Thursday, October 19, 2006


GraphExpo, Despair with HP/Indigo, Inflation Distortion, Trade Deficit Hysteria, Good Economic News Buried on Page 12, There's Less of Dr. Joe!

I started the notes for this blog the early morning before the last day of GraphExpo. This has been the most upbeat show I have been to in quite a long time. We have to remember that the "winners" go to trade shows, plus whatever the local crowd is. But that was true of recent shows as well. Perhaps the worst of the pain is finally over? We still have many things as an industry to work through, and more ahead, but this was quite encouraging... finally. The industry needs to revise its capital base and make significant investments in modern workflow and management. For once, the latter area seemed to be getting some attention from less-than-cutting-edge printers. You can't invest in capital improvements that unless you are generating profits. Clearly, many of the attendees finally are if their show floor behavior is any indication.

Everyone knows how much I love the work done at where making fun of clueless and bad management is the core of their business. For everyone who has sat through a dumb seminar, a silly motivational speech, or explanation of procedures that assume physical laws do not apply, this company is for you. A month ago they announced that they were doing customized calendars I just got an e-mail today that has the text below... they've bought their own HP Indigo 5000... business must be good! Some background on can be found at
Here's the text from the e-mail that mentions their purchase:
For once in your life, don't procrastinate. Buy it now. Because we're not sure we'll be able to keep up with demand when the holidays start. You read it right. With only one HP Indigo 5000 printer under roof, a maximum output of only a couple thousand calendars per day, and no back-up plan in the event of equipment failure, Despair is playing a dangerous game of chicken with Fate this year. Sure, it would've been a lot more pragmatic to secure a second printer- just to have a little bit of extra capacity, to say nothing of redundancy. But at half-a-million a pop, that would've cut into profits, and in turn, might have forced certain higher-ups here to indulge their annual Relentless Pursuit of Perfection at Southpoint Kia instead of Lexus of Austin. It goes without saying that can not be allowed to happen. So if YOU'RE planning to indulge in the Relentless Pursuit of Dejection this year, why not just go ahead and do your Christmas shopping today, while our turnaround times are less than a week? What? Sheer pragmatism isn't a good enough motivator for you? You're waiting for a coupon code or something? Okay, fine, why not try "ipinchpenniessoharditmakesabelincolncry". It'll save you a whopping 1%, just like my employee discount does. Are you satisfied now?

Barron's opinon page editor Thomas Donlan reminds us of the insidious nature of inflation on the indices we use to measure investment performance. The brief note "Dow Be Not Proud" is in relation to the joy in the recent move of the Dow to new highs. I wrote a note to him asking what the values are with inflation-adjusted dividends reinvested; I'll post if I get an answer.
The DJIA needs to rise almost 20% from here, to about 13900, to offset inflation -- even the weak inflation of the past six years...S&P index investors need another 12% rise to get back to the old top of 1527, set in October 2000. To offset inflation, S&P 500 investors would like to see the index surpass 1807 -- a 32% gain from here. Others need still more: The benchmark S&P index beat two-thirds of actively managed mutual funds over the past five years...The only good news about the Nasdaq is that inflation losses aren't significant. That's because losses due to inflation are as nothing, compared to the 55% nominal loss in the Nasdaq index since it hit its record of 5132 in March, 2000. A buy-and-hold investor in the Nasdaq index would be even with the all-time high, adjusted for inflation, if it were at 6075.
Some folks get upset with me when I adjust industry shipments for inflation, but you have to. While I do it in both ways, the real question is what those consumer dollars can buy. I find it fascinating that you can buy more printing today with a dollar than you could before, because the Producer Price Index for print has not kept up with the Consumer Price Index. Yet such a bargain is not stimulating print demand, and it has nothing to do with capacity because capacity is coming down and capacity utilization is going up, yet these problems with shipments persist. So it must be coming from elsewhere, and these bargain prices for print are caused by the fact that dollars are going elsewhere. As far as Donlan's investment calculations, because investment dollars are long-term dollars for savings, you have the choice to find undervalued investments and move your money elsewhere, or invest a little at a time, such as is always suggested by the dollar-cost averaging advocates. Print buyers are not investing: they are buying all they need at a particular moment. They can't buy a little at a time because their content's value is greatest at the particular time that it is published. Though archived material may benefit from a "Long Tail," the greatest profits are at a time when the marginal cost is lowest, and that's at the time when the most of an item is sold. And that goes for the intellectual value as well; content has the greatest value when it is newest.

Economist Walter Williams has an excellent column explaining how silly it is to be preoccupied with trade deficits.
Last week, the trade deficit increased... that was great news, but reported as devastating, as is usually the case. An increase in the trade deficit means that the economy is still strong, stronger than most give it credit for.

Speaking of that, at the beginning of my WTT event on Tuesday, I summarized the neglected or under-reported good economic news:
GDP positive for 19 qtrs, +3%
ISM manufacturing index positive for 53 months
ISM non-manufacturing index positive for 55 months
Largest employed workforce in history: 144.8 million, +2.4 million since last year at this time
Last month +271,000 new jobs in the BLS household survey
BLS corrects itself: has been undercounting by +810,000 jobs (was on a page 5 footnote of their last report)
We're averaging +78,000 net new businesses per month
Household wealth $53 trillion, +7% since last year (current dollars)
Personal income +8.6% since last year at this time
Corporate profits +18% since last year at this time
Tax collections are up: Corporate +27%, Individual +13%
Exports +8%
Conference Board consumer confidence index is now at 104 vs. 87 since last year at this time

I received many positive comments about my presentation on Tuesday, but am still surprised by the number of comments about my weight. Briefly, I have been on a low-carb diet for five years, and knocked off more than 50 pounds and kept it off. I also have done traditional Okinawan Karate "almost seriously" for three years (I'm not good, but you don't have to be to get the benefits from it) when I realized doing it casually was solving a nagging health problem Okinawan Karate is not sport karate, nor does it emphasize fighting, but is almost exclusively self defense; I do my "forms" most every day for 45 minutes and do some light weights most of those times (even when I travel), as well as class two or three times a week. I have the various limitations in movement that one has when you break 50 years old, but it's not hard to imagine that I would be in pretty bad shape if I had not started doing this. As far as the diet goes, avoiding bread and starches has been essential. For breakfast most days I have egg whites or EggBeaters with turkey sausage or ham, but no toast and no juice. Lunch will be plain salad with no-fat no-carb dressings (, or turkey, or turkey kielbasa, or certain other meats. I snack on turkey pepperoni or similar items, and also almonds or walnuts. For dinner I limit bread and stay away from sugary vegetables, and only have small portions of potatoes. I'm half Italian, so I can't give up pasta, nor should I (too many nice memories of my grandmother's fresh tomato gravy [that's what NY City Italians called it, it was never called sauce] with a newly cooked meatball and the end of a piece of Italian bread after Sunday Mass; to this day we have spaghetti as the first dinner meal when I get home from a trip as my favorite comfort food). I have a stranglehold on two meals, so I just tweak the dinner meal because I don't want to burden the family for my dietary issues. I also make certain that at least once a week I have something totally off-diet that I "miss." I've found the diet easy to stick with, partly because of how my weight gain was the result of "eating healthy." Most diet foods are horrible (which is an improvement because they used to be ghastly), but low-carb dieting doesn't require them unless you like them. Many "diet" foods have no fat but still have sugar, which makes them not applicable for low-carb dieting anyway. Food was meant to be enjoyed, and I can't say I feel like I've given anything up other than the weight. One day, I'll write a book. Somehow this single blog paragraph will get dragged out to 150 pages. Then will be the book tour. Then will be #1 on Amazon. Then will be my own cardboard-tasting cereal.

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