swim fins and snorkels. Maybe they will find pennies down by the drain in the deep end.
NW
TJ&thebear:
Thanks, I have read 'Party's Over'. I AM an optimist, too. I think Kunstler's version of the future is essentially correct, but I don't think it's 'The End'.
Did you ever read 'The Hirsch Report?' The report said that there were alternatives to oil, but that they'd be expensive, and take years to implement... 10 - 15 years of 'economic hardship', if we waited until the oil peak occurred.
Since theoildrum.com puts the peak at 2005 - 2006, it'll be interesting to see what we invest in first.... energy, or more housing.
REBear writes:
India police: Terror attack on Bombay Stock Exchange foiled
No, they were too late. The Reliance IPO has already blown up and tanked the market.
NW
Japan is so upset that they are taking the day off.
What a generous way of pointing out to Anon that the Nikkei isn't down 189.91.
Yossarian,
No, not read the Hirsch report, but I have seen excerpts. Timeframe sounds correct to me. People don't realize how long it's taken to build the whole petroleum infrastructure we already have. It's going to be the mother of all rude awakenings, isn't it?
What scares me is the fact that wars are typically fought over access to resources. The future could get really ugly, really fast.
Okay, now I'm confused:
tj & the bear are optimistic, or at least hopeful. That must be tj talking, not the bear.
Yossarian is also an optimist who thinks "Kunstler's version of the future is essentially correct."
My reading of Kunstler led me to conclude: H#*y S&!t, I hope he's not right. And I'm NOT an optimist about the future.
sportsfan,
Now you understand the duality that is the eternal optimist "tj" and his more recently discovered alter ego known as "the bear".
Unlike mp's conjure bag, "the bear" is only about six years old.
p.s.: Plus it's a minimally clever variation on the title of the old TV show with the hunky truck driver constantly surrounded by gorgeous chicks (and a monkey).
sportsfan:
Society is overdue for a big change. If you like, think about Schumpter's "creative destruction" Creative destruction - Wikipedia, the free encyclopedia
If not forced to change, we'd continue building houses people don't need, as a plan for rebuilding the economy, and American competitiveness.
That's just the way societal systems work.
tj, one man's duality is another man's schizophrenia, but, hey, given the description of conjure bag, I'd say you're still on the healthy side of the line.
That WSJ article is not at all surprising. Why would anyone want to trade cash for the kind of paper the banks are trying to unload?
I'll only get really concerned if the U.S. Treasury holds an auction and no one bids.
sportsfan, yossarian, tj:
I am in the pessimist camp.
Even if we realize tomorrow that we have to do something, the bureaucratic and regulatory inertia was stop everything for years.
In 1989, there was an earthquake in San Francisco. Part of the Bay Bridge fell down. Every knows that it has to be replaced. After 17+ years, they still haven't finished the replacement. No one in our country knows how to get anything done any longer, but we can organize meetings, planning sessions, and circle-jerks.
If the energy projects are outside the US, the Chinese will handle it. They have the dollars to pay for it; we have deficits. Foreign governments know that if they do any deal with any US entity, it will come with all sorts strings attached. They know that the Chinese aren't so picky.
sportsfan,
LOL! Yeah, back in 2002 the burgeoning housing bubble (coming so soon after dotcom) led me to do a little reading, and THAT put me onto the contrarian blogosphere, and well... the rest is history. I thought I was a pretty well-informed guy, but I was utterly clueless. Needless to say, I didn't like what I learned, and thus the inner bear started growling and hasn't stopped since.
This is not good news for the (few?) remaining zombie companies from the tech bubble, and the no-business-model companies that have been launched since.
Don't get me wrong. Lots of great innovative and amazing companies have been created as a result of the last two bubbles. That's one benefit of bubbles -- some crazy ideas turn out to be pure genius.
However, lots of crazy stupid ideas also get funded and survive off the speculative frenzy. For a while, that is. These young companies are good, dependable consumers of IT products, until they're gone.
Yossarian,
I'm not familiar with Schumpter or his economic theories, but according to the link, he read Nietzsche, who popularized the notion that man could creatively destruct himself into an ubermensch, so I am familiar with the concept.
Also Sprach Zarathustra
Norka,
High net worth investors have borrowed money from banks to buy Reliance Power IPO. Margin + IPO price cost them Rs 600/share. The stock is trading at 425. Foreign investors are fleeing and high net worth investors are getting screwed.
Now they say the 'fundamental value' of the stock is 300/share. Go figure.
I wonder how many HNW investors bought Blackstone?
Great comments.
I've read the party's over, also high noon for natural gas, and a few others.
I'm very pessimistic for this century. I am convinced by the end of it the population bubble will be mostly deflated.
In the near term though, I think there is an important question to ask: When will 5% of the worlds population(the US) stop using 25% of the worlds petroleum production?
I think a large drop in US consumption of fossil fuels will occur during this down-cycle, caused by a reversal of US borrowing, likely coincident with a currency/debt crisis. The adjustment for the economy will be severe, and the recovery will be far off.
When will 5% of the worlds population(the US) stop using 25% of the worlds petroleum production?
I think you're probably correct that U.S. consumption of fossil fuels will drop during this part of the cycle for simple economic reasons. People will conserve oil to conserve dollars.
But the reality is that the fossil fuel producers have not wanted the U.S. to diminish its consumption. It's their bread, butter, cake and icing all at one time and they love selling the stuff to the tune of 90MM bbls/day.
Price has not been an object until now, as shown by the move from $10/bbl to $100/bbl in a decade. I don't think price becomes a real problem in the U.S. until $200/bbl.
It will have to be a shortage, a cut off, lines at the pump, the true political effects of peak oil, to get the average American's attention.
tj:
One problem that foreign investors might experience with their capital flight is that India still has the remains of capital controls.
NW
SweetHomeKilla,
The next 10 to 20 years will definitely be interesting, but I'm fervently hoping that the intervening years will prove the folly of so many things -- fiat currencies, nanny governments, oil dependence, etc. -- that we'll clean house and come out so much stronger on the other side. You know, the old Phoenix "rising from the ashes" thing.
Unfortunately, human nature never changes, so we seem doomed to repeat the same mistakes over and over again.
sportsfan:
US refining capacity is tight. They have been running flat-out with deferred maintenance for years.
If Venezuela's Citco refineries (accidentally on purpose due to the ExxonMobil spat) have turn around problems this spring, we might get your gas lines.
As a newly-minted CS grad I didn't have any great expectations for the 90s so I went off to Japan in the summer of 1992, expertly missing the great dotcom boom and jumping right into Japan's "Lost Decade".
I've been back for going on 8 years now, and I don't have any idea what to expect for the remainder of this decade let alone the 2010s.
We talk of capital destruction but the capital from the Bush economy is still out there...Here's a chart showing savings essentially doubling from $2T to $4T over the Bush years.
Basically I think as long as we sock it to the rich we'll make it through the next 20 years A-OK. They've profitted immensely from the previous 20+ so they can certainly start/resume "sharing the wealth" to keep this country in one piece and moving forward.
I agree that current oil prices aren't extremely high or damaging to the economy. A lot of that is just the result of them coming from such low prices, and pretty high and steady inflation.
Higher oil prices are(would have been) good for society in the long term.
It's not going to be too terribly long before there is some significant supply disruptions. They will likely be isolated to certain geographical regions, or countries.
With a shrinking economy and growing debt backing the us dollar, it's only a matter of time before it demands significant less oil on the global markets.
Even ignoring the current/debt aspect, there is a lot to be worried about wrt the regional production we rely on, such as the oil and natural gas coming from canada and mexico. Mexicos production is declining very quickly, and North American natural gas production will be going into significant decline long before enough LNG infrastructure has been developed to take it's place, even if the global production is there to supply it.
NorkaWest re If the energy projects are outside the US, the Chinese will handle it.
I'm not so sure about that. The U.S. still has tremendous energy related experience and processes to offer. But that won't be our salvation in the sense that trading dependence on foreign oil for dependence on foreign LNG leaves us in the same place.
I really hope we do have an Apollo type commitment to renewable energy projects inside the U.S. together with increased R&D into alternate forms of liquid energy (other than ethanol). It's the only logical answer for the long term.
(I know . . . in the long term we're all dead anyway . . . but presumably there will be other Americans here then.)
tj & the bear,
I totally agree with you. I'm all about quality not quantity. I somewhat look forward to the challenges that are coming, but am sad for the suffering that so many will experience, but like you say, that is unavoidable human nature.
Troy,
A $2T gain in savings deposits pales against the trillions in losses we're facing. Heck, the national debt more than doubled in the same period.
NorkaWest, I'd like to see Chavez cut off the tankers to the U.S. It would wake up a few folks around here and probably create additional political instability in Venezuela.
As far as actual supply, though, oil is still fungible world wide. If he directs tankers elsewhere, other tankers will come to the U.S.
There's no doubt we're at peak oil, but production has not yet begun its inexorable drop off and, with the world's economies all slowing somewhat, the producers will have an incentive to keep supplies flowing.
"Basically I think as long as we sock it to the rich we'll make it through the next 20 years A-OK. They've profitted immensely from the previous 20+ so they can certainly start/resume "sharing the wealth" to keep this country in one piece and moving forward."
That's the kind of thinking I'd like to hear more of!
Back in the Sixties, less than one percent of the population controlled 20 percent of the wealth. Now it controls over 40.... I think they can sink back to 20 percent without undue trauma.
Yes, raise taxes... but also enforce the others the way they ought to be. Knew a corporate tax auditor for the IRS, and he told me about all the dodges corporations use to hide income; since they know the IRS has limited manpower. And hit those American corporations who dodge US corp. taxes with a Cayman Island dropbox.
As for IT.... I keep thinking that one of these days, some cash-strapped state will decided to save money by going open-source for desktop software. And they'll put together a standard distribution for the OS and interface and apps... and other people will start to use it... and suddenly Microsoft and even Apple find their revenue stream shrinking.
Sportfan:
I was with Sohio in the late 1970s when we finished the Trans Alaska Pipeline to Prudhoe Bay and an international company that found and developed Columbia's Cano Limon field. In the 1980s, most of the people who completed these projects left the energy industry.
I am not confident that American energy companies still have the institutional knowledge to complete a large number of this large projects. Also, what institutional knowledge and experience remains is getting long in the tooth and ready to retire.
sportsfan,
Have you read Simmons? The decline charts for mature fields is absolutely stunning.
did i read incorrectly or was the sensex off 5%? India is what the rogue trader/emergency rate cut story going a few sunday nights ago.
oh yeah back to the topic
back in the day here's how i learnt to look at it
y=c+i+g+nx
c is stagnant or slumping
nx is negative, but turning positive
g is growing
i is stagnant to declining
my guess is domestic investment and growing exports (while reducing imports) is the trick to get the US out of the slump. now how the rest of the world responds, ya got me!
"Yes, raise taxes... "
No... Maybe start by eliminating the government sanctioned monopolies, stop building so many weapons and sending them overseas, stop policing the world, stop subsidizing "growth", etc. Cut unneeded(and especially immoral) spending before ever raising taxes.
NorkaWest, yes, it's true that a lot of experienced people have been lost (thanks to the booms and busts) and many more will be gone soon. Hopefully the generation behind them has learned something.
At least everyone agrees there are no more 20Bbbl fields like Prudhoe Bay to be found.
tj, yes, Simmons has been right on for a long time, educating even the industry about reality, and especially in poking through the obscurity of the state of the Saudi fields.
For the first half of this decade I was virtually 100% in energy. I'm not now, though I fondly remember a big chunk of CHK at $2.20 and even more WMB at $1.37. Those were table pounding buys. I always follow PTEN these days, but never pull the trigger.
My company has cut IT spending since the second half of 07. For the first time in a number of years, I have had to delay upgrades/software/purchases of various kinds. I can definitely say hiring's been suspended as well.
sportsfan,
When this market hits bottom, I'm moving all my pennies to energy. IMHO they'll be table pounding buys all over again.
sportsfan & tj:
Simmons decline charts correspond to what the geologies were showing me when I was with the oil companies.
Recently, there was a big fight about drilling in ANWR. What no one mentioned was that Prudhoe Bay and Kuparek fields are declining. If we do not find new sources of oil to run through the Trans Alaska Pipeline, the the pipeline will become uneconomic. The oil companies are legally required to rip out the pipeline when they are done.
If we decide later to develop fields on Alaska's North Slope, it will be uneconomic to rebuild the pipeline to get the oil to market.
make that:
"geologists were showing me"
Food and energy. We need them to survive. No bout adoubt it.
That must be the reason we don't count them in core inflation. No sense involving necessities like that.
Bob Dobbs wrote: Back in the Sixties, less than one percent of the population controlled 20 percent of the wealth. Now it controls over 40.... [...] Yes, raise taxes...
Bob, that 1% doesn't pay taxes...they'd appreciate the help preventing others from joining their group.
SHK,
Although I'm definitely of a libertarian bent, some of these $100M+ types seem to be just begging for a tax hike. Heck, they're paying a lower rate than I am!!! I'm just hoping that Obama draws the line above my income.
"No... Maybe start by eliminating the government sanctioned monopolies, stop building so many weapons and sending them overseas, stop policing the world, stop subsidizing "growth", etc. Cut unneeded(and especially immoral) spending before ever raising taxes."
I'd drink to most of that... but frankly, in the short run... raising taxes might be easier. While you gradually work on all the rest.
I'd like to think we could get support to cut the defense budget and reign in adventurism overseas, but it'll be awhile before the public will buy it. Especially with the kind of employment the industry still supports.
We'll have to get poorer first, I fear.
NorkaWest,
I think you've hit a very important nerve that I'd like to expand on.
If we get a severe recession, possibly global, based on contraction of credit and negative sentiment, it could prevent a lot of energy related investment that we drastically need to cushion the effects of peak oil, making the decline much steeper then it might have been.
I wholeheartedly agree that the distribution of wealth is a major problem and needs to be dealt with. I think before worrying about taxes we need to stop giving away so much to the top 1% through the fiat system of money.
man that WMB buy was a good call but risky. in the aftermath of the enron bust, WMB was selling off their 'non-core' assets left and right, raising cash. It even got to the point they had to get a $1Billion loan from Buffet at 18% or 20% for a 1 year term(collateralized by some asset he would like). yeah, gutsy, but buying there when it was below 2 bucks has paid off handsomely. good call!
NorkaWest, the Pipeline is an interesting world in its own right. I gather you've followed it over the years.
I understand maintenance is running about $100M/yr these days which seems awfully expensive, but understandable given the age of the pipes and pumps and the brutal weather conditions.
I have no problem drilling in ANWR and think that if it ever comes down to drill there or rip out the pipe, the people will go with drilling.
Completely agree that it will never be built again. I'm still amazed that it was ever done in the first place.
SHK,
Not to toot my own horn, but I made much the same point a few days back on Winter Watch:
OIL: Were past the production peak, and prices are unlikely to drop more than 20% from here. Precipitously declining supply combined with increasing domestic demand within the producing countries pretty much guarantees that. Any demand destruction due to economic slowdown will be more than offset by the decreased exploration accompanying that slowdown, too.
ANWR? Heck, they'll be drilling everywhere off the California coast once people start screaming about persistent gasoline shortages.
stinky, those events happened at the same time. The loan and the sale of the Mid-American Pipeline brought the price up to $1.37 and I decided it wouldn't fail and it was essential.
I still have my GO WMB T-shirt and wear it once in a while, though no one understands the Band of Fools ball cap. You had to be on the Yahoo board in those days.
You gotta make money from oil while you can. It won't last long if this works out.
Oil-Free Israel Is Set to Embrace Broad Project to Promote the Use of Electric Cars - NY Times
i lived in tulsa and may '99 the williams tower downtown had a big '50' on the building at night by lighting up the right windows of the building. broadcasting to all their stock price ah, what a true decimation that was. what a fall and i knew many who lost jobs during the dot com bust and thereafter.
yeah that buffett put helped them get lean and mean again, true that. now i'm in oklahoma city and everyone and their dog works for CHK or is subcontracted out thru them. what a crazy few years...
Energy & energy-related infrastructure will definitely be a driver of future growth. IMHO, I wouldn't be surprised to see an Apollo-like project once the SHTF.
tj & the bear
With roll/roll solar, what infrastructure is needed beyond 2 way metering and dc/ac converters? The future is distributed power. Once nanosolar
can scale up production, with sufficient market penetration peak load generation during the summer goes bye bye.
Between solar, wind, constructed wetlands and the desalinization technique developed by New Mexico St U, I can live completely off the grid on an island in the Bahamas, or Mexico, or wherever I want near a body of water below the 43rd parallel with all mod cons.
It got built originally by Congress passing legislation telling environmentalists and the EPA to "Shut up and just build it".
It will never happen again.
I wasted a year of my life trying to get a pipeline built to move Alaskan oil to refineries in the Midwest. It never got built so we shipped the oil to Japan.
If given the choice between living through that frustration again or retiring, I would choose early retirement and move to Costa Rica. Cost of living is reasonable there. People are nice too.
I suspect that many of my former colleagues would make similar decisions.
NW
Renault will offer a small number of electric models of existing vehicles, like the Megane sedan, at prices roughly comparable to gasoline models. The batteries will come from Mr. Agassi. The tax breaks for clean electric vehicles, which Israel promises to keep until at least 2015, will make the cars cheaper to consumers than gasoline-engine cars. Youll be able to get a nice, high-end car at a price roughly half that of the gasoline model today, Mr. Agassi said.
FYI for anyone still up... in Simmon's book, "Twilight in the Desert" he shows many graphs detailing the depletion of all the known 'supergiant' fields.
Prudhoe Bay is 70 percent gone.
And... open source software for schools and municipalities, to save money? Excellent!! Of course, we won't do that unless we have to.
We'll have to.
'Creative destruction' rears its head again.
"As for IT.... I keep thinking that one of these days, some cash-strapped state will decided to save money by going open-source for desktop software. And they'll put together a standard distribution for the OS and interface and apps... and other people will start to use it."
Bob Dobbs, I'm with you. I think governments and companies could save a tremendous amount of money using open source alternatives.
Typical worker monkey sitting at his XP desktop, running spreadsheets and doing web-based database stuff could just as easily be running an Ubuntu desktop, with Firefox and OpenOffice, running free email clients and servers, and Java or whatever, connected to a Linux server with apache+php, MySQL, samba, you-name-it.
I could go on a long diatribe at this point, but suffice it to say that those of us who have switched to Linux/OSS are mighty glad we did, and can appreciated the many benefits such a switch provides.
Weather Helm:
Good plan, but the fly in the ointment is that most IT professionals are Microsoft monkeys. Give them MS stuff, they know which levers to hit in order to get a banana. Give them Linux and they are lost.
Ubuntu on a old Soni Vaio laptop is sweet and an interesting project.
NW
In highschool, a foreign exchange student and I set up a computer lab in an unused classroom using redhat linux 5.2 on recycled "old" computers donated to the schools.
They were never used of course, even though the majority of the kids at the school had very little experience with computers, due to only a couple computer related classes offered. Only the occasional paper had to be typed at the library, where there were less than 20 computers, for a school with 1500 people.
Point being that the ability has been there, but decisions are made. Even in the future there may be just as much increase in the use of pirated software compared to use of open source software. Personally I could care less if that's what people choose, let them use that proprietary crap(granted there are a few gems).
Saving money using open source software won't be much of a win for the economy as a whole, since it will result in less computer programming jobs while only saving marginal costs for most businesses, though I agree with it for other reasons.
Something strange is going one when it seems that I can agree with most of the commentary on CR.
SweetHomeKilla:
It must be the wine.
|:-O)
Night all.
"Saving money using open source software won't be much of a win for the economy as a whole,.."
IMHO, the economy is best served when people don't worry about the "economy as a whole", rather when they look after themselves with productive self-interest. Unless, of course, you are talking about an economy of the Marx/Engels variety.
That was my point, that productive self interest may choose pirated software over open source, with the income to the software companies declining either way. I think open source is great, and in the long term much more "efficient" in the economic sense that proprietary, but that doesn't provide unneeded jobs.
I think there is a vast overcapacity of human labor, with a looming shortage of resources. Much of the economy now is government mandated unproductive low-middle wage jobs. Airport security is my best example. There's a lot of things that are good for society, but bad for what we call our economy.
I'm certainly not suggesting that the government should try to manage any of it, we can see how well that has worked in the past.
Hello. Small OT. I hope no one minds. I figure 3:10 am I may not irk people.
The comments about energy related business being the new drivers of the economy led to a question.
Due to Pisspoor persoanl decision making skills I am a bit behind the curve. Nearing 40 and facing a dilemma those half my age face. I have an opportunity to go to school. Community college, two year or less.
Any ideas which direction I should look for a degree/certificate that will lead to decent employment? Not saying it right, sorry.
Not asking what to take, but guidance and suggestions where to look to decide. This is it, after this schooling the rest will be a class here and there.
Veering back on topic:
Right now I work in a factory that supplies some automotive and some construction and some pool liner.
Bonus is not happening this year, lay-offs have started and expenses are looked at harshly. I think this year is going to be a wild and crazy ride.
Odd, I finally pull my head out of my butt, claw my way from mentally ill homeless woman to mildly eccentric factory worker and the world is going pffft. sigh. I think I will miss health insurance most of all, after the paycheck.
Any guidance appreciated, thanks.
rsj
rsj
i'm 2/3 your age, but the 'educated' friends of mine who are doing well and would likely do well even in a bad national downturn are in engineering, accounting, and medical technology.
but thats just my window on the world. good luck!
Thanks stinky. looking into it.
guidance and suggestions where to look to decide
Look inside yourself.
If reading this blog says anything, it's that there are a lot of different opinions. You might as well take something you enjoy learning about,.... Or consider something to do with real estate. By the time you finish there won't be anywhere for it to go but up:)
Good Luck.
I hear from a friend at Bloomberg, that they have a hiring freeze there, and are not selling leases on many terminals. I suppose if Wall Street is sliming down, they just don't need all them anymore.
sdtfs-Thanks for the laugh. Real estate, hahaha.
I hear you about learing what interests you. Tomorrow I am beginning my research. Google is my friend. Just killing some time at work and threw the question out.
Many things interest me. I need to narrow it down and come out the other side with a marketable certificate that will lead to a stable job that will enable me to support my family. If I need to balance out interests vs economics, I need to plan before I use the money I have saved for school. No financial aid, totally out of pocket. Proud of that actually, but makes it a bit more...ruthlessly practical when it comes time to choose. No majoring in pottery then crossing my fingers at graduation. heehehehehe.
Regarding IT professionals as Microsoft monkeys, some here may recall when IBM reigned over business computing and the bullet-proof choice for purchasing managers was to spec big blue's hardware and software.
Don't know if open source will play David to the MS Goliath, but it wouldn't be the first time.
Does anyone here remember that great heir apparent to Prudhoe Bay, the Mukluk formation? This find was supposed to be the great new North Slope elephant field back in the early 1980s. Yeah, I thought so. What happens if ANWR turns out the same?
With the advances ini seismic science, you don't really hear about coming up dry, you just hear about cost issues.