Wednesday, May 06, 2009

Global Warming: Politics versus Science

What has been advocated by politicians...

According to Seattlepi.com, ``Al Gore said Tuesday the world must act quickly to slow the melting of the world's polar ice packs and glaciers before it reaches a critical rate for global warming."

``"We have to act and we have to act quickly because we don't want to cross this tipping point," the Nobel peace laureate and former U.S. vice president told a meeting of foreign ministers, experts and scientists from the most affected countries.

``The meeting, called "Melting Ice Regional Dramas, Global Wake-Up Call" was held the day before a meeting of the Arctic Council of foreign ministers. The council members are the United States, Russia, Canada, Sweden, Denmark, Finland, Iceland and Norway.

Hasn't been validated by evidence...

From Canada Free Press: North Pole Sea Ice twice as thick as expected

``The research aircraft “Polar 5” today concluded its Arctic expedition in Canada. During the flight, researchers measured the current ice thickness at the North Pole and in areas that have never before been surveyed. The result: The sea-ice in the surveyed areas is apparently thicker than scientists had suspected.

``Normally, newly formed ice measures some two meters in thickness after two years. “Here, we measured ice thickness up to four meters,” said a spokesperson for Bremerhaven’s Alfred Wegener Institute for Polar and Marine Research. At present, this result contradicts the warming of the sea water, according to the scientists.

Apart from measuring ice thickness, the composition of arctic air was also investigated. With the help of a laser, the researchers studied the level of pollution of the atmosphere by emissions from industrialized countries. In the next few weeks the results will be evaluated. Some 20 scientists from the U.S., Canada, Italy and Germany took part in the expedition.

From National Post: Lawrence Solomon: Thick Arctic ice surprises scientific expedition

``Ice in the Arctic is often twice as thick as expected, report surprised scientists who returned last week from a major scientific expedition. The scientists - a 20-member contingent from Canada, the U.S., Germany, and Italy - spent one month exploring the North Pole as well as never-before measured regions of the Arctic. Among their findings: Rather than finding newly formed ice to be two metres thick, "we measured ice thickness up to four metres," stated a spokesperson for the Alfred Wegener Institute for Polar and Marine Research of the Helmholtz Association, Germany's largest scientific organization.

``The Alfred Wegener Institute is one of the six research organizations involved in the month-long expedition, called Pan-Arctic Measurements and Arctic Climate Model Inter Comparison Project. The other five include three from Canada (Environment Canada, University of Alberta, York University) one from the U.S. (National Oceanic and Atmospheric Administration) and one from Italy (Institute of Atmospheric Sciences and Climate.

``The path-breaking project broke new ground by employing the Polar 5, a fixed-wing aircraft, rather than a helicopter with its more limited range. The Polar 5 not only landed in the Arctic ice, it towed a device called EM-Bird on an 80 metre-long rope 20 metres above the ice surface. The EM-Bird conducts electromagnetic (EM) induction sounding for ice thickness measurements.

The thickest ice that the expedition found was at Ellesmere Iceland, where thicknesses often exceeded 15 metres.

Nonetheless green house effect global warming dissenters seem to be getting mainstream coverage, which implies of a growing crowd of supporters.

From the New York Times, ``Marc Morano does not think global warming is anything to worry about, and he brags about his confrontations with those who do...

``As a spokesman for Senator James M. Inhofe of Oklahoma, the ranking Republican on the Environment and Public Works Committee, Mr. Morano was for years a ceaseless purveyor of the dissenting view on climate change, sending out a blizzard of e-mail to journalists covering the issue. Now, with Congress debating legislation to curb carbon dioxide emissions, Mr. Morano is hoping to have an even greater impact. He has left his job with Mr. Inhofe to start his own Web site, ClimateDepot.com.

``The site, scheduled to debut this week, will be a “one-stop shop” for anyone following climate change, Mr. Morano says. He will post research he thinks the public should see, as well as reported video segments and ratings of environmental journalists.

``Supporters see Mr. Morano as a crucial organizing force who has taken diffuse pieces of scientific research and fused them into a political battering ram.

“Before Marc, efforts to debunk global warming were scattered and disorganized,” said John Coleman, a weather broadcaster who helped found the Weather Channel and who has called global warming “a scam.”

``And environmentalists and mainstream climate scientists, however much they disagree with Mr. Morano’s views, still pay attention to what he does.

And why AL Gore's persistence to promote the global warming theory?

From Investor's Business Daily's editorial, ``When Gore left office in January 2001, he was said to have a net worth in the neighborhood of $2 million. A mere eight years later, estimates are that he is now worth about $100 million. It seems it's easy being green, at least for some.

``Gore has his lectures and speeches, his books, a hit movie and Oscar, and a Nobel Prize. But Rep. Marsha Blackburn, R-Tenn., was curious about how a man dedicated to saving the planet could get so wealthy so quickly. She sought out investment advice we all could use in a shaky economy.

``Last May, we noted that Big Al had joined the venture capital group Kleiner Perkins Caufield & Byers the previous September. On May 1, 2008, the firm announced a $500 million investment in maturing green technology firms called the Green Growth Fund.

``Last Friday, Gore was the star witness at the hearings on cap-and- trade legislation before the House Energy and Commerce Committee. Blackburn asked Gore about Kleiner-Perkins, noting that at last count they "have invested about a billion dollars invested in 40 companies that are going to benefit from cap-and-trade legislation that we are discussing here today."

``Blackburn then asked the $100 million question: "Is that something that you are going to personally benefit from?" Gore gave the stock answer that "the transition to a green economy is good for our economy and good for all of us, and I have invested in it but every penny that I have made I have put right into a nonprofit, the Alliance for Climate Protection, to spread awareness of why we have to take on this challenge."

``Last May, we also noted that on March 1, Gore, while speaking at a conference in Monterey, Calif., admitted to having "a stake" in a number of green investments that he recommended attendees put money in rather than "subprime carbon assets" such as tar sands and shale oil.

``He also is co-founder of Generation Investment Management, which sells carbon offsets that allow rich polluters to continue with a clear conscience. It's a scheme that will make traders of this new commodity rich and Bernie Madoff look like a pickpocket. The other founder is former Goldman Sachs partner David Blood."

Hmmmm...

Hat Tip Mark Perry

Asian Markets: Crossing the Bull Market Rubicon?

For many fundamental reasons discussed in our previous articles (such as in 2009: Asian Markets Could OUTPERFORM, or in Will “Divergences” Be A Theme for 2009?, or in What Posttraumatic Stress Disorder (PTSD) Have To Do With Today’s Financial Crisis,) it has been our longstanding belief that Asian markets will likely 'decouple' or diverge and or outperform the rest of the world.

In addition, we further advanced the case that general technical indicators, market sentiment and market internals have been substantially improving in our domestic market as it had likewise been reflecting on the state of the regional performance (see
Phisix: The Case For A Bull Run,) where the final obstacle to the full transition of the market cycle from a bottom to the advance phase requires the breach of the 200-day moving averages.

This week, the Philippine Phisix has been buoyed by the same regional tide and appears to have successfully hurdled the remaining last barrier.

So have Asian markets finally crossed the rubicon?
The Philippine Phisix has now popped above the milestone 200 day moving averages (red line).

Some have argued that excess capacity have plagued nations, whose primary economic activities cater to US consumers, will suffer more than the US due to "lack of domestic demand".

Well East Asian bourses, in contrast to such expectations have surged earlier than the rest.

Like Taiwan's Taiex

Singapore's STI

Hong Kong's Hang Seng

Even India's BSE index has leapt above the threshold mark.

We see the same actions in some of our closest neighbors.

Indonesia has also broken through

As well as Malaysia.
Albeit, Thailand has yet to achieve the same goal but is now at the testing zone. Although as of this writing Thailand appears to have joined the bandwagon.

Nonetheless, there are still some laggards...

As New Zealand's NZ50
The Australian All Ordinaries

And Japan's Nikkei 225.

But we shouldn't forget the leader of the pack: China's Shanghai index that has braved the negative tide and continues to post higher highs.

Yet the recent run has prompted many regional bellwethers to reach nearly oversold levels. Combined with seasonal factors perhaps there may be some weakness that may lie ahead.

Nonetheless they would seem like buying opportunities ahead of the immense liquidity driven market environment.

Sunday, May 03, 2009

Swine Flu: The Black Swan That Wasn’t

``There is only one thing which causes man to look for and to organize a tool which is an instrument of compulsion and prohibition. That thing is fear. Men look to government to protect them because they fear. And virtually without exception, everything that human beings fear becomes a project for government." Robert LeFevre The Nature of Man and His Government

The Swine Flu could have been a Black Swan. And perhaps yet it could.

The Black Swan theory as proposed by my favorite iconoclast Nassim Nicholas Taleb comprises three traits:

One, it “lies outside the realm of regular expectations”,

Two, it “carries an extreme impact” and

Finally it makes people “concoct explanations for its occurrence after the fact, making it explainable and predictable”.

Since the swine flu struck, it had practically caught everyone by surprise. Next, many have been unnerved or nations have been in a state of panic; the World Health Organization (WHO), the health agency of the multilateral organization the United Nations, have raised the pandemic alarm level to 5 out of the maximum 6, which implies pandemic levels or the risks of the global spread of disease as “imminent”. (Reuters). Lastly, there have been many theories circulating in traditional media or in the cyberspace as to why and how such ailment came to be.

So this episode contains elements fitting of a Black Swan. But what seems arguable is the degree of impact.

Since the Swine Flu surfaced in the news, markets have initially been devastated, albeit not equally. Realizing the sensitivity of today’s fragile environment, I had also been tempted to undertake “crash” or defensive positions.

However, it dawned upon me that panics are always triggered by our brain’s Amygdala, which had been hardwired into our fight-or-flight responses by our primitive progenitors, who were faced with survivalship against the adverse forces of nature. Panics are actually exacerbated by the lack of information.

Hence, considering the uneven nature of the market’s responses, the underlying market trend, the most recent experiences of the world to deal with epidemics (SARS, Avian Flu) and the rapidly advancing state of our technology, I decided that it would be best to defer fear and possibly deal with this from the reverse.

Figure 1: US Global Investors: SARS Blip

A great example would be the Severe Acute Respiratory Syndrome (SARS) episode, as shown in Figure 1.

From the benefit of hindsight, the SARS was a short term dislocation or a blip or another account of Posttraumatic Stress Disorder (PTSD) for the tourism industries of key East Asian economies. From the market perspective, it served as a window of opportunity to profit from fear.

Since global markets have rallied furiously following the initial shock from the Swine Flu this implies that the pandemic risks have been digested and discounted in contrast to the headlines and the actuations of governments.

Sensationalism-Survivorship Bias: Markets versus Media and Politics

So why the flagrant disparity between the market and news headlines or from political authorities?

Because it is primarily about perspective.

In Mexico, the epicenter of the disease, the present death toll from the Swine flu has been reduced from 176 to 101 (Guardian) and now to 75 (BBC)! But even at 176, this number represents as an infinitesimal fraction relative to Mexico’s population of 110 million (CIA).

Moreover, the expanded global reach is said to cover 18 countries which had reported accounts of infections, as The Independent reported, ``The World Health Organisation said that 18 countries have now reported 766 infections. The confirmed cases include 443 in Mexico, 184 in the US, 85 in Canada, 15 in Spain, 15 in Britain, six in Germany, and smaller numbers in 12 other countries. Italy reported its first known case yesterday, a man in the Tuscany region who returned from Mexico on 24 April. He has since recovered. Almost all infections outside Mexico have been mild. In Britain, where two new cases were confirmed – one being the husband of a woman who was confirmed the day before – some 632 possibles are under investigation”.

The accounted fatalities, as of this writing, have been 17 globally, according to the same article.

To compare, the US Centers for Disease Control and Prevention (CDC) reports of 36,000 influenza associated deaths and 200,000 hospitalizations annually. This translates to 98 deaths per day and 548 people hospitalized per day from seasonal influenza in the US alone.

In addition, 115 people die from car accidents a day in the US (car-accidents.com), 38,500 People die each week around the world from the Aids virus and 1,288 is the number of British people who die from strokes in an average week (The Independent).

In other words, the actual collateral damage has hardly surpassed the average annual losses from its seasonal strain counterpart or from other common causes of deaths even based on US figures alone. Yet because the disease has reached 18 countries with 766 infections and 17 deaths, the WHO has triggered global alarm bells and international hysteria by placing the pandemic alarm level to 5!

So opposite to the survivorship bias, which usually fixates on winners, global authorities today have been entranced with sensationalism and has virtually used fears to respond on an overkill basis.

Notwithstanding, the ensuing consternation has led to divergent definitions of the disease; the Swine Flu has been reported as little to do with the Swine itself (Poor Pig- serves not only as human’s dish but as fall “guy” animal!) where according to the Reuters ``The WHO has said it would call the new virus strain Influenza A (H1N1), not "swine flu," since there is no evidence that pigs have the virus or can transmit it to humans. Pork producers had said consumers were shunning their product.”

Bizarrely too, even some US Farmers have raised concerns that their herd of pigs might be contaminated by infected humans!!!

This paradox as reported by another Reuter’s article, ``There is no evidence of this new strain being in our pig populations in the United States. And our concern very much is we don't want a sick human to come into our barns and transmit this new virus to our pigs," said National Pork Producers chief veterinarian Jennifer Greiner. If humans give it to pigs, we don't have things like Tamiflu for pigs. We don't have antivirals. We have no treatment other than to give them aspirin," said Greiner.” (bold highlight mine).

Yet many have alluded to the Spanish Flu as its origins, but the effects have been so far way way way off.

The Spanish Flu as described by wikipedia.org, ``The pandemic lasted from March 1918 to June 1920, spreading even to the Arctic and remote Pacific islands. It is estimated that anywhere from 25 to 80 million people were killed worldwide, or the approximate equivalent of one third of the population of Europe, more than double the number killed in World War I. This extraordinary toll resulted from the extremely high illness rate of up to 50% and the extreme severity of the symptoms, suspected to be caused by cytokine storms. The pandemic is estimated to have affected up to one billion people: more than half the world's population at the time.”

Perhaps lacking the expected casualty impact in the scale of the Spanish Flu pandemic, authorities have presently been downplaying its association, this from the Associated Press, ``Scientists looking closely at the H1N1 virus itself have found some encouraging news, said Nancy Cox, flu chief at the federal Centers for Disease Control and Prevention. Its genetic makeup doesn't show specific traits that showed up in the 1918 pandemic virus, which killed about 40 million to 50 million people worldwide.

``"However, we know that there is a great deal that we do not understand about the virulence of the 1918 virus or other influenza viruses" that caused serious illnesses, Cox said. "So we are continuing to learn." (all bold emphasis mine)

The irony is, if the said expert does not understand much about the virulence of the 1918 virus, how can she conclude that the genetic make up of today’s strain doesn’t resemble the specific killer traits of 1918 virus? Isn’t this a case of rationalization?

So like in the markets, we seem to be witnessing evidences of reflexivity behavior being applied to the Swine Flu incident-where the present outcome (diminished degree of impact and rising markets) seems to be influencing the public’s thinking as reflected by news accounts and backed by shifting views or sentiments of officials as cited by mainstream media.

Yet the frenzied policy responses have resulted to some unintended consequences. For instance, Egypt’s arbitrary decision to slaughter its entire pig population has spawned a religious schism between majority Muslims and Christians.

Another, Mexico’s decision to shut down stores and companies or its economy has prompted some agitation among the citizenry. According to the Reuters, ``The Labor Ministry said it would fine or forcibly close companies that stay open Monday and Tuesday as a major factory association and many small businesses say they plan to.

``"As far as I know we're coming to work next week. Unless someone comes from the government to tell us to close," said Victor Barracas, a bookstore employee in central Mexico City.”

It appears that the Mexican government prefers its population to suffer or perish out of starvation than from an overblown epidemic!

Talk about governments knowing the interest of their people.

Conspiracy Theories

Nevertheless, the compulsiveness over the Swine Flu won’t be complete without “conspiracy” theories.

Since the current strain of Swine Flu combines genetic material not only from pigs but from birds and humans, where “it has bird flu from North America, swine flu from Europe, and swine flu from Asia. Humans do not have natural immunity to this strain”, (qualityhealth.com) some have suggested that this has been a “human engineered pathogen” meant as a biological weapon for biowarfare.

Many possible scenarios have been floated; it could have been an experiment gone awry or accidentally leaked into the population, or a deliberate covert test by some government entities for political purposes (deflect attention from the economic crisis?), or from a rogue insider who could have stolen from the government’s biolabs in order to advance an unspecified cause, similar to the Anthrax tainted letters mailed to the US Congress from which an employee, Bruce Edwards Irvins, a microbiologist, vaccinologist, and senior biodefense researcher of the US Army Medical Research Institute of Infectious Diseases (USAMRIID) in Fort Detrick, Maryland was held responsible (Global Research).

Or it could also have possibly been perpetrated by vested interests aimed at creating at an atmosphere of pandemic for economic or financial interests, or worst, perhaps in cahoots with the government.

And this isn’t new, according to qualityhealth.com, ``in 2006 investigators discovered that a major pharmaceutical company knowingly dumped HIV-tainted drugs for hemophiliacs onto European, Asian and Latin American markets.”

Anyway, such plot may run across the similar lines as with the movie Mission Impossible II.

Stock Market and Pandemics-Then and Today

True enough a full blown pandemic at the scale of the Spanish Flu will result to economic mayhem.

Economic activities in heavily impacted areas will suffer most while deglobalization in trade, tourism, migration or investments will probably worsen, given today’s recessionary environment.

But we learned that such devastating pandemic don’t necessarily translate to stock market collapses.

Since the public has been obsessed with the Spanish Flu, Bespoke Invest gives a good account of how the US stock market reacted to its outbreak in 1918 see figure 2.

Figure 2: Bespoke Invest: Spanish Flu and Dow Jones Industrials

We quote Bespoke Invest, ``There were three pandemic waves from 1918-1919, with the worst coming from October to December of 1918. While fear of the flu was widespread, the market really didn't react too badly. Following the first pandemic wave, the market sold off a little bit, but then rallied during the summer months before topping out prior to the second wave. The market trended downward during the worst wave of the flu outbreak, but it only went down 10.9% from peak to trough, and then it rallied significantly during and following the third wave. World War I was also coming to an end in late 1918, so the end of the pandemic and the war probably contributed to the subsequent rally in stocks.”

Let me emphasize that despite the huge losses of human lives and massive economic disruption brought about by both World War I and the Spanish Flu, the Dow Jones lost only 11% from the Spanish Flu plague.

However, it won’t do justice to say that the Spanish Flu was the biggest driver of the markets then, as with the culmination of World War I, because there could be other possible unseen variables which may have contributed to the market action, although we also don’t deny that both factors could have provided for significant inputs.

Unfortunately, history, for the mainstream, is always seen from a single observation that had taken place.

But the point is; initial fear from a shock usually dominates the markets, which is then followed by gradual recognition of the problem and its eventual resolution-the recovery.

Today we seem to share a similar impact but at very compressed or short circuited cycle see figure 3.


Figure 3: Stockcharts.com: Swine Flu: Aborted Black Swan

Major global stock market benchmarks as seen by the Dow Jones World (DJW), Emerging Markets (EEM), Europe’s Stoxx 50 (STOX 50) and Asia (DJP1) seems to have simultaneously suffered a “blip” (circle) from the pseudo Swine Flu scare which eventually was more than recovered by most global bourses at the close of the week’s session.

Another way to look at it is that collective governments push to inflation has far larger influence than fear generated from the pandemic menace. Besides, by stoking fear governments implied action is to spur inflation by spending more for protection.

In addition, today’s environment is very much different than that of 1918. The world has been more globalized or integrated. Moreover, technological diffusion has been increasingly deepening this integration whereas monetary standards that drive the risk taking environment have been distinct.

As to how this has altered the pandemic risk environment we suggest some based on news accounts;

-the lessons from SARs and the Avian Flu have fostered stronger collaborations among global governments in dealing with potential pandemic risk by agreeing on “a sensible set of protocols for pandemic preparedness, sharing of genetic samples and other ways of coordinating a global response.” (Economist)

-technology impelled advancement in incubation and manufacturing techniques. Again from the Economist, ``It is possible, though, that new technology will come to the rescue. Gregory Poland of the Mayo Clinic, an American hospital chain, argues that thanks to SARS, bird flu and fears about bioterrorism, work has been undertaken on a range of new incubation and manufacturing techniques.

``One example is DNA-based vaccines, which are made in cell cultures, not incubated slowly in eggs. Vocal, an American biotechnology firm, has shown in early tests that its DNA vaccine for potentially pandemic influenzas, such as strains of H5N1, is safe and effective, and it claims the technology can be scaled up easily.”

-technology enabled information sharing via the cyberspace which has cultivated mass collaboration, networking and openness in the medical and science industry that may lead to faster vaccine discovery and production.

From the Reuters, ``Scientists in Mexico, the United States and New Zealand have since posted full sequences of its DNA taken from 34 virus samples in an online public library. And the list is growing.

``What this means is scientists everywhere can now use these descriptions to create new tools to fight the virus, such as rapid diagnostic test kits and vaccines.

``While the fastest conventional tests take up to two days, scientists are designing highly specific ones that can pick up this swine H1N1 flu virus in four to six hours…

``The genetic sequences have just been made available ... many laboratories are rushing to find the best test, it will take one to two weeks (for us to design one), but we need a lot of validation, we need hundreds of specimen to do that," said microbiologist Yuen Kwok-yung at the University of Hong Kong.”

Conclusion

So while the risks of pandemics will always be present in a rapidly evolving global environment, whether due to natural or lab-induced viral mutations, the world’s capability to address such risks based on global collaboration and technological adoption appears to be more enhanced than the yesteryears. Hence, conditions from the Spanish Flu, the SARS, Avian Flu or the pseudo Swine Flu have been different.

But this doesn’t guarantee immunity from other prospective tail risks.

Nevertheless, the recent Swine Flu which had the elements of surprise and rationalizations from the public almost seemed to have morphed into a full blown Black Swan risk except that the degree of impact was apparently muted in terms of collateral damage or as viewed from the financial market’s response.

The only profound impact from the present episode based on last week’s drama had been government sensationalism and its attendant overreaching political response which had been greatly amplified or inflamed by media.

Fear, as we know it, is a conventional tool of control used by governments to subvert civil liberties by coercion. Thus, considering today’s socialization trends of important segments of the global economy, it can’t be dismissed that this could be another part of the tactical socialization thrust to impose more government on our lives.

Nonetheless, the market reflecting on its inherent discounting mechanism has shattered this prism of state instituted fear and by virtue of reflexivity behavior has equally diminished its justification. The likelihood is that the threats of the pseudo pandemic will evaporate overtime.

Over the interim, global stock markets and the commodity markets will most likely continue to manifest on the concerted inflationary measures adapted by global governments.


Friday, May 01, 2009

Will The US Technology Industry Function As The New Economic Driver?

Pew Research gives us some interesting clues in the changes of consumer habits or consumer preferences of Americans in today's crisis dominated environment.

Seen from the the investing dimension, if we are to bet on a new economic paradigm emerging from today's crisis, some of the "recent" trends may portend or serve as prologue to the future.

According to Pew Research (bold emphasis mine), ``In hard times, the Pew Research survey finds that many Americans are changing their minds about which everyday goods and services they consider essential and which ones they could live without. The survey also shows that "old-tech" household appliances have fared the worst in the public's reassessment of the line between luxury and necessity in their daily lives.

``Of 12 items tested1, six dropped significantly in the necessity rankings from 2006 to 2009, while the other six basically held their own. All of the "old-tech" household appliances on the list dropped in their necessity ratings. For example, the proportion of people who rate a clothes dryer as a necessity fell by 17 percentage points in the past three years. There are similar declines for the home air conditioner (16 points), the dishwasher (14 points) and the television set (12 points).

``A few of the "middle-aged" household appliances and services also declined. The microwave, a kitchen staple since the late 1980s, is currently viewed as a necessity by less than half the public, a 21-point drop in the past three years. The proportion who rate cable and satellite television service as a necessity fell 10 percentage points since 2006, nearly matching the declining value of a television set."

Adds Pew, ``In contrast, none of the newer information-era gadgets and services has fallen in Americans' assessment of what they absolutely need to have. Cell phones and home computers continue to be seen as a necessity by half of the public, unchanged from three years ago. High-speed Internet access is seen as a necessity by about three-in-ten adults, also unchanged from 2006. Two items that came onto the consumer scene in this decade -- iPods and flat-screen TVs -- are still seen as a necessity by a very small share of the public, but that share hasn't declined during the recession."

Why is this important?

First, it shows that the weight of consumer activities or consumer preferences appears to be shifting towards communications in the form of high end TV, iPod or the internet. Despite the recession, while other appliances are suffering from consumption retrenchment, positive growth is still seen on technology based devices or equipments.

This gives further validation to some studies alluding to the ongoing explosive growth in non traditional media as social networking, see our previous post,
Wikinomics: The Exploding Growth In Social Networking Media

Next, note that today's crisis won't last forever which possibly means that some of the recent trend shifts may accelerate when economic growth will be restored.

Third is the issue of demographics.

The cellphone and landline usage depicts of the technology "generational gap" trends between youth and the elderly.


Again from Pew, ``The survey also finds that some consumer products, including some high-tech devices that have entered the marketplace relatively recently, appear so far to be "recession-proof." About half of respondents in the current survey (49%) and a similar proportion in 2006 consider a cellular telephone to be a necessity. That overall finding obscures a considerable generation gap: Currently 60% of adults under the age of 30 say a cell phone is a necessity, compared with 38% of those 65 years old or older. But this generation gap is not significantly larger today than it was three years ago; in fact, views on the need for a cell phone have not changed significantly among any age group since 2006.

``An equally dramatic generation gap opens when Americans are asked whether landline telephone service -- the familiar home phone -- is a luxury or a necessity. But this gap runs in the opposite direction. More than eight-in-ten (84%) adults ages 65 and above say a landline phone is a necessity, while only 49% of those younger than 30 agree. And younger adults are nearly four times as likely as older adults to say an in-home phone is a luxury (51% vs. 14%)."

Our point is that the younger generation appear to be more adaptive in utilizing applications from technological innovation, although even the elderly seems to be fast catching up.

And considering that in 2020, demographic trends as seen from the chart above by nationmaster.com indicates of the probable shift in the weightings of the population distribution in the US, where its bulk is expected to comprise the age levels of 25-39. This effectively extrapolates to today's biggest technology users as the core market for the technology industry.

In short, we may expect a huge surge in industry growth in terms of penetration level or in the diffusion of users.


Barring the risks of imposition of extreme regulations which may restrict and choke off innovations, my predisposition is for unexpected or underappreciated technology originated economic recovery for the US. Albeit I think any solid recovery may not be seen anytime soon as the US could be faced with growing risks of hyperinflation.

Nonetheless, the present outperformance of the technology rich bellwether the Nasdaq relative to the broadmarket as signified by the S&P 500 seems to provide some foundation for such thesis.

As Don Tapscott and Anthony Williams wrote in Wikinomics, ``The future, therefore, lies in collaboration across borders, cultures, companies, and disciplines. Countries that focus narrowly on "national goals" or turn inward will not succeed in the new era. Likewise, firms that fail to diversify their activities geographically and develop robust global innovation webs will find themselves unable to compete in a global world. Effectively it's globalize or die."

Seth Godin On Survivorship Bias

Marketing guru Seth Godin in his latest post gives a fantastic layman's description of the "survivorship bias"-or the tendency to see only winners- in the context of million blind squirrels.

From Mr. Godin...

``My dad likes to say, "even a blind squirrel finds an acorn now and then." And it's true. You shouldn't pick your strategy by modeling someone else's success. The success might have been strategic and planned, but it's just as likely to be a matter of blind luck. Someone had to get that big deal, and this time it was him.

``The numbing reality of the net is that now we can see all the blind squirrels, all the time. A recent piece in the Times talked about bloggers getting six figure book deals in just a few weeks after posting community-driven goofy websites. It's easy to read this and say, "I should do that! I could do that!"

``What's missing from the article is that for every 10,000 goofy websites that get launched, one turns into a six-figure book deal and the other 9,999 fade away. If you want to build a goofy website, go for it. Just don't expect to be the lucky squirrel."

In media, blind squirrel reporting or analysis seems to be the norm.

Thursday, April 30, 2009

Blogs Versus Traditional Media: Divergent Weights of Issues Covered

Pew Research shows how topics diverged in terms of coverage by blogs against traditional media. Read the rest here.
What seems interesting is that since social networks have been actively competing with traditional media, the divergent weightings of topics could possibly reflect on the niches of audiences or of the interests of publishers. To which media the market evolves to could win more ad spending.

Self Regulation In Child Pornography

Many have claimed that the recent crisis highlighted the failure of market's self regulation.

In contrast, we assert that markets have merely responded to the incentives brought about by the policies imposed by the regulators.

For instance in the tightly regulated banking industry, loose monetary policies and other administrative policies that encouraged moral hazard severely distorted the industry's incentives in managing its resources, which subsequently ballooned their risk appetites by taking on more leverage by circumventing regulations and erecting a "shadow" system.

And this has been compounded by authorities who were "caught sleeping at the wheel" or who were in collusion to "game" the system or what is known as the "regulatory capture".

For industries, such as the internet service, which have been less subjected to incentive skewing regulations, the self policing mechanism appears to be taking on some good effect: for instance applied to the crusade against child pornography.

According to the Economist, ``SELF-REGULATION by internet authorities and internet service providers (ISPs) may be having some effect in combatting the worst kinds of online crime. Last year there were 10% fewer websites hosting indecent images of children than in 2007, according to the Internet Watch Foundation (IWF), which deals with criminal internet content reported in Britain. Although a worrying 1,530 sites were in operation globally, this is somewhat lower than the peak of almost 2,000 in 2006, perhaps because of more effective co-operation from ISPs and better data sharing with international authorities. The IWF notes that domains are often moved around every few days, making it much harder to block them."

To quote Jeffrey Tucker in Learning from Web Commerce, ``The key feature of most internet commerce is that government is at arm's length. If the rest of the economy were permitted to work in the same way, all of the blessings of innovation, service, self-regulation, and consumer sovereignty would be everywhere, and not just on computer screens."

Wednesday, April 29, 2009

Tracking Swine Flu's Global Reach, Understanding Pandemics

The following map from New York Times shows of the areas where the contamination from the Piggy Flu has been accounted for so far.

The epicenter being in Mexico.
The map below reveals of the global reach.


So far only 7 countries have reported cases of the flu's infestation.

According to the
New York Times, ``Israel confirmed its first two cases of swine flu, which is now in at least seven countries. Ten others including China and Russia, which were set to quarantine passengers suspected of having the flu, are investigating possible cases."


Despite the global reach, this hasn't been pronounced yet as a full blown pandemic.

Anyway to give you an idea how pandemics work, the map below from Leonardo Monasterio gives a great perspective of the spread of the Bubonic plague otherwise known as the Black Death, one of the deadliest in history.

The reported casualties-75 million people worldwide. Europe suffered most having lost 30-60% of its population.

The difference in the manner of
contamination then and today is that the former has been contiguous whereas today has seen a wider dispersion.

Although I don't think we are going to get anywhere near this given the positive response of the flu to present medication. We just hope that this won't mutate into a drug resistant strain.

Besides, the alertness and swift response gained from recent experiences (e.g.
SARS and the Bird Flu or Avian influenza) aside
from the capability of technology to adopt should make us more prepared to deal with this pestilence.

Tuesday, April 28, 2009

25 Largest Companies of the World

25 largest companies in the world as compiled by Bespoke Research
According to Bespoke Invest, ``For those interested, we highlight the 25 largest companies in the world. For each company, we provide its country, sector, price (local currency), year to date change, and market cap in dollars. As shown, Exxon Mobil (XOM) is the biggest company in the world and the only one worth more than $300 billion. PetroChina ranks second and is the only other company worth more than $200 billion. The Industrial and Commercial Bank of China is the world's third largest company, giving China two of the biggest three. Wal-Mart and Microsoft round out the top five. The United States still dominates the list with 12 of the 25 spots. China ranks second with four spots. General Electric used to be the biggest company in the world, but it has slipped all the way down to the 18th spot. Google (GOOG) is also on the list at number 22."

Including China Mobile which has been classified under Hong Kong China has 5. Although the others have been spread among Japan 1, Britain 2, Brazil 1, France 1,Switzerland 1, Netherlands 1, and Australia 1.

By region North America has 12, Asia 7, Europe 5 and South America has 1.

What is interesting is that we are seeing more Asian companies in the race among the elite.

10 US Energy Facts


1 New York State per capita energy consumption is among the lowest in the nation due in part to its widely used mass transportation systems.

2 California imports more electricity from other states than any other state.

3 Iowa is the largest producer of ethanol in the United State and is a leading state in electricity generation from wind turbines.

4 Montana is one of the top hydroelectric power producers in the United States.

5 Colorado’s oil shale deposits hold an estimated 1 trillion barrels of oil—nearly as much oil as the entire world’s proven oil reserves. However, oil production from those deposits remains speculative.

6 Florida is a leading producer of oranges, and researchers are attempting to derive ethanol from citrus peel waste.

7 North Carolina is one of the top nuclear power producers in the United States.

8 Oregon is one of the nation’s leading generators of hydroelectric power, which accounts for more than one-half of state electricity generation.

9 The Henry Hub in Louisiana is the largest centralized point for natural gas spot and futures trading in the United States, providing access to major markets throughout the country.

10 The Powder River Basin, most of which lies in northeastern Wyoming, is the largest coal-producing region in the nation, accounting for approximately 40 percent of all coal mined in the United States.


Cartoon of the Day: Swine Flu or Pork Flu?

Nice one from the Investor's Daily...