Important summary of China development series in NYT
https://www.nytimes.com/2018/11/25/business/dealbook/china-economy-business.html
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Sunday, November 25, 2018
DealBook Special: China Means Business [feedly]
https://www.nytimes.com/2018/11/25/business/dealbook/china-economy-business.html
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Grim Stock Signals Piling Up as Wall Street Mulls Recession Odds [feedly]
Grim Stock Signals Piling Up as Wall Street Mulls Recession Odds
https://www.bloomberg.com/news/articles/2018-11-25/grim-stock-signals-piling-up-as-wall-street-mulls-recession-odds
Nine turbulent weeks and a correction in U.S. stocks have left analysts with a thorny question. What's the market saying about the economy?
And while few see incontrovertible signs investors are bracing for a recession, it's a word that's been coming up more as they seek a signal in the chaos.
From the ascent of defensive industries to the sudden craze for companies that resist volatility, stocks are acting in ways that have presaged slowing growth in the past. That makes sense: gains in the economy and corporate earnings are forecast to ease in 2019 from this year's torrid pace.
Befitting that, most of the charts that follow reflect observations by analysts who don't see a recession as the most obvious conclusion. Many view the sell-off as healthy after a 10-year run of gains. But with a trade war flaring and the Federal Reserve set to boost interest rates again, the number of stock researchers who are at least willing to mention the possibility is rising.
"What's driving the sell-off? The idea that the market sees something that we don't," said Bruce McCain, chief investment strategist at KeyBank. "That global growth and the global economy are much weaker than you would've thought otherwise reinforces concern that there aren't too many places to hide."
Momentum Scare
It doesn't take a degree in technical analysis to be concerned. More than $3 trillion has been lopped from U.S. equity values since late September, a sell-off that has driven the S&P 500 down 10 percent and tech stocks well past the threshold for a correction.
To see how violent it's been, look at the number of stocks where this year's once-robust price momentum has come asunder -- those trading below their 200-day average. Support is wearing thin, with just 37 percent of S&P 500 companies exceeding their long-term moving mean.
At the same time, the chart is an illustration of how it can be a mistake to take markets too seriously when looking for clues about the economy. While the preponderance of stalled stocks is high by historical standards, it does have a recent precedent: 2016. No recession followed that signal.
None is coming now, either, according to the people who are paid to anticipate such things. Odds the U.S. will fall into a recession in the next year stands at 15 percent, according to Bloomberg's U.S. Recession Probability Forecast index. While they see the economy losing a bit of speed next year and in 2020, the median estimate of economists calls for 2.6 percent economic growth in the next 12 months.
Economists haven't always done a great job predicting contractions. A 2014 study by the International Monetary Fund's Prakash Loungani found that not one of 49 recessions suffered around the world in 2009 had been predicted by the consensus of economists a year earlier. Loungani previously reported that only two of the 60 recessions of the 1990s had been anticipated a year in advance.
One way or the other, investors are acting worried. They're rotating into defensive sectors that do better when the economy is in trouble. Utilities, the only sector that's risen since September, had trailed the broader market in nine consecutive quarters.
Some investors seek shelter from market turmoil in stocks with muted price swings as opposed to their riskier brethren. Tranquil equities offer little alpha when things are good, but are supposed to shine during times of uncertainty. Those with risk aversion have piled into the Invesco S&P Low Volatility ETF and the fund has beaten the S&P since the market rout started in late September.
The performance gap between defensive and cyclical stocks suggests that investors are starting to price in a recession-like scenario, JPMorgan strategists led by Dubravko Lakos-Bujas said in a note this week. They view the dislocation as overdone and inconsistent with the fundamental backdrop.
Societe Generale's strategists including Roland Kaloyan evoked the R word within one of the more depressing stock outlooks to be issued lately. They see the S&P closing next year at 2,400, an 18 percent decline from its September record. Still, even in their skeptical eyes, the threat of a contraction is a long way off: early to mid-2020.
Equities still yield more than 10-year Treasuries, but are far from being the most-loved asset class. A recent survey by the National Association of Active Investment Managers shows that mutual funds' equity exposure has fallen to 30.5 percent, the least since 2016. It isn't helping much -- practically everything is falling. Treasuries, raw materials and corporate bonds are all down for the year.
Where'd You Go?
Equity exposure reaches the lowest level since 2016 amid a 10% S&P drop
Source: National Association of Active Investment Managers
"Both equities and commodities are reflecting some of the fears of a global growth slowdown, so you're not seeing positive returns at all," said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. "Meanwhile the Federal Reserve is raising interest rates for the next six months, if not longer, which is also causing fixed income to go down. Global slowdowns are weighing on credit. And that's giving investors no place to hide."
To be sure, the economic indicators that often precede recession -- yield curve inversion and rising unemployment -- are not flashing warning signs. The yield curve is flat but not inverted and the unemployment rate keeps falling, as opposed to rising when a recession approaches.
— With assistance by Lu Wang
-- via my feedly newsfeed
https://www.bloomberg.com/news/articles/2018-11-25/grim-stock-signals-piling-up-as-wall-street-mulls-recession-odds
And while few see incontrovertible signs investors are bracing for a recession, it's a word that's been coming up more as they seek a signal in the chaos.
From the ascent of defensive industries to the sudden craze for companies that resist volatility, stocks are acting in ways that have presaged slowing growth in the past. That makes sense: gains in the economy and corporate earnings are forecast to ease in 2019 from this year's torrid pace.
Befitting that, most of the charts that follow reflect observations by analysts who don't see a recession as the most obvious conclusion. Many view the sell-off as healthy after a 10-year run of gains. But with a trade war flaring and the Federal Reserve set to boost interest rates again, the number of stock researchers who are at least willing to mention the possibility is rising.
"What's driving the sell-off? The idea that the market sees something that we don't," said Bruce McCain, chief investment strategist at KeyBank. "That global growth and the global economy are much weaker than you would've thought otherwise reinforces concern that there aren't too many places to hide."
Momentum Scare
It doesn't take a degree in technical analysis to be concerned. More than $3 trillion has been lopped from U.S. equity values since late September, a sell-off that has driven the S&P 500 down 10 percent and tech stocks well past the threshold for a correction.
To see how violent it's been, look at the number of stocks where this year's once-robust price momentum has come asunder -- those trading below their 200-day average. Support is wearing thin, with just 37 percent of S&P 500 companies exceeding their long-term moving mean.
At the same time, the chart is an illustration of how it can be a mistake to take markets too seriously when looking for clues about the economy. While the preponderance of stalled stocks is high by historical standards, it does have a recent precedent: 2016. No recession followed that signal.
None is coming now, either, according to the people who are paid to anticipate such things. Odds the U.S. will fall into a recession in the next year stands at 15 percent, according to Bloomberg's U.S. Recession Probability Forecast index. While they see the economy losing a bit of speed next year and in 2020, the median estimate of economists calls for 2.6 percent economic growth in the next 12 months.
Economists haven't always done a great job predicting contractions. A 2014 study by the International Monetary Fund's Prakash Loungani found that not one of 49 recessions suffered around the world in 2009 had been predicted by the consensus of economists a year earlier. Loungani previously reported that only two of the 60 recessions of the 1990s had been anticipated a year in advance.
One way or the other, investors are acting worried. They're rotating into defensive sectors that do better when the economy is in trouble. Utilities, the only sector that's risen since September, had trailed the broader market in nine consecutive quarters.
Some investors seek shelter from market turmoil in stocks with muted price swings as opposed to their riskier brethren. Tranquil equities offer little alpha when things are good, but are supposed to shine during times of uncertainty. Those with risk aversion have piled into the Invesco S&P Low Volatility ETF and the fund has beaten the S&P since the market rout started in late September.
The performance gap between defensive and cyclical stocks suggests that investors are starting to price in a recession-like scenario, JPMorgan strategists led by Dubravko Lakos-Bujas said in a note this week. They view the dislocation as overdone and inconsistent with the fundamental backdrop.
Societe Generale's strategists including Roland Kaloyan evoked the R word within one of the more depressing stock outlooks to be issued lately. They see the S&P closing next year at 2,400, an 18 percent decline from its September record. Still, even in their skeptical eyes, the threat of a contraction is a long way off: early to mid-2020.
Equities still yield more than 10-year Treasuries, but are far from being the most-loved asset class. A recent survey by the National Association of Active Investment Managers shows that mutual funds' equity exposure has fallen to 30.5 percent, the least since 2016. It isn't helping much -- practically everything is falling. Treasuries, raw materials and corporate bonds are all down for the year.
Where'd You Go?
Equity exposure reaches the lowest level since 2016 amid a 10% S&P drop
Source: National Association of Active Investment Managers
"Both equities and commodities are reflecting some of the fears of a global growth slowdown, so you're not seeing positive returns at all," said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. "Meanwhile the Federal Reserve is raising interest rates for the next six months, if not longer, which is also causing fixed income to go down. Global slowdowns are weighing on credit. And that's giving investors no place to hide."
To be sure, the economic indicators that often precede recession -- yield curve inversion and rising unemployment -- are not flashing warning signs. The yield curve is flat but not inverted and the unemployment rate keeps falling, as opposed to rising when a recession approaches.
— With assistance by Lu Wang
-- via my feedly newsfeed
Mark thoma Links (11/21/18) [feedly]
Recent top econ blog posts
https://economistsview.typepad.com/economistsview/2018/11/links-112118.html
-- via my feedly newsfeed
Wednesday, November 21, 2018
Progress Radio:No Name Becomes Citizens Progress Diner Program: The Drunks Delight Show
John Case has sent you a link to a blog:
Blog: Progress Radio
Post: No Name Becomes Citizens Progress Diner Program: The Drunks Delight Show
Link: http://progress.enlightenradio.org/2018/11/the-drunks-delight-show-first-show-from.html
--
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Blog: Progress Radio
Post: No Name Becomes Citizens Progress Diner Program: The Drunks Delight Show
Link: http://progress.enlightenradio.org/2018/11/the-drunks-delight-show-first-show-from.html
--
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Recovery Radio:Recovery Rado" Pastor and author Diana Ferguson discusses "My Father's House"
John Case has sent you a link to a blog:
Blog: Recovery Radio
Post: Recovery Rado" Pastor and author Diana Ferguson discusses "My Father's House"
Link: http://recovery.enlightenradio.org/2018/11/recovery-rado-pastor-and-author-diana.html
--
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Blog: Recovery Radio
Post: Recovery Rado" Pastor and author Diana Ferguson discusses "My Father's House"
Link: http://recovery.enlightenradio.org/2018/11/recovery-rado-pastor-and-author-diana.html
--
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Tuesday, November 20, 2018
Economics of Mushroom Production: Kennett Square and the Rise of China [feedly]
Economics of Mushroom Production: Kennett Square and the Rise of China
http://conversableeconomist.blogspot.com/2018/11/economics-of-mushroom-production.html
http://conversableeconomist.blogspot.com/2018/11/economics-of-mushroom-production.html
Mushrooms are a relatively small US agricultural crop, with total production of about $1.2 billion in the 2017-2018 growing year. But they do illustrate some economic lessons, including how a local area that develops a specialization in a certain product can be hard to dislodge, and how the rise of China is reshaping global production in so many ways.
US mushroom production has for a long time been very geographically concentrated. The town of Kennett Square in southeastern Pennsylvania bills itself as the Mushroom Capital of the World, because about half of all US mushroom production happens in the surrounding area of Chester County.
The story here goes back to 1885, and to a florist named William Swayne who lived in Kennett Square. Swayne grew a lot of carnations, which required raised beds. He pondered whether it might be possible to grow a cash crop in the space under those raised beds. Mushrooms had been domesticated in France and England in the middle of the 19th century. Swayne sent away to England for mushroom spores, and began growing them. The demand was high enough that he built a "mushroom house," an enclosed building designed to grow only mushrooms. Other local farmers took note, and the Mushroom Capital of the World became established.
From an economic point of view, an obvious question is why mushroom production remains so concentrated in Chester County more than 120 years later. After all, the basic materials for growing mushrooms like compost from vegetative material (like straw and hay), along with animal manure, are not hard to find. The climate of southeastern Pennsylvania provides a usefully cool ground temperature in fall, winter, and spring, but there are many other locations with similar temperatures.
But from the perspective of global mushroom production, this sixfold increase in US mushroom production in the last half-century is only a modest part of the story. The growth of China's economy has led an extraordinary rise in global mushroom production in the last 20 years. Daniel J. Royse , Johan Baars and Qi Tan provide background in "Current Overview of Mushroom Production in the World." which appears as Chapter 2 in the 2017 book Edible and Medicinal Mushrooms: Technology and Applications, edited by Diego Cunha Zied and Arturo Pardo-Giménez. As they note (references omitted):
And here's a figure showing global mushroom production by location:
For sales of fresh mushrooms within the US and Canada, Kennett Square doesn't appear to be under immediate threat. But a 2010 report of the US International Trade Commissionpointed out that the US became a net importer of processed mushrooms--typically grown in China--back in 2003-2004.
-- via my feedly newsfeed
US mushroom production has for a long time been very geographically concentrated. The town of Kennett Square in southeastern Pennsylvania bills itself as the Mushroom Capital of the World, because about half of all US mushroom production happens in the surrounding area of Chester County.
The story here goes back to 1885, and to a florist named William Swayne who lived in Kennett Square. Swayne grew a lot of carnations, which required raised beds. He pondered whether it might be possible to grow a cash crop in the space under those raised beds. Mushrooms had been domesticated in France and England in the middle of the 19th century. Swayne sent away to England for mushroom spores, and began growing them. The demand was high enough that he built a "mushroom house," an enclosed building designed to grow only mushrooms. Other local farmers took note, and the Mushroom Capital of the World became established.
From an economic point of view, an obvious question is why mushroom production remains so concentrated in Chester County more than 120 years later. After all, the basic materials for growing mushrooms like compost from vegetative material (like straw and hay), along with animal manure, are not hard to find. The climate of southeastern Pennsylvania provides a usefully cool ground temperature in fall, winter, and spring, but there are many other locations with similar temperatures.
Although I do not know of a systematic study of mushroom technology, there are some obvious hypotheses as to why mushroom growing has stayed so geographically concentrated. Many types of production look fairly easy from the outside. But when it comes to large-scale commercial production that covers costs and makes a profit, it seems likely that growing mushrooms commercially requires detailed skill and knowledge that spreads among the workers and producers in a geographically close community--in much the same way that software developers flourish in the area around Silicon Valley. In addition to a local labor force with crop-specific skills, local producers build up a chain of processors, wholesalers, national distribution networks, and retailers that is not quickly duplicated. The producers around Kennett Square have shown an ability to dramatically increase production over time: for example, back in 1967 the total US production of mushrooms was 157 million pounds, with 57% coming from Pennsylvania mushroom farmers; in recent years, total US production of mushrooms has risen by a multiple of six at over 900 million pounds. Finally, the relatively small size of the mushroom market can limit the incentives for new competitors to make substantial investments in trying to take over this market.
But from the perspective of global mushroom production, this sixfold increase in US mushroom production in the last half-century is only a modest part of the story. The growth of China's economy has led an extraordinary rise in global mushroom production in the last 20 years. Daniel J. Royse , Johan Baars and Qi Tan provide background in "Current Overview of Mushroom Production in the World." which appears as Chapter 2 in the 2017 book Edible and Medicinal Mushrooms: Technology and Applications, edited by Diego Cunha Zied and Arturo Pardo-Giménez. As they note (references omitted):
World production of cultivated, edible mushrooms has increased more than 30‐fold since 1978 (from about 1 billion kg in 1978 to 34 billion kg in 2013). This is an extraordinary accomplishment, considering the world's population has increased only about 1.7‐fold during the same period (from about 4.2 billion in 1978 to about 7.1 billion in 2013). Thus, per capita consumption of mushrooms has increased at a relatively rapid rate, especially since 1997, and now exceeds 4.7 kg annually (vs 1 kg in 1997; Figure 2.2). ...
China is the main producer of cultivated, edible mushrooms (Figure 2.3). Over 30 billion kg of mushrooms were produced in China in 2014, and this accounted for about 87% of total production. The rest of Asia produced about 1.3 billion kg, while the EU, the Americas, and other countries produced about 3.1 billion kg.Here's a figure showing growth of mushroom production vs. world population.
For sales of fresh mushrooms within the US and Canada, Kennett Square doesn't appear to be under immediate threat. But a 2010 report of the US International Trade Commissionpointed out that the US became a net importer of processed mushrooms--typically grown in China--back in 2003-2004.
-- via my feedly newsfeed
Dems Must Wield Power Against the Powerful to Win Back Rural America [feedly]
As usual .... look at the rural economies and see the hole R strategists drove a truck through
http://cepr.net/publications/op-eds-columns/dems-must-wield-power-against-the-powerful-to-win-back-rural-america
Much of the commentary surrounding the midterm elections focuses on the divide between increasingly Democratic metropolitan areas and increasingly intensely Republican rural and small-town America.
Some pundits and former elected officials claim an emphasis on "the opioid crisis" and rural economic development policy proposals can address Democrats' weaknesses in areas with disproportionate power in the Senate.
Other pundits ignore Phil Bredesen's landslide defeat in the U.S. Senate race in Tennessee and imply Democrats could staunch their rural bleeding by nominating more conservative, more male and more white nominees.
Progressive activists, alternately uninspired by technocratic policy papers and revulsed by the implication that only conservative white male candidates can win, scoff at those proposals, but as the saying goes, "A plan beats no plan."
Progressives need an alternative to selling out the party's greatly overdue commitment to diversity and something more attention-grabbing than ever-more clever policy proposals.
A good solution requires a good understanding of the problem. I believe Democrats' problems are two-fold; one, a history of insufficient energy in office in fighting the villains victimizing rural and small-town America; and two, extreme difficulty communicating with voters in media deserts.
Thus, I propose that in 2019, Democrats do better than promising to fight on behalf of rural and small-town Americans. Democrats should actually wield government oversight power to fight for them.
Here's how Democrats can address their substantive and communications problems in tandem. House Democrats can create a "Special Committee on Rural America" designed to investigate the very real struggles in much of small-town and rural America.
This committee might ultimately help standing committees develop legislation. However, the principal purpose of this committee would be to conduct congressional oversight that identifies the villains draining the lifeblood away from struggling sectors of the country and to very publicly pick fights with these villains.
The hypothesis is that in order to articulate solutions that might persuade the persuadable in those communities, policy prescriptions must be embedded in battles capable of gaining traction in both social media and news coverage. Trump's lies about a "caravan" are simply more provocative than even the best white paper.
Thus, Democrats must not just identify economic problems in antiseptic policy proposals, but actually demonstrate an eagerness to wield power against the powerful on behalf of small-town America.
That would mean vicious cross-examination of rich opioid pushers, angry back-and-forth with executives from Monsanto, examining the practices of the processing goliaths and hauling before Congress the "seed, livestock and banking" monopolists who "are punishing rural America."
The Democrat who ran against Rep. Steve King (R-Iowa), J.D. Scholten, made inroads in rural western Iowa in part by highlighting issues of monopoly power. How much greater traction could the party achieve as a whole if it actively used genuine government power, such as aggressive subpoenas, against these villains?
Videos of angry back-and-forths of these oversight battles shared on social media would receive more attention than white papers. News of billionaires resisting subpoenas would yield more interest than policy proposals with which Trump never engages.
Policy proposals resulting from the context of melees with corporate executives are going to seem like a political party's authentic priority in a way that a paper posted on a corner of a candidate's website never can.
Basically, if the forces destroying the family farm, consolidating sources of farm credit and destroying small-town retail come to hate a political party, that political party will generate the credibility among small-town voters necessary to earn a real hearing.
This proposed committee would not be stuck in D.C.; hearings would be held across the country. The committee's efforts would require dedicated staffers to push each and every investigative step out on social media while making members available to rural radio, print, television and podcasts.
This proposal has a historical basis in the considerable history of rural populist oversight in Congress. The banking committees were in large part led by populists popular in rural parts of Texas and Wisconsin from the 1960s until the early 1990s — Rep. Wright Patman (D-Texas) and Rep. Henry Gonzalez (D-Texas) in the House and Sen. William Proxmire (D-Wis.) in the Senate.
In addition, as an official Senate history noted, "No senator ever gained greater political benefits from chairing a special investigating committee than did Missouri's Harry S. Truman."
As Robert Weissman has noted, "committee investigations highlighted deceptive practices on credit reporting, interest overcharges, [...] and abuses in the securities industry," and even "relentlessly scrutinized the Federal Reserve Board for its tendency to favor creditors with tight money policies."
And as Martin Longman has demonstrated, anti-monopoly politics has a deep, albeit oft-forgotten, history of resonance in small-town America.
Democrats have a chance to return to the roots of past successes in non-urban America by wielding the actual power of congressional oversight against deserving villains — will they take it?
Jeff Hauser is the founder and director of the Revolving Door Project, an initiative which scrutinizes executive branch appointments to ensure political appointees serve the broad public interest, at the Center for Economic and Policy Research.
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