The Hyde-Norton Group

“Giving up is the ultimate tragedy.” - Robert Donovan

Wed, 10 Aug 2011 16:59:02 -0600

“Giving up is the ultimate tragedy.” - Robert Donovan

#RMES2011 - Catherine Mann

Fri, 29 Jul 2011 16:11:35 -0600

Speaking on Dollar Risk:

There is an assumption that the value of the dollar will be declining overtime. She is challenging that assumption based on foreign investors coming into the US.

Foreign purchasers of US bonds are maintaining their allocation percentages.

She said several other things that frankly, I did not understand, though the net of her presentation was that there is evidence that there are strong indications of pressures that will increase the value of the dollar.

#RMES2011 Picture of the Economic Summit.

Fri, 29 Jul 2011 15:53:00 -0600

#RMES2011 Picture of the Economic Summit.

#RMES2011 - Rudy Penner

Fri, 29 Jul 2011 15:27:01 -0600

The unlaying issue of the debt is:

Healthcare
Social Security

The key cause is aging. More older people, leaving longer and fewer younger people.

The hopes of solving the the debt limit problems are declining with the campaign speeches from both the President and the Republican leadership.

What if there is a default in our debt? Sounds like they would default on the American’s through Social Security, but keep foreigners, like China whole.

The government keeps going after the low hanging fruit, but soon we will have to deal with Medicare and Social Security.

The only way to manage Medicare is to apply them to budget constraints.

#RMES2011 - Special Workshop on Sovereign Debt Issues

Fri, 29 Jul 2011 15:10:12 -0600

Speakers include:

Rudy Penner, Senior Fellow, The Urban Institute, on the US Federal Debt
John Monusseau, Managing Director and Portfolio Manager, Cumberland Advisors
Ron Florance, Managing DIrector of Asset Allocation and Strategy, Wells Fargo.
Catherine Mann, Professor, International Business at Brandis University

#RMES2011 - Keynote Summary

Fri, 29 Jul 2011 14:46:00 -0600

Has the US economy become less interest rate sensitive?

Jim: I have not seen any evidence of this yet. Need more research.

Do we have a new unemployment rate norm or the natural rate of unemployment?

Dennis: Many believe that the natural rate is 4-5% some argue that it could be 6-7%, but few would say it would be 9%.

Jim: More fiscal responsibility will be required to have a strong and growing GNP and economy.

Jim: The Feds cannot allow overdrafts by the Treasury. The only solution on the table is to raise the debt ceiling.

#RMES2011 - Dennis Lockhart

Fri, 29 Jul 2011 14:28:00 -0600

We are at a juncture where is it too difficult to call what is happening with the economy.

I am in a wait and see mode on the economy and on Policy.

Incoming data on the economy is disappointing relative to expectations.

Today’s GDP growth was much lower than expected just 3 months ago.

Unemployment is stuck around 9% since the first of the year.

We have been pondering whether we are on a long-term trend growth projection of 2.5% or a faster recovery up to a 4-5%.

Historically, we have seen recovery after recessions to be higher than normal to pick up the slack in the economy.

At present I don’t see a big risk of another recession, however, we are dealing with structural change requirements and business models that need to change over a longer period of time.

The first half of this year has seen uncommon impacts to the economy that will not have an enduring impact on the economy.

My base case forecast is for a stronger recovery in the 2nd half of the year. However, it is not unrealistic to believe that a slower recovery may be a possibility. If we are to see a faster growth, then we cannot see additional uncommon disruptions that we saw in the beginning of the year.

The longer term recovery path will require closing of the gaps in fiscal deficits and labor employment gaps due to mismatches in supply and demand.

#RMES2011 - Jim Bullard

Fri, 29 Jul 2011 14:02:05 -0600

Paul McCally: The two mandates of the Federal Reserve from Congress are to: Keep unemployment low and inflation low.

Jim Bullard:

Four part story:

Monetary policy remains ultra-easy
US economic performance is likely to improve in the 2nd half
Fed cannot remedy a failure to raise the debt ceiling
How to think about the decade of growth driven in part by a housing bubble.

Monetary policy keeps rates near zero.

Inflation expectation are climbing. Actual inflation was low last year in Nov measured near 1% and is being measured today up above 2%.

We expect the economy to improve in the 2nd half of the year. But need to watch and manage the large asset base.

Four Uncertainties have slowed the recovery of the economy. The 1st 3 have been resolved mostly:

Situation in Japan
Energy and commodity prices
European Sovereign Debt Crisis
The Fed and the Debt Ceiling

We cannot default by not raising the debt ceiling. The outcome will be bad, but uncertain.

The US AAA rating is in peril and will likely be lost.

The Fed cannot save the day, because the debt ceiling is an issue and controlled by Congress.

How to think about a bubble.

A bubble implies a significant resource misallocation.

Too many resources were being allocated to housing in 2001 to 2007, which contributed to increase growth to the GNP, estimated at .65%. Without the bubble we would have grown as a consistent 1.75%.

A bubble economy creates huge volatility in the economy. Too much of the economic recovery comparisons are made to the peak of the bubble instead of to a more stable point which does not include the bubble run up.

#RMES2011 - Keynote Monetary Policy Discussion

Fri, 29 Jul 2011 13:26:29 -0600

Speakers for this session:

Jim Bullard: President, Federal Reserve Bank of St. Louis
Dennis Lockhart: President, Federal Reserve Bank of Atlanta
Moderated by Paul McCulley, Chair GIC Global Society of Fellows

Lunch time at the Summit. Great lunch and great conversation.

Fri, 29 Jul 2011 13:20:00 -0600

Lunch time at the Summit. Great lunch and great conversation.

#RMES - Session 2 Summary

Fri, 29 Jul 2011 12:18:29 -0600

Policy Recommendation for our Employment Problems.

Bill: Small businesses are hesitating hiring due to the uncertainty about the potential cost in employees because of Federal Policies because of Obamacare and other regulations.
Robert: People are frozen, because people don’t believe that the US is a growth economy.
Robert: Need tax reform.
Robert: The re-capitalization of earning overseas is not happening due to the 35% corporate tax rate.
John: Too many kids are not graduating from High School. 15% unemployment rates for high school drop outs. And the high schoolers have the wrong skills. They are being educated in the wrong things. We need to revise our training.
John: Jobs are not coming back, they are changing and the preparation needs to change.
Robert: We should pay teachers more for teaching courses that are in high demand, ie. math and science teachers. There is a big mismatch between what companies need and what schools are turning out.

#RMES - Bill Dunkelberg

Fri, 29 Jul 2011 11:57:37 -0600

Employers are not using workers to get jobs done. They are using automation. GNP is up, employment is not. 7 million less jobs than in ‘07.

From 64% to 58% of adults have a job over the past 10 years.

Michigan Consumer Confidence Index is down more than any point over the past 20 years.

90% of all employers have fewer than 20 employees.

98% have less than 500 employees.

Small businesses makeup a huge part of the economy and it is not doing well.

Small Business Index numbers are all down in confidence, employment growth and sales.

We lost 250,000 teen jobs in 2009 and increase to 500,000 lost jobs due to increase in minimum wage.

14% more businesses are saying that they will be decreasing inventories.

Borrowing activity is at all time low numbers.

Weak sales is my number one problem, says small businesses.

#RMES - John Silvia

Fri, 29 Jul 2011 11:35:07 -0600

Bridge to Sustained Expansion?

We are changing what, how and how much we are producing in the US.

US is a leader in mfg and software production.

We have a problem: 9% unemployment and 2.1% GNP growth. This is not a good mix for the outlook for inflation.

We are changing the capital/labor ratio dramatically based on all the issues/overhead that comes with labor.

Labor force growth in the US today is practically zero.

We are destroying the 16 to 24 year-old age labor force.

Whenever the GNP growth rate brakes below 2% then we are headed into a recession.

#RMES - Robert Gardy

Fri, 29 Jul 2011 11:23:00 -0600

Debit Issues:

Entitlements is the issue: It is over 60% of the debt.

1960: 26%

2010 64%

Entitlements have grown by 11x. Driven mainly by Medicare and Medicaid. It will go from 4% of GDP in 2007 to 18.5% of GDP in 2082.

Obamacare added 16 million people to Medicaid.

Even if you doubled the taxes on every individual in the US it would not make up for the growth in entitlements.

President Obama has not made an proposal to solve this problem.

It can be done.

Venture-backed companies are employing more than 12million employees today.

States are spending far more on Medicaid spending than on Education.

40% of founders in venture-backed high tech companies are foreign nationals, and we are limiting their ability to come to the US.

Last year US based companies were 16% of all IPOs were in the 80s and 90s the US was 80%.

Liquidity is not the Problem, the risk of Inflation and the debt growth is affecting the confidence of Americans. People are investing their money overseas.

Earning are looking very strong, so M&A in trending up.

States have the same problems as the Federal government, they promise more entitlements than they can afford. You will continue to see increased competition between states to attract start-ups.

#RMES Poll #2

Fri, 29 Jul 2011 10:53:10 -0600

What is the outlook for the US economy? Majority: It will muddle along but will not enter another recession.

Does the US have the prospect to resume strong growth? Majority: Yes, it can

#RMES Session 2 - Hot Topics in Economics

Fri, 29 Jul 2011 10:36:41 -0600

Session presenters include:

Bill Dunkenlberg, Chief Economist for the National Federation of Independent Business and GIC Chair.
John Silvia, Chief Economist, WElls Fargo Securities and GIC Board of Directors
Robert E Grady, Managing Director, Cheyenne Capital Fund
Moderated by Richard Yamarone, Economist, Bloomberg

#RMES - Session 1 Summary

Fri, 29 Jul 2011 10:30:22 -0600

Bill: We are becoming less dependent on the supply of energy for our GNP growth than we have been in the past due to the move by the US to a Service based economy. Energy crises do not effect us as much as they have in the past.

Bill: There is a skills gap between those layout in the mfg sector and the emerging jobs in this sector. There needs to be more training to bridge those gaps.

Bill: The loss of mfg jobs is not just a US issue, it is a global issue even in China. All this is driven by productivity gains. China decreased in mfg employment from 98 million employees to 83 million over the last several years.

#RMES Zozo Koide - Japanese Economist

Fri, 29 Jul 2011 10:15:13 -0600

Thank you and the US for all of your support of Japan after the Earthquake.

Largest earthquake in the last 200 years.

The effect of this quake on the Japanese economy has proven to be much more hurtful than I had expected.

Most of the impacted parts manufacturers will recovery to normal pre-earthquake levels in the September or October timeframes.

It also greatly impacted the US imports which will return to normal levels in this next quarter.

#RMES2011 Kevin Kliesen

Fri, 29 Jul 2011 09:52:00 -0600

The manufacturing sector is a success story.

Manufacturers tend to be large firms, though there is a small business component. Mfg growth rates are much more volatile than the GDP.

Returns to capital in the mfg sector have exceeded most other industries since 2005.

Trends:

A cyclically strong rebound in mfg output, but with only modest labor increases.

Unit demand remained relatively healthy in Q2 (NABE survey). Profits have dipped modestly, but appear to be healthy.

Moderate increases in unit costs due to Japanese earthquake.

Capital outlays remain healthy in the goods-producing industry.

Evolving Trends:

Real goods imports help increase manufacturing productions in the US much more so than exports. This allows them to boost productivity and produce goods at a lower cost.

#RMES Session 1 : Bill Strauss

Fri, 29 Jul 2011 09:31:47 -0600

Bill Strauss

Is the US Losing its Manufacturing Base?

The mid-west is driven by manufacturing. Manufacturing output fell by over 20% during this last recession. Manufacturing employment decreased dramatically as shown by a decline over the past 50 years. IT was raising throughout the ‘70s and has been declining ever since.

We are moving more and more toward a service-based economy.

However, manufacturing output has been up due to an increase in productivity by over 600%.

The divergence in the national productivity rates to the manufacturing productivity rate began in the mid-70’s.

Even with the increase in output due to productivity, the share of the total GNP is down based on the declining costs driven by increased productivity.

Farming constitutes less than 2% of our employment base.

China has risen to #1 for US imports to 19.1% of total imports.

China is US’s #3 export distinction with 7% and is growing rapidly.

Much of the China imports, however, include many parts from other countries in the Pacific Rim, thus, inflating China’s import numbers.

Don’t look to manufacturing to drive strong employment growth.