Wednesday, December 03, 2008
P-Nat Matrices Take Major Turn For Better
But here's the thing: these are all forward looking. They don't tell you what is happening now, but they tell you what should be happening six months to a year from now if current circumstances remain the same, and they tell you a lot about baseline trends two years from now.
The vector international matrix has stopped circling the drain and adopted a confused and diffused stance. It has no direction, and if you look at portions of the thing, it shows conflicting vectors. That's good. That hasn't been true since last spring internationally, largely because of energy.
When Chinese refineries are cutting output, and Japanese refineries are cutting output, and coal shipments are stabilizing (as prices drop), then one can safely say that the economic net is centering on a prolonged drop into the necessary $40-50s range for crude. The only fly in the ointment is that the carbon bugs may succeed in preventing that impetus from rolling through to many of the developed economies. Still, it's good for Asia.
The US consumer matrix is improving rapidly. There are quite a few positives; one of the ones I didn't expect is long-range income stability. Figuring an enhanced shift to early Social Security and extended unemployment benefits shifts the bottom 40-60% (depending on area) into positive territory. Traditional adjustable rate mortgages and lines are pretty much all adjusting down, so that helps.
Then there's real incomes for the bottom 40% of US workers (those that still have jobs). The drop in gas prices and what seems to be a food company capitulation and adaptation is shifting that positive, and sharply so.
There are downward vectors for some countries that are cutting into real consuming power, such as currency depreciation. Still, it's not all bad.
Take it from the POV of a Guangdong shoemaker. A lower income worker in the US is probably gaining at least $20 a week compared to last summer. Every 2 weeks that's one pair of shoes, so that lower income worker can probably afford to buy at least three pairs of shoes this year after catching up on bills, and by now, that lower income worker needs shoes and therefore will buy them. In the spring.
May 09 is turnaround for US baseline consumer buying, assuming no wacky energy costs. We can't assume that, but at least it gives us a baseline.