Pompano Frog

Pompano Frog
Contributor since: 2013
Company: Fox River Economics
Thank you Mr. Stewert..
Well done and totally correct.
Dear Reader..
The author's do a wonderful job of presenting the American/European academic consensus viewpoint. All of the facts presented are correct.
Almost none of the conclusions are written in stone. If you control your debt your economy is going to boom? Where is the evidence for this?
I see just the opposite. Everyone of the high growth economies has expanded their debt as a percent of GDP. Economic growth penalizes earnings because expansion creates startup costs besides the actual capital investment. Countries that have economic growth subsidize investment and expansion, and punish consumption.
China has zero tax on capital gains. They have massive taxes on new housing.
Monetary policy is only ineffective if it is separated from government fiscal policy. If interest rates are pushed down and the elites don't want to commit to economic expansion in the private sector, then the public sector needs to take up the slack.
Borrowing at 3% for 20 years and building new STEM universities, updating the nation's bridges, ports and airports, or increasing medical research. There are thousands of worthy long term projects that the market will never fund.
Europe cannot be saved. They are done. The Asian economic model will sweep them into the dustbin of history. Maybe the authors could correct me if I am wrong, but I seem to remember that the German economic miracle ended in the year that they had the first close two party election.
I see the forces behind the massive immigration of uneducated workers into developed economies as being nothing more than politicians attempts at ballot box stuffing. It's no different than busing in voters from another state or district. It's enormously costly in economic terms and is especially hurtful to those in the bottom quartile of the population.
Dear Reader..
I can only say I am appalled by this article. Does it make sense to the reader that all of the world's central banks know nothing with their thousands of experts studying the historical relationships of economic factors to each other.
These are the same thoughts on economics that we encounter when we read the papers from 1933.
I highly recommend the Ben Bernanke autobiography. He teaches the beginning course in economics at Harvard and is a great writer. He carefully explains the modern financial system and monetary policy.
The 10 year treasury bond is 1.97%. The 30 year bond is 2.77%.
If the politicians were following modern economic policy they would be borrowing at those rates and financing massive infrastructure investment. These interest rates are near 50 year lows. The economy would take off.
The U.S. politicians should be lowering the down payment requirements on real estate purchases. This is what China did yesterday. The loss rate in the U.S. on mortgages other than no down payment loans was small in 2008/2009.
Central Banks have unlimited resources if they have the political backing. The only limitations are the domestic savings rate and the inflation rate.
You can read this same article in 2009 on Seeking Alpha. Investors missed one of the great bull markets. This is a similar opportunity to the declines of 2010 and 2011. They were blips.
You can't have a major market decline unless the Central Bank is tightening credit. It is the availability of credit and not its cost that is critical.
Another great article by this author on an important subject. This should have been an "Editor's Pick."
Let me add that the bond market is also subject to the massive "principle/agent" problems that exist in financial markets.
Institutional investors (the agents) will sell a bond that they know has a likely recovery value higher than the trading price. They do this because they don't want clients to see the losing transaction in their portfolio.
During 2008/2009 bonds were selling at prices that indicated a recovery of only 70% and in the end the recovery was 89%. Remember a default is usually only a delay in the interest payment or principal.
The most recent supply/demand elasticity numbers I have seen for oil show global demand below $65 generating more demand than supply.
At $40 you have global demand increasing at 1.5 mil bbls a day. Remember China has retail sales growing at 10% plus and GDP growing at 6.5 - 7%.
Global supply in 2017 at $40 would be flat.
With all four of the major Central banks pouring liquidity into the financial system it seems highly unlikely that global economic activity will be weak in 2016/2017.
TDune..
Japan can easily change the legal landscape. I stand by my comment without any hesitation that the political party currently in power in Japan is totally focused on a rearming.
When dealing with the political aspects of economic events you need to look at what they do and the timing rather than what they say.
Did Roosevelt tell the American public what he was doing prior to World War II?
Are the Saudi's really worried about U.S. shale producers or do they realize that an increase in the price of oil allows Iran and Russia to buy more weapons to use against them?
Bill..
Japan ended the war with little except having the economic bureaucrats who had just had a hands on learning experience in how to increase war material production. That plus the engineers survived the war intact.
Today, they enjoy a life style comparable to the U.S. The recent stress on economic growth is not truly motivated of a desire to increase their wealth. It is because they see China as an aggressive threat that can only be contained by rearming. You need economic growth to increase the well being of your population or to buy or develop military material.
snoopy
Ben Bernanke has written an autobiography which is an excellent introduction to understanding modern monetary policy. He tells the story of being sent to the Congress by the President to explain what he wants to do. In both political parties they had zero interest of being of help even with the threat of a global financial meltdown. These politicians, who practice economic theories from the 1930's, are responsible for our relative decline.
You might also look at Singapore which upon achieving independence had a GDP per capita of I think $250 per person. Today 1 out of 6 citizens is a millionaire. It was not an accident.
Regarding the p/e you quote. First, I think it is from Shiller which is an academic exercise which has no realationship to forecasting future financial market returns. Second, earnings are depressed because of the drop in the price of oil. When oil mean reverts, because long term demand is growing 1.3% per year and yet global reserves are declining, those same earnings are going to blow the lid off of the estimates.
Thirdly, think of 2009. What was the p/e ratio? Corporate earnings are a function of changes in revenue. Revenue is the end result of the changes in money supply and changes in the financial markets. In other words, financial markets create rather than forecast changes in the real economy. This is the way it has always been. This is not new.
Dear Reader..
Every fact given in this article is correct. Every conclusion is wrong and the historical facts are the exact opposite.
Japan going to negative interest rates, in other words expanding monetary stimulus and financial liquidity is a negative for asset markets?
In what world is this? You can create a spreadsheet easily by downloading money supply data and doing a simple regression with logarithms to any equity market. Lag the equity market 6 months.
Equity markets are the expression of monetary expansion. It has always been this way. When the French came to our rescue at Yorktown during the revolutionary war they came with silver. The expansion of the money supply caused the value of real estate and prices to escalate enormously.
Ben Bernanke has written a paper in 1996 entitled the "The Financial Accelerator Model." It is available on the internet. Read the introduction and the conclusion because the rest is technical.
The politicians teach this anti central bank ideology so they will escape the blame for our 2% long term economic growth.
Taiwan just had an election with a major regime change. They have had low growth for years. Watch what happens when the political policy making is focused on moving the economic growth rate.
Oil prices are negative for equity prices? Create a spreadsheet and check the historical record. Yes, the sovereign wealth funds, that did not exist in the last drop, are the source of the equity liquidation.
They are creating bargains. We have cheap global earnings multiples combined with expansive monetary policies on a global basis. It doesn't get any easier than this.
The hedge funds have low nominal single digit returns from their constant momentum trading. They then leverage those returns through borrowing to make it appear that they are generating low double digit returns. In most cases investors are getting nothing for their money.
It is clear from the historical record that longer term investors outperform by practicing mean reversion. Ok, I am ready to go back to my spreadsheet.
Dear Reader..
This should have been an "Editor's Pick." It is one of the best discussions of the weakness in "Austrian Theology."
From an investment standpoint if you don't have an accurate macro economic model most of your investment decision making is going to be wrong.
I am not as confident as the author in the ability for technology to overcome a flawed political environment.
Neither political party in the U.S. has a successful plan to increase growth above 2-2.5% and that means with continued immigration of unskilled workers almost zero economic growth for 80% of the population. That cannot be a good background for any nation.
The U.S. spends the lowest percentage of GDP on infrastructure of any developed nation. The U.S. is turning out the same percentage of STEM (Science,Technology...) graduates as a percent of the population as they were 50 years ago. All of the high growth countries focus on that number and the supporting structures necessary for its creation.
Dear Reader..
This article should have been an Editor's Choice. It covers a number of extremely important subtle investment factors that readers of Seeking Alpha need to be exposed to.
A superb use of examples.
Dear Reader..
I am in the midst of the drudgery of putting together a new spreadsheet. Excuse me if I take a break to make a few comments.
So, the author and the comments know how monetary policy and economic stimulus work better than the hundreds of experts at the FRB. I could add practically all of the other Central Banks as well.
In the U.S., unlike Europe, Japan and China the banks are important but not key credit providers. In those other financial centers the banks dominate credit allocation because the governments want to be able to closely control the lending of the nations precious national savings.
In our system the bond market and stock market are the major source of capital allocation directly or indirectly through signaling effects.
So, the writer believes that the great economic thoughts of the 1930's of small government and free markets is going to create massive long term economic growth. It might be 2.5% versus 2% under a European socialist economic policy. Let me suggest that the economic policies of both political parties are ideologies from the 1930's that have little relevance today.
If you want to read a suberb book on modern economic growth for free on the internet take a look at the following by this professor entitled "Bad Samartin's."
http://bit.ly/1OSEeFb
Thank for a stimulating article on a complicated subject.
SENG..
I am implying that historically large one month down moves are almost always a buying opportunity over the next 12 or 18 months. The S&P has a historical return of 8% every 12 months or 12% in 18 months.
If you bought in January, 2009 you did roughly double the historical return over the next 12 or 18 month period.
The S&P was down -9.2% in Feb, 2001.
M1 was down 2.8% over the prior 12 months. That is a 1st decile monetary event over the last 55 years.
The yield curve was .19.. That is 2nd decile monetary event.
This comment is exactly the point. Reader's are missing the most basis..basic knowledge of monetary behavior.
I still do consulting in this industry. I owned a brokerage firm. I have never..never seen anyone accumulate wealth short term trading. Never.
I have many friends in this industry. They have never seen it. Is it possible?
Meanwhile, I have seen numerous large accounts managed by value investors.
Dear Reader..
An investment advisor every day on Seeking Alpha pulls out the charts to explain why just using moving averages you can make a fortune. It is so easy.
The S&P is down - 8.3% in January, 2016.
The S&P was down - 8.2% in May, 2010.
The S&P was down - 7.2% in September, 2011.
Each of these prior drops represented a buying opportunity.
In each of these prior drops investment advisors became bearish.
Margin debt started to liquidate. That is a surprise.
Today 3 mos T-bills yield .25%/ 10 year govt bonds yield 2.10%/ BAA corporate bonds yield 5.46
The yield curve is 1.85%. My spreadsheet shows a negative..negative yield curve every month from August, 2006 to April, 2007.
My spreadsheet shows a negative yield curve from August, 2000 to December, 2000. The yield curve was under 50 basis pts (.5%) from Jan, 1998 to January, 1999.
Those market declines just came out of thin air due to liquidating margin accounts and crossing moving averages. Someone might take that sentence seriously.
Markets are a function of two sets of factors which are valuation and monetary. All central banks practice counter cyclical monetary policy. The very real economic indicators that the public is focused on are causing the central bank to revise monetary policy upwards creating the next bull market movement.
And it is not only our Central Bank. Is the Peoples Bank of China trying to slow their economy down? What about the Bank of Japan? Maybe the European Central Bank?
The next 18 months will be as easy as it gets.
Dear Reader..
There is no basis in fact for this author's claim that China GDP numbers are fabricated.
See the attached paper on this subject:
http://1.usa.gov/16lvVuu
Let me quote in the summary, "However, the quantity of debate has not been matched by quality. The last time that economists engaged in broad and in-depth analysis was in the late 1990's to early 2000s."
This author is just quoting prevailing media sentiment on the subject. The source of these charges are the academics in history and political science. China and the other Asian growth models represent an extreme threat to the ideology they peddle to our political leaders, their students and the public.
Meanwhile, you can buy an etf on China (First Trust AlphaDex China, FCA 17.80) stocks trading on the Hong Kong Stock Exchange with a p/e of 9.6x, a dividend of 4% and most importantly an earnings growth rate of 15%.
At some point global institutional investors are going to need to increase dramatically their holdings in China. It will be a stampede.
China's latest household savings rate is in excess of 30%. They have a zero..zero capital gains tax. Retail sales are up 11% versus a year prior. Wages are up 9%.
The government subsidizes tourist travel in China to provide employment for older Chinese who did not get into the current educational environment. It is an eye opener. You would see first hand the quality of our media coverage of an ideological subject.
Gary,
I was going to apologize for the 1987 reference and then I thought I should reread the article and check.
Sure enough in paragraph 11 there is the statement:
"In fact, over the last six decades, there were non-recession 20%-plus bearish drops in 1962, 1966, 1978 and 1987."
The BAA index is currently 5.46%. That is substantially below the earnings yield on most analyst's estimates of normalized earnings.
In 1987, prior to the market "surprise" the BAA index was 11.5%.
I will stick with my original comments.
Dear Reader..
All of the comments from his clients are factual. So what. What does this have to do with forecasting financial markets?
Today, Jan 15, 2016, the S&P closed at 1880. This is down roughly 8.2% from the December 2015 close.
In May, 2010, the S&P was down 8.2%.
In September, 2011, the S&P was down 7.2%.
This 1 month volatility tends to be at buying opportunities rather than selling opportunities.
It is because the clients and their agents feel comfortable with trends. We call this "herding" in the academic literature.
The problem is that the monetary authorities do just the opposite of herding. They run policy on a counter cyclical basis if they can. In 2007 and early 2008 they kept credit tight because they were concerned about inflation.
Are they concerned about inflation here? Markets are global. Is China tightening credit?
Is the European Central Bank tightening credit?
Is Japan tightening credit?
The drop in the price of oil has nothing to do with a drop in global demand. Demand for oil in 2016 will be bigger than average due to the lower prices.
No one is going to use cash to drill. Period. Oil companies with cash will buy reserves on the cheap.
The growth in demand for oil is relentless on a global basis. I don't know whether the equilibrium price for oil is $45 or $65. But, I do know you can go a 100% over equilibrium.
My comments on Seeking Alpha go back to 2009. They make interesting reading.
Tack..
May I suggest that you consider that the investment advisor sentiment index is bearish. As you know this is a bullish indicator. As you might not know is that investment advisor sentiment is strictly based on the previous 24 month market action.
The 24 month market action is inversely correlated to future price movement.
DigDeep..
The point is that a small smattering of knowledge about monetary policy is necessary to set an investment strategy. A rise in interest rates has little to do with liquidity in the financial system. It is not the cost of money it is the availability of money.
There is an enormous amount of global liquidity pushing on equity prices. There has never..never been a major price decline without a major central bank tightening credit.
Brianklu..
Over the last 18 months value investing has been an extremely poor investment strategy. In the prior 18 months it was not unusual to have an account up 50% plus. Value investing's long term record attracted an enormous amount of additional investor attention and led to relative..relative over pricing.
Value investing is in simple terms dealing in equities in the lowest 1/3 of market capitalization to book value. Those are typically companies that have higher debt to equity ratios and lower bond ratings. As you might be aware the CCC bond index has moved into the 18% range currently. These bonds are an alternative to purchasing value stocks and have contributed to the near term under performance.
Dear Reader..
Let me suggest another hypothesis. Financial markets are not "no earnings growth, no price growth." This is what we tell children in a high school investment class. Financial markets are the medium through which monetary policy is transmitted to the real economy.
The weakness in the recovery is a fact. The Federal Reserve is well aware of this. All central banks conduct counter cyclical monetary behavior if they have the ability to execute that policy. What would stop them? Inflation running substantially above their targets.
The Federal Reserve will conduct more expansive monetary policy in response to the fundamental data. That liquidity makes financial markets set for double digit gains in 2016.
The author uses 1987 as a period where you had a bear market without tight credit. In Sept. 1987 the S&P was 321. In Nov. 1987 it was 230. Not good. M1 had been growing 9.2% in the previous 12 months. The yield curve was 3.02% (10 yr govt bond- 3mos tbill).
What the author fails to point out is that BAA corporate bonds, which are currently trading at 5.5%, were in 1987 trading at 11.5%. The S&P was trading roughly at a p/e of 17x in 1987. That is an earnings yield 5.7%..
So let's look at this. You could be in a near risk free corporate bond for 11.5% or I can buy stocks for 5.7%. I wonder what I am going to do?
This differential between stock valuation levels and bond prices is what has been pushing stock prices higher.
I have been publishing comments on Seeking Alpha since 2009. You can, not easily, see what I was saying then and, more importantly, see the reasoning. This is one of the easiest markets I have ever seen for a value investor.
Dear Reader..
Just in case a reader wants to look at the market from a different perspective let me throw out the wild idea that the equity markets do not follow earnings. Corporate earnings are actually a lagging indicator with employment.
The stock market movement creates...creates corporate revenue, corporate investment rates and earnings. Stock market movements are the transmission mechanism through which monetary policy is transmitted to the real economy.
Monetary policies make equity markets move. Bernanke taught 1st year economics at Harvard. I assure you they were not being told that corporate earnings create stock market movement.
It has always been this way. Our Central Bank is still creating liquidity. The yield curve is 200 basis pts. (2% between 3 mos tbills and the 10 yr govt).
Equity markets are a function of global monetary policy. Are the central banks of China, Japan or the Euro Zone tightening liquidity?
All you need to do is look at that Shiller chart. He got you out of the equity market in 1990 and never got you back in. Brilliant.
Shiller took his technique from Graham and Dodd written in 1933 which used 10 year corporate average earnings. In 1933 it made sense to think that if a company was selling 1000 cars a month it would always sell 1000 cars.
In a modern global monetary environment you have a rising line representing global GDP because you have increasing monetary liquidity. Betting against global economic growth has been a disaster since World War II.
It appears that there are time limits to business cycles because when global economic growth exceeds the ability to generate the underlying infrastructure and skills needed to support that growth inflation picks up. That inflation causes central banks to tighten credit to slow the economy to bring inflation down.
The tightening of credit creates the decline in the financial markets which slows consumption and signals decision makers to restrict investment.
I am being told to get ready. Feel free to stop by for a glass of Champagne.
Dear Reader..
"Unofficially growth has crashed to around 2%."
I would like to see the source for this and at least some math behind the forecast.
China grew retail sales 11.2% versus last november. What GDP forecasting model is not based on retail sales. A 5% forecast is almost mathematically impossible.
China has a savings rate near 40% of GDP. They have no capital gains tax..zero..
They can grow 7% in their sleep. That is the same growth rate as many other Asian countries experienced at the same relative growth to the U.S. economy. And yet China has been consistently ahead of these other countries.
The base source of all of these negative articles on China are history and political science professors who see China as an ideological threat. They may be right.
But, from an investment standpoint you make a 4% dividend and are buying assets at 8.5x p/e when you buy the First Trust AlphaDex China ETF (FCA 20.84, S&P 2054).
What a beautiful article which introduced me to a city I have never heard of. The map gives you a needed sense of the location.
Thanks again.
This is a well reasoned article. The stock and debt of CHK are great additions to a value portfolio or a medium term investor looking at the historical cyclical movement of natural gas prices.
Dear Reader..
The author of this little note failed to read the FRB short summary of the 1937-1938 recession available here:
http://tinyurl.com/lta...
The Central Bank engaged in extremely tight monetary policy which created the crisis.
The Central Bank is not engaged in extreme tightening. They will only raise rates if the economy is moving forward.
These articles have been appearing in Seeking Alpha since 2009 always advocating a cautious or bearish view of the financial markets.
They have cost investors a lot of money.
Dear Reader..
Going back to the 1930's for your economic comparisons is difficult. We have very little data on the domestic economy or, more importantly the global economy.
Hitler was put in office in 1933 and he took unemployment in Germany from 30% to 5%.
Importantly, 1936 was a presidential election year. Roosevelt was reelected in a landslide. History books tend to not understand economics or financial markets. Roosevelt was running on an extremely anti-business platform.
As I am writing this I have to admit there are similarities with today's election process.
I can't even think of a country to make a comparison with 1937 America. Today, every country has access to international agencies with huge amounts of economic knowledge on how to handle a crisis.
I am going to look up on google if there has been an economic paper on the 1937 market panic.
After two years of S&P underperformance, with a positive yield curve and the interest rates on BAA corporate bonds 5.5% you want to be fully invested. And most importantly, China, Japan and the Eurozone are creating enormous amounts of new financial assets that will flow through the global financial markets.
Dear Reader..
The author gives all of this fundamental data that indicates that oil is a buy and yet, concludes we are in a bear market.
I guess it is because the chart is pointing down.
I guess investing is easy just look at a 2 year chart and invest. Oh, I forgot to tell you if the two year chart is below the historical norm there is a strong tendency to have the future year outperform the historical norm.
Conversely sad to say, if you have two great years the future 12 months is not so good.
Think of March, 2009. All of that monetary data and valuation data, except Shiller, was exceedingly bullish and yet the chart was pointing down.
Regarding China the increase in demand for materials in 2016 with 6% growth will be equal to their demand in 2007 when they grew 14%. That is because you are dealing with a larger base.
If you are a value investor you want to heavily weight the portfolio to oil and gas.
JasonC..
Great reply. Very annoying article. It is indeed sad that readers of an investment blog would believe that all of the world's central banks, with all of their experts and the analysis of the historical data, would be engaged in unhelpful policies.
In a democracy central banks have limited power. They have no strong political base. Long term economic growth rates are political decisions. Asian countries when they got new leadership that was motivated to increase economic growth was magically able to create vibrant economies.
The politicians determine all of the factors that create economic growth. They determine the educational outcomes of the citizens, they determine the savings rates, they determine the percentage of GDP spent on infrastructure, they determine where to apply the nations savings or to let the "market" determine the allocation and they determine immigration policies.
The Federal Reserve implemented policies that took the unemployment rate from 10% to 5%. In our economy unemployment and monetary policy are not inflationary until a roughly 5% unemployment rate is reached. At that level skills that are in short supply become very tight. It is usually more profitable for a company to raise prices and pay the increased costs.
Since, the politicians have not made any structural changes any increase in wages is translated mainly into inflation. That is why the experts who study this expect inflation to pick up to near the 2% level. That assumes energy prices are flat. If energy prices pick up to $45 you could see 2.5% inflation.
You can see the Federal Reserve estimates for inflation at the following tables and charts:
http://tinyurl.com/hqv...
In the Bernanke autobiography, which is a terrific read, he tells the story of presenting the crisis to congressional leaders. In both parties, where the stakes were enormously high, they could care less. Bernanke taught the freshman economics class at Harvard and his book explains monetary policy in very clear terms.
RS055..
Great comment..
Just because the CCC has blown out to 18% from 10% 6 mos prior due to oil stock debt to equity ratios what is going to cause the BAA which is at 5.5% to blow out???
It is the BAA borrowing, very low default risk, that is used for buybacks.
When the CPI (CPIAUCNS) picks up to 2 to 2.5% in 2016 the BAA might move 50 basis pts. That is not enough to effect stock market valuations.
You need the BAA to be trading at 8% to have the interest rate a factor in bringing the market down.
UV..
I am in total agreement that what we are seeing is an income financial asset bubble.
And I am impressed that you are aware that the median tbill rate over the last 55 years is over 5%.
An interest rate has two components the real rate and the inflation rate. I don't see the necessity for a central bank to allow the risk free government short term interest rate to trade more than 25 basis points above the inflation rate.
Since I suspect the inflation rate is going to run, fairly quickly, to the 2.5% level that would put the upper range in the 2.5 to 2.75 range. The ten year government could then trade at 4 to 4.5%.
I can't see rates moving much higher until one of the other major economic blocs see a GDP pickup. Otherwise the U.S.$ would attract enormous amounts of speculative global capital. The higher U.S.$ would weaken the U.S. GDP forecasts.
You can see the FRB assumptions in the tables and dot graph at the FRB.
http://1.usa.gov/1GtcBjy
Dear Reader..
I read this article. I would like to point out a few minor issues I have with some of the facts presented.
Warren Buffet in 1967. Let me suggest that Mr. B was more concerned with the yield curve in 1966 than he was the valuation level.
In Sept, 1966 the yield curve was minus -.32. That is the 10 yr govt bond rate - 3 mos tbill rate.
In Feb, 2007 the yield curve was minus -.45.. Typically, not good for equities.
The yield curve currently is 1.86..
Regarding the Buffet indicator of market cap relative to GDP I have several comments. First, it does not have a good record in predicting market risk in any future time frame.
Second, it was appropriate in the 1970's when U.S. GDP dominated the global economic system. Today, the S&P 500 is an expression of global GDP. That is the U.S. is roughly an equal partner in a global economic system comprising Japan, China and the Euro Zone.
And..the stock market has no relationship to how individual investors or investment advisors "feel" about the market. Individual investors represent an extremely small sliver of total equity trading. Market prices are determined by entities that trade. Entities that buy and sell based on incoming information.
What were individuals "feeling" about the stock market in March of 2009? That's right their decision making is simple "herding" mixed with all kinds of "principle/agent" problems.
In fact, most of the arguments made about global central bank policies were true in 2009. They missed one of the largest bull markets in the last 50 years.
Does it make sense to you that all of the world's central bankers don't know what they are doing?
Ben Bernanke wrote a paper in 1996 describing the "Financial Accelerator Model." In this paper he points out that the stock market has always been the key transmitter of monetary policy to the real economy. This paper is on the internet.