Shake-out ahead

Kerry Knudsen

Kerry Knudsen

December 2013 Wood Industry e-letter:

Statistics Canada on Friday released its October building permits report. According to Statcan, there were $7.2 billion worth of permits issued in October, up 7.4 percent from September. This followed a 4.1 percent increase in August. Construction intentions for multi-family dwellings rose 8.4 percent to $2.0 billion, a second consecutive monthly advance. The value of building permits for single-family dwellings increased 4.7 percent to $2.4 billion in October – the second consecutive monthly increase – and construction intentions for commercial buildings rose 22.0 percent to $1.8 billion, the highest level since July 2013 and the third increase in four months.

I have not said anything about the U.S. stock markets for a long time. The Dow broke 17,000 for the first time ever, although it has receded on current U.S. political uncertainties. I guess I’ll just say it… I don’t trust the U.S. stocks any longer. To me, stocks should reflect value. However, the U.S. embarked in Dec. of 2008 on its journey of Quantitative Easing. Basically QE has evolved to accomplish two things: 1) it moves $60 billion per month from the taxpayers to the banks, which then goes to the stocks and 2) like a kid on crack, the U.S. financial sector has become so dependent on it that the stock markets crash on the slightest rumour it will be taken away. It’s a family game, and nobody dares pull the plug.

Unfortunately, and you can check the record on this, as much as grieving parents fear the results of pulling the plug on an addict, it is going to get pulled, one way or another. There are no exceptions.

 

Have I mentioned lately I am no economist? I’m not. However, I am an economist-ist. That is, I study the behaviour of economists. For example, economics is a science, correct? That is, economics is the study of empirical facts about economies and the theories those facts produce.

But there is a problem that permeates economics from top to bottom. Nobody really believes in it as a science. Look. For every “bull” economist there is a “bear.” For every stock buyer, there is a seller. For every pundit show about economics, there is a minimum of one bull and one bear. Economists cannot agree on anything unless there is a paycheque attached. Unlike medicine, nobody does economics for charity.

So you have a Bernanke and a Greenspan, and you have a Keynes and a Friedman. What does that get you? Hash. A bunch of presidential camp followers get together at a Washington night spot and nine months later you have Quantitative Easing and nothing to take for it.

So I am not an economist. I do, however, have two eyes, and I see the taxpayers’ money going through the White House and landing at Solyndra, John Corzine, General Motors’ union chiefs and so on, with the beneficiaries of the miraculously “lost” money being Democrats and the losers being the taxpayers and bond holders. The money of the GM bond holders was transferred away. Whoever “lost” half-a-billion dollars, anyway? Sit me down with a bank statement and a pencil, and even this non-economist can find the answer. With Democrats holding the purse strings for the impoverished, even an economist could see what is going on. The poor don’t have a prayer.

 

The latest new word from the new-word-makers is “crony capitalism” to describe the way pilferers pilfer. As with most new words, they should have stuck with the old. There is no such thing as crony capitalism. Capitalism is an economic structure (not theory) upon which a society is based. What they are trying to say is “corruption.” Corruption is political guys taking taxpayer money and giving to their buddies. Communism is famous for it. Military dictatorships are famous for it. Monarchies are famous for it. It is not crony capitalism; it is corruption.

The news flood on ObamaCare, Rob Ford and demented celebrities has obscured a few important events I will be trying to enlarge upon later.

First, the U.S. Federal Trade Commission held a workshop last week on what is now known as native advertising. Basically, it’s editorial content an advertiser pays to have happen. The hearing was well attended by marketers that want to preserve their right to make money, no matter the opinion of the market. Other, more cogent, presenters, such as former Advertising Age Editor-at-Large Bob Garfield, likened the deterioration of quality editorial to selling off an island of bat guano: “They will, in a matter of years, destroy the media industry: one boatload of shit at a time.”

This is significant because the economy is in a rout. Nobody really knows what is happening, though they should. Google says we have a new advertising paradigm to replace the old, so everybody waddles along in line, like a bunch of ducks. Never mind that the basics of trade have been the same since Mesopotamians stamped cuneiforms in clay with sharpened reeds and used the result for exchange. History is full of such stories. For kicks, Google New World and fraud. You will get about 8.7 million hits.

You have heard this anti-in-content line of reasoning from us consistently for years. It seems to be strong among people that have been trained in media history. It is also documented in every set of media standards I know. Since the mission of the Federal Trade Commission is “to work for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them,” we are guessing the workshop is a precedent to further action, and that native advertising advocates have an uphill battle. The market does not like it, as is clear from our own past surveys.

Second, Detroit, Mich., was approved to file bankruptcy. I think this is a critical turning point, because this will pit the unions against the citizens – a battle that has been forming since unions began. The unions have used political pull to get ever-increasing concessions – always under the threat of violence – regarding what they call their “rights.”

Rights or not, I see the situation as an unwinnable one for the unions. If they don’t fight, it will certainly start the snowball rolling on an international scale. If they do fight it, they will aggravate a large metropolitan population with no money to pay bills that former in-the-pocket politicians have foisted on them. The demonstrators are carrying signs that say the banks should pay, but by now most of the banks are owned by union pension funds. Ring around the rosie.

Detroit is not the only city (or state or province) that has unfunded liabilities for the unions, and programs that benefit union members at the expense of the citizenry. I won’t mention Canada Post at the moment, but I am certainly thinking of them. Since both countries are headed more-or-less at the same destination, I think Detroit will be important.

Third, another bit of news that seemed to sneak by is again from Ad Age, regarding Facebook’s falling short on expectations of market reach. You can read the link, but a regular study of Ad Age and other marketing magazines reveals a pattern of leaving behind today’s work and promising for tomorrow. Fortunes are being lost. As above, your money does not disappear. It just doesn’t produce. It may be true that “everybody is on Facebook.” However, monetizing that presence has proved dicey. Google Dot-Com Bubble. You will get 40.6 million results. Take your time or take your pick. Cyberspace is not friendly.

Finally, Canada has passed Bill C-28, Canada’s Anti-Spam Legislation, coming into effect next July. Its intent is to shake the foundations of junk e-mail to their roots. It will be informative to see how it works.

Taken together, these seemingly unrelated matters from the U.S. and Canadian governments, as well as from internet marketing, point to a strong resistance on the parts of consumers to any further invasion of their privacy. Nobody wants a rapacious con artist knowing where you and your cell phone are located.

Throw in Edward Snowden, ObamaCare and whatever the police union was doing to Rob Ford, and I predict 2013 was a pivotal year that we simply cannot measure yet. It will be fun to look back. I don’t see any Armageddon, but I think there will be some shake-outs, and I think we can weather the storm because of the already-shaken and re-firmed political-economic structures in both countries. The economists never factor in the human spirit.

 

For the staff at W.I. Media, it has been a pivotal year, as well. As always we are grateful for the contacts and friends we meet along the way.

We are a bit bothered by one survey respondent that said we should accept Letters to the Editor that present opposing points of view. We have always sought letters and opposing or agreeing or off-flying points of view. We have never “not published” a letter from a reader. The fact is, the smart-ass (the polite call them controversial) editorials are designed to trigger responses. However, this is just a little trade magazine in the frozen north, our readers have more to do than argue in print, and we are no more politicians than we are economists. We hope the magazine remains fun to read and informative, and we will do our best to make it so. If you have an idea or an opinion, write to us. Make it a test to see if we will publish. You can also visit the web site.

This is our last publication before Christmas. We hope your company, your family and your friends and associates have had a good year and a better one coming. May all the joy of Christmas find you during this season, and we will see you in the new year.

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