Posted by: Tom Keene on October 31, 2010
Edward F. McKelvey Sees a Trend to 2016
It is one thing to line up some 842 economists and try to gauge their abilities. Who are the 50 Major Economists? (This is a must-own book!) It is an entirely separate effort to glean the nuance, the weekly dynamics in their writings and predicitions. I was honored to have Bill Dudley and Ed McKelvey write a chapter in my book on the nation’s deficit. I am even more privileged to read McKelvey’s work every week.
McKelvey, authoritative on the deficit, has been thinking about housing and the “framework of massive excess supply that we enunciated about three years ago.” He sees a trend to…2016.
HOWNSART INDEX GP Q ROLL: Homeownership, pre-boom at 64%; post-boom at 66.9%. The regression from the 9-unit moving average extrapolates to the vicinity of St. Patrick’s Day, 2016.
There is a Debate
I have the clearest memory of driving four-lane-West with my parents (Alan Mulally, you can’t build this). Long hours of familial torture as back-seat battles were arbited by possible and rare violence from the front seat. And then the road stopped. We built a highway system. We built things. And, we need to build and repair, now.
Here is John B. Taylor of Stanford with a devastating critique of “stimulus.”
“The portion allocated to infrastructure (gross investment) at the federal level was $0.9 billion in 2009 and $1.5 billion in the first two quarters of 2010. Thus, of the total $862 billion, 0.3 percent has been spent on federal infrastructure projects.”
CNSTPUHI INDEX GP Q ROLL: U.S. Public Highway & Street Construction shown arithmetic. Picks & Shovels shown logarithmic.
White, Sondhi & Fried
Now what? Elections, QE2, G-Whatever in Korea. If the marginal difference in economists and strategists views is the attempt to anticipate behavior, now what? One guess is a generational (societal?) shift in our personal and household accounting.
Long ago and far away (Warren was younger), we were more tempered. We (Philip Carret) kept one eye on assets and liabilities in a less-levered world. We (les boom des bebes) then shifted and presumed the top-line of the income statement would always migrate higher with various permutations to margins below. Some years good; some years better, but always advancing.
The shift is on. Not nostalgically back, but forward to our new, improved (?) behavioral accounting. To adjust your inner clock, serious torture is in order. Try White, Sondhi & Fried to understand better your inner accounting (for $142!). There are two mysteries in life: Daughters and equipment-lease accounting.
Which of the following actions would be least likely to be viewed as
A. Company increases its estimated provision for bad debts.
B. Company uses the FIFO inventory method when inventory prices are
C. Company discloses contingency losses in the footnotes to the financial
D. Company uses the completed contract method for recognizing revenue for
Consider, just possibly, a lesser weight to the income statement.
2011 beckons. Post election, QE2, G-Whatever and wherever Cliff Lee lands (they don’t spit in Boston), we will need courage to consider Balance Sheet Nation.