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John Lounsbury

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  • Weighing The Week Ahead: Can Earnings Season Reverse The Stock Market Decline? [View article]
    dancing diva - - -

    Very good observation on the Scott Grannis chart which plots liabilities against asset value. Debt is mostly repaid with income (or selling assets which puts downward pressure on value so that would produce "unpleasant" distortions to the Grannis plot).

    A more meaningful graph is obtained by plotting liabilities against income and that shows we are still at historic over-leveraged conditions. To be technically correct we should plot debt service against income (cash flow vs. cash flow) but I don't know if the data is that easy to compile.

    Bottom line, I am not ready to sign up for the deleveraging is "Mission Accomplished" kool-aide.
    Oct 13 06:46 PM | 3 Likes Like |Link to Comment
  • Why Not Ignore Economic Forecasts? [View article]
    Drummer Dude - - -

    I apologize in advance for an overly long response.

    Your analogy is incomplete. The determination of real information in electromagnetic waves from an overriding noisy background is a technology that has developed into the 21st century. The determination of economic patterns from a somewhat analogous type of noise has not left the 18th century for the most part.

    Yes, there are some examples of success but they are few and far between.

    The best examples of definitions in economics where this lack of ability to extract meaningful economic data from the noise come from Marx, Schumpeter, Keynes, von Mises and Hayack (and a few others) who have been largely ignored by most economists - who simply put on blinders and make assumptions that ignore the noise. They end up with rigorous proofs (based on assumptions) which all too often turn out to be nonsense.

    My criticism might be represented by a couple of analogies:

    1. Many economic models assume to describe the economy in a manner which would allow someone to describe the progress of a motor car across the country from a small set of photos taken of it as it traveled down a highway.

    2. Many economic models depend on the assumption that the future is defined by present expectations. This unfortunately removes the uncertainty of the future from economic modeling and eliminates the most valuable contributions of the classical economists I mentioned previously. Much economic modeling attempts to predict the future by assuming it is predetermined by present expectations. How circular can a process get?

    I will repeat an instructive parody which relates to the EMH (Efficient Market Hypothesis) which is a manifestation of the assumption that uncertainty about the future does not apply.

    An economics professor and a student are walking across campus. A $100 bill appears on the sidewalk immediately in the professor's path. As they walk by (the professor stepping over the $100) the student says: "Why didn't you pick up the money?"
    "Because" said the professor, "it was obviously an illusion and not real. If it were real someone would have picked it up already."
    Sep 20 02:02 PM | 6 Likes Like |Link to Comment
  • Is Inequality Causing Soft Economic Growth? [View article]
    @ billcharlesdixon
    Should I limit the use of the word "rant" when I describe my own writing? I use the descriptor often when I express an opinion in more than a couple of dozen words (in which case I usually manage to identify it as an opinion). If I have written 100 words or more of opinion I often edit the presentation to identify it as a "rant". This is because I try to deal with facts as much as possible and avoid wasting a lot of effort on opinion - but when I do I warn the reader(s). So I think I will continue to use the word. (Including describing the writing of others.) I remember the use, but not the exact occasion, not too long ago of describing an essay written by another as a "magnificent rant". I thought that much more apropos than saying something like a "well written opinion".

    Thus concludes another rant. :-)
    Aug 21 05:20 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: The Market Risk From Current Crises [View article]
    I don't know how bbro calculates loan growth it but I would use the data for 'Loans and Leases, All Commercial Banks' at the St. Louis Fed data base ( I just did a quick check of that data and the two results he quoted are very close to what I estimated from the Fred data.
    Aug 10 05:39 PM | 2 Likes Like |Link to Comment
  • Obamacare And Part Time Jobs Growth [View article]
    drdata - - -

    Yes, the example you give will count as three workers in the nonfarm payrolls data (establishment survey). But they only count as one employed person in the household survey and that is the data which determines the unemployment rates (U-3 through U-6). This may be one of the reasons that employment losses have been completely recovered by nonfarms payroll data but not when using the household survey employed numbers.

    Doug Short has posted data showing that since 2006 the percentage of the employed with two or more jobs with one being full-time has declined from about 1.15% of the total employed to about 0.75% today (35% decline). Link:

    He also shows that since 2007 the percentage of those with two or more jobs who are part-time for all jobs has increased from about 1.18% of total employed to 1.32% today (12% increase).

    The total with two or more jobs (including those with two full-time jobs, a very small number) has declined from about 2.75% of the total employed in 2007 (and from about 2.85% in 2008 and 2009) to 2.5% today, which is a decline of 9% (12% from 2008 and 2009).

    The net from this data is that it supports a net change in full-time to part-time employment for about 0.4% of the total number of people employed. That percentage seems small but it amounts to more than half a million people.

    On a macroeconomic scale, 500,000 out of more than 146 million people employed is "noise". For the half million individuals so affected it can be life changing.

    When we discuss what can be determined on a macroeconomic scale the individuals falling into a fraction of one percent get lost.

    Just a note, in case the low percentage numbers discussed above are confusing compared to the much higher percentages the author discussed in the article. The author was discussing the numbers for all part-time employment which covers those with only one job as well as the smaller number with two or more jobs that I was discussing.
    Jul 13 12:29 AM | 3 Likes Like |Link to Comment
  • Proof That Cutting Taxes Does Not Stimulate? [View article]
    MLP Trader - - -

    You said: "Under a distortive tax regime, you inefficiently re-invest it to avoid taxes."

    Aren't all taxes distorting? The question is what distortions do the least harm or encourage the best macroeconomic patterns?

    Are you proposing that corporate tax rates be reduced by recognizing (in some form) all investment anywhere as tax preferred?

    Interesting thought, but would that aid and abet capital outflows from a country? And if the tax preference was allowed only for domestic investment doesn't that create the possibility of malinvestment, which you have mentioned?

    Tax incentives are complicated things. When it comes to taxation you can be damned if you do and damned if you don't (tax).

    You have opened a very interesting discussion. I fear it can never be concluded to a reasonable conclusion in a forum such as this. And maybe not to the satisfaction of everyone in any venue. Every tax law/levy creates winners and losers and the losers are seldom happy about it.
    Jul 6 02:08 PM | 1 Like Like |Link to Comment
  • Why Ending The USA Export Import Bank Is Bad For The Economy [View article]
    The Exim bank may be making a profit for the government but it would not be well served by private banking because the profit is modest. There are much more profitable (as well as risky) ventures for the private sector. There are many service areas of banking that are better served by a public bank (like the Exim bank) such as infrastructure development, for example. The government is a big, fat brood sow for private banking; the functions of public funding should be operating by-and-large through public banking entities. Private banking would then provide its services to private enterprise and individual citizens. Obviously the Federal Reserve becomes a very different animal functioning as an interface between two banking functions - a clearing house and reserve operation for each and their intersections. Too Big To Fail might well be a much easier condition to cure under the new system.
    Jun 28 11:57 AM | 1 Like Like |Link to Comment
  • Another Reason Economic Growth Will Be Poor In 2014 [View article]
    Jan - - -

    I should let the author answer first but here are some numbers you can calculate from Census Bureau data

    Population growth by year:
    2005 0.9%
    2006 1.0%
    2007 0.9%
    2008 1.0%
    2009 0.9%
    2010 1.2%
    2011 0.7%
    2012 0.7%
    2013 0.7%

    These numbers all round to 1%.
    The average for the last nine years is 0.9%.
    The average for the last three years is 0.7%.

    Household formation rate has been very low in recent years and that is certainly a factor in the recent lowered birthrate. Will that continue? Will the population growth rate sink below 0.5% so that it will no longer round to 1%? Will the U.S. turn into Japan in this regard and see a negative growth rate (shrinking population)?

    You have to speculate pretty wildly about the future to come up with a population growth rate different from 1%.

    Perhaps you are confused by the statement of 1% and are thinking 1.0%? It is often the case that the question of significant fixtures is not properly recognized when having a discussion.

    You have asked a very good (straightforward) question. The answer is not quite so straightforward.
    Jun 22 02:09 PM | 1 Like Like |Link to Comment
  • Flying The Economy Close To Stall Speed [View article]
    Logical Thought - - -

    The Fed has been "printing" money for the banks, not for the real economy. Ben's helicopter was very selectively avoiding Main Street which is where economic growth comes from. Financial growth can be decoupled from the real economy and we have seen a good example of that in the current era.
    Jun 7 12:54 PM | 2 Likes Like |Link to Comment
  • Flying The Economy Close To Stall Speed [View article]
    jji937 - - -

    Read the article.

    The first quarter is not ignored in the author's graph. He has plotted year-over-year GDP change, not the quarter-to-quarter number annualized. That was a point that he explained in what he wrote.

    The Fed Fred graph does not appear to have been updated with 1Q 2014 yet. They may not do that until the "final" estimate is reported in July.
    Jun 7 12:49 PM | 3 Likes Like |Link to Comment
  • Flying The Economy Close To Stall Speed [View article]
    dancing diva - - -

    You make a good point. Economic conditions today (debt deflation pressures) are more like they were 70 years ago than at any time since. We have to remain alert that the "new normal" may only be new if we don't go back far enough in time. There are many differences between now and the Great Depression but there are some important similarities. The people who make the most money will get the situation figured out with the fewest errors.
    Jun 7 12:44 PM | 1 Like Like |Link to Comment
  • Robotics May Be Good For U.S. Employment [View article]
    A paragraph needs correction:

    "Others have argued that because of the Keynes "disproof" of Say's Law that widespread unemployment can never be involuntary and that for widespread unemployment in a broad population only occurs if many people chose unemployment therefore are not (for an entire population) "involuntarily" unemployed. With this assertion the validity of Say's Law is reestablished over Keynes objection."


    Others have argued that, because of the Keynes "disproof" of Say's Law, widespread unemployment can never be involuntary. The argument is that widespread unemployment in a broad population only occurs if many people chose unemployment. Therefore (for an entire population) "involuntarily" unemployment is impossible. With this assertion the validity of Say's Law is reestablished over Keynes objection (if you accept the argument and I don't - I think the argument is circular and therefore invalid).
    May 24 03:00 PM | 1 Like Like |Link to Comment
  • Robotics May Be Good For U.S. Employment [View article]
    Robgggr - - -

    Short but insightful comment.

    Futurists in 1960 foresaw a world where much manual work was automated and human work was much less in demand. The ultimate scenario envisioned had even intellectual work diminished by artificial intelligence. The scenario that was described more than 50 years ago had humanity benefiting from (1) lower costs for goods and services and (2) work weeks reduced to 20 hours or even less for many people providing a bonanza of leisure time for recreation, self-improvement, etc.

    The second benefit is related to your comment: "Maybe we can all work less hours and share work."

    The idea that the masses will benefit from increased leisure time implies that the "profits" from the increased efficiency of automation and artificial intelligence are widely distributed in some way. The second benefit is diminished or eliminated if all the increased productivity inures to higher profit of a few and does not get distributed through the "work sharing" suggested in your comment.

    Ultimately the futurists' scenario from long ago falls apart if we develop the technology to produce more and more for less and less cost but at the same time the customer base shrinks so that less and less can be sold. Say's Law ( suggests that supply will create its own demand. But that is dependent on the assumption that the proceeds from selling the increased supply remain available to purchase it in a virtuous cycle. Keynes essentially focused on this dependency (and Say himself explicitly recognized it as a limitation) when he argued that the concept, if valid as a general "law", would mean that lack of demand could not occur and therefore widespread involuntary unemployment could not occur.

    Others have argued that because of the Keynes "disproof" of Say's Law that widespread unemployment can never be involuntary and that for widespread unemployment in a broad population only occurs if many people chose unemployment therefore are not (for an entire population) "involuntarily" unemployed. With this assertion the validity of Say's Law is reestablished over Keynes objection.

    My personal bias is to deny the probability that a majority of a large population will express a preference for unemployment. So that keeps me in the camp that views the economy driven by demand and not by supply. I will concede that there are occasions when supply does drive economic growth - examples are the introduction of revolutionary new technologies. One specific case was the PC in the 1980s which was created and marketed into an environment with no significant demand. As the supply became available 1984-1988 the demand followed.

    But for established products increasing the supply often does not increase demand; instead oversupply results and companies are driven out of business. Try selling Say's Law to a homebuilder who was riding high in 2006 and was bankrupt in 2009.

    So that gets us back to the author's discussion which suggests that as long as the benefits of automation accrue almost entirely to the "automators" (often called "capital") and insufficiently to "labor" (sometimes called "human capital") then a death spiral can result where more and more can be made at lower and lower costs but the market shrinks because of lost employment.

    Oh oh!! We have fallen into the "inequality pit" again.

    Unless those who benefit from inequality find a way to share some of their gains with the "less equal" the markets on which "capital" depends for earning returns will diminish and the "more equal" will kill the goose that has been laying their golden eggs.

    May 24 02:18 PM | 5 Likes Like |Link to Comment
  • One New Reason To Ignore The BLS Jobs Report [View article]
    ollyolin1 - - -

    You are only partly correct. The acceleration in decline of the participation rate since 2009 has been caused by retirements. It is impossible to determine from the data presented how much of retirement is "early for economic reasons" and how much is "according to plan". It is likely that both factors are significant so not all of the decline can be attributed to bad trade treaties.
    However, there is an underlying slow rate of decline in the participation rate now about 14-15 years old and until 2009 that was not associated with retirements. Some part or all of that may be from your attributed cause.
    Considering the span of time over three administrations (and possibly influenced by what happened in the three before that) I have to agree with your pox on both parties.
    Reference study:
    May 6 07:17 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: ETF Portfolio Versus The Stock Only Portfolio, A Glaring Update [View article]
    RS, I am not surprised at your results in the first two months. I do expect that if you continue the experiment for three years or longer it may be the case that the cost of the higher return for the stock portfolio will be a greater volatility. And if that is the case then over the long haul there will be a number of short periods of time when the EFT portfolio outperforms. Nervous Nellies may have difficulty in living with that trade-off.
    May 3 12:52 AM | Likes Like |Link to Comment