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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?


To: NOW who wrote (18385)12/11/2004 10:45:47 PM
From: mishedlo  Read Replies (1) | Respond to of 116555
 
Computerized Confidants

“Computer power continues to double roughly every one and a half years. Today's supercomputers rival a rat's brain in their sophistication. Within the next two decades, by every reasonable projection, computers will match human brains and then rapidly outstrip us.”

Jonathan Kolber

Around this time of year, the ubiquitous department store Santas make their annual appearance. Among these are the mechanical Santas. Some of these have built-in motion and even speak. At my local grocery store, I recently watched in fascination as a small boy approached a mechanical Santa and seemed mesmerized by it. He had to touch it and even shook its hand when the Santa gestured and moved its arm toward him.

Though I didn't ask him, the boy seemed to believe he was interacting with a thinking being. How much stronger, I wondered, will this bond be when Santa recognizes the boy's presence, makes eye contact, smiles at him and can have an interactive conversation? I'll bet that it will then become harder to convince lots of kids that Santa is only a myth.

Of course, it's one thing to convince small children, who are already disposed to blurring the line between fantasy and reality. It's another thing entirely to convince adults. Yet the latter is coming as well.

Years ago, the computer scientist Alan Turing devised the now-famous "Turing Test." It basically requires that a person converse with a computer through a black box, so the person doesn't know whether it's a computer or another person. If the computer can fool the person, it has passed the Turing Test and is to be considered intelligent.

Of course, this test is imprecise. Who is the person (or persons) qualified to conduct the test? What kind of "personhood" are we looking for -- Einstein, Joe Average or the village idiot? Still, there have been some striking developments.

A computer program was written to perform Rogerian therapy. Basically, this is therapy in which the therapist feeds back the patient's concerns and reactions. Often, this turns what the patient says into a question. (Patient: "I am feeling sad." Therapist: "Why are you feeling sad?") The therapist remembers what the patient said earlier, so not all of this feedback is triggered by the most immediate remarks. But it's clear that this is ideally suited to a computer program, and indeed, it was turned into one called Eliza.

What's interesting about this is that in tests, people who are offered the chance to use Eliza do use it. Many prefer it to a person, because it's always available, doesn't cut you off after 45 minutes and is free. Most remarkable, even when told that they were conversing with a program, many patients continued to prefer the software.

I believe this is a harbinger for things to come. Today, we can buy advanced "animatronic" toys (the best are made in Japan) that exhibit lifelike behaviors, such as the behaviors of dogs. Indeed, Sony's AIBO has been called the first toy with a personality, and it's artificially intelligent -- it learns. It's billed as something that can become "an endearing companion."

Computer speech recognition systems handle a lot of the customer service requests at businesses like utility companies. This has been going on for several years now.

I recently had a weird experience while "talking" to Verizon's system. Its pleasant female voice had been interacting with me, responding reasonably intelligently to my spoken information. At one point in the conversation, just for a moment, I felt I was talking to an actual woman. This disconcerting moment quickly passed, but I had to wonder: What happens when the pleasant voice, with its simulated warmth and concern that managed to touch my emotions, if only briefly, is backed up by an intelligence capable of making sophisticated decisions?

Lest you think that is a flight of fancy, consider the progress of computer intelligence for a moment. In 1985, there was serious debate whether computers would ever play chess at grandmaster level. By 2000, they had defeated the best human players. Computers already perform medical diagnoses better than 90% of physicians. Computers make investment decisions managing billions of dollars. Computers have even invented things that have been awarded U.S. patents.

And that's only the beginning. Computer power continues to double roughly every one and a half years. Today's supercomputers rival a rat's brain in their sophistication. Within the next two decades, by every reasonable projection, computers will match human brains and then rapidly outstrip us.

At some point, they won't only simulate humans in ways that fool children, but will simulate us in ways that no one can detect. Coupled with speech recognition and synthesis systems that will rival human accuracy and the ability to depict "talking heads" that seem quite real (consider the recent movie, The Incredibles), it's only a matter of time before people begin treating their computer companions as living entities.

Today, it's just your Palm Pilot, but tomorrow, your confidant?

Jonathan Kolber is the editor of Vantage Point Investment Advisory - a newsletter that uncovers companies with life-changing emerging technologies. We're talking the kind that could revolutionize the world and your portfolio - at once. And Jonathan knows a thing or two about such technologies.In the 1980s, Jonathan was a top consultant to supercomputer companies. In 1996, he founded Hide & Seek Technologies Inc. - the company that pioneered limited-use, or "disposable," CDs and DVDs. Plus, he's co-founded two technology companies... served as senior management for several others... and helped a handful of startups get off the ground.

dailyreckoning.com



To: NOW who wrote (18385)12/11/2004 11:15:17 PM
From: orkrious  Respond to of 116555
 
lease elaborate on that ORK. i have a nice count that shows ACF nearly done here

Well, I can't comment on EW, but the stock broke out to new 2 yr highs on friday. there is no question that it will be toast when the credit bubble bursts, and maybe even when the auto industry implodes, but if I was short I would have been stopped out friday.



To: NOW who wrote (18385)12/12/2004 12:51:15 AM
From: mishedlo  Respond to of 116555
 
Leading indicators & other stuff
[I am copying a link by tooearly on Russ's board over here - mish]
martincapital.com

lots of great charts
scroll down for "different" leading indicators all of which are positive

martincapital.com

looks like there is a difference of opinion on what leading indicators are

Mish



To: NOW who wrote (18385)12/12/2004 12:53:52 AM
From: mishedlo  Respond to of 116555
 
Leading indicators & other stuff
[I am copying a link by tooearly on Russ's board over here - mish]
martincapital.com

lots of great charts
scroll down for "different" leading indicators all of which are positive

martincapital.com

looks like there is a difference of opinion on what leading indicators are

Mish



To: NOW who wrote (18385)12/12/2004 1:11:47 AM
From: mishedlo  Respond to of 116555
 
Real Long Treasury Rates Still Encouraging to Investors
Since 1870, the nominal long term Treasury bond yield has averaged 4.2%. The rate of increase in the GDP deflator over that period has been 2.1%, resulting in a real bond yield average of 2.1%. The historical record has indicated that investors should stay invested in long Treasuries when the prevailing real rates are above the historical average and be invested in Treasury bills when below the historical average. Using the April/May average for the long Treasury yield and the core personal consumption expenditures deflator, the real rate was 3.8%, 170 basis points above the historical average (Chart 6). We continue to the believe that the secular bull market in bonds will be intact until the real rate moves below the historical average and holds there for an extended period of time, as was the case in the late 19th century and in the 1930s and 1940s. As the historical record indicates, the real rate may even need to fall below zero before the secular bull market in bonds is over. Such a prospect is a long way off. Patient investors will continue to be rewarded by holding positions in long Treasury coupons and strips, just as they have been well served by such investments over the past two decades, as the secular bull market continues.Van R. HoisingtonLacy H. Hunt, Ph.D.

hoisingtonmgt.com

Third quarter discussion
hoisingtonmgt.com

I await their 4th quarter discussion
It should be interesting
hoisingtonmgt.com



To: NOW who wrote (18385)12/12/2004 1:48:54 AM
From: mishedlo  Respond to of 116555
 
Top-Ten Predictions for the Global Economy 2005
I stumbled on this website this evening

Global Outlook Webcast: Top-Ten Predictions for the Global Economy in 2005
globalinsight.com

Their forecast for 2004 was pretty good
globalinsight.com



To: NOW who wrote (18385)12/12/2004 1:52:31 AM
From: mishedlo  Respond to of 116555
 
The Changing Pattern of U.S. Construction Activity

globalinsight.com



To: NOW who wrote (18385)12/12/2004 1:54:30 AM
From: mishedlo  Read Replies (1) | Respond to of 116555
 
Recent Trends and Near-Term Prospects for Canadian Exports

globalinsight.com



To: NOW who wrote (18385)12/12/2004 2:02:41 AM
From: mishedlo  Respond to of 116555
 
Economic Challenges During Bush II: Will Financial Markets Roll Over or Regain Their Bark?

by Nariman Behravesh

Perhaps the "easy" part for President Bush was winning re-election and consolidating the Republican majority in Congress. The hard part will be facing up to the some of the daunting challenges facing the U.S. economy in ways that do not upset financial markets and do not bring out the bond market "vigilantes."

One of the biggest puzzles of the last few years is the sanguine reaction of both the bond and foreign exchange markets to large and growing U.S. budget and current account deficits. Why have financial markets "lost their bark?" Possible explanations include:

* Continued low inflation rates in the United States and elsewhere.
* Massive purchases of U.S. Treasury securities by Asian central banks in the past couple of years.
* The expectation that deficit reduction would eventually become a priority of President Bush.

Immediately following the election, the stock market gave a big thumbs-up to the Bush victory. But the reaction in the currency market was more negative, because of concerns about the president's unwillingness to sacrifice his tax cuts to reduce the deficit. Could this be a precursor to more financial jitters?

What Kind of Mandate? The 2004 election gave President Bush a much stronger mandate than he received in 2000. This time around the popular vote was about three-and-a-half million in his favor, versus half a million against him four years ago. At the same time, though, while the Republicans increased their numbers in the both the House and the Senate, they are short of the 60% majority in the Senate needed to prevent any Democratic filibuster. Democrats will be reluctant to sign on to spending controls as tight as those implied by the president's budget plans. Moreover, not all the Republican members of Congress can be guaranteed to sign on to the president's tax-cutting plans if they mean enlarging the deficit. Thus, despite the "political capital" he earned through his successful re-election, President Bush will have difficulties with Congress, and will have to take a somewhat more centrist approach than in his first term—if he hopes to avoid legislative gridlock over the next four years.

Will the Bond Market Tolerate Persistently Large Budget Deficits? The president's toughest economic challenge—should he decide to face it—will be cutting the large U.S. budget deficit. President Bush places great importance on making his tax cuts permanent. The administration sees no inconsistency between this policy and its declaration that the budget deficit will fall by half over the next five years. They "close the loop" by freezing nondefense discretionary spending and assuming no further increases in spending on the Iraq war. Both assumptions are unrealistic. Politically, it will be nearly impossible to prevent increases in the 15% of the U.S. federal budget that is not absorbed by defense spending, the entitlement programs (including Social Security and Medicare), and interest on the debt. Many of the small nondefense discretionary programs have already been deeply cut. While a growing economy should prevent the deficit from widening, it will not close the structural gap between revenues and expenditures.

If the president takes a "devil-may-care" attitude to the budget deficit—sacrificing deficit reduction to ensure he keeps his tax cuts—the U.S. bond market is likely to react badly. Investors will become more concerned about the impact of these large deficits on U.S. interest rates, the U.S. current account deficit, and the dollar.

Tax Reform, Tax Increases, or Both? While deficit reduction is a manageable problem in the United States, ultimately it cannot be accomplished without some increase in taxes. This would require strong leadership from the administration, but to date there has been no indication that the White House would ever contemplate raising taxes. It is useful to remember, though, that Ronald Reagan—one of the greatest tax cutters of all time—raised taxes three times in two terms.

One relatively easy way to reconcile an increase in tax revenues with the president's goal of reforming taxes would be to leave marginal tax rates low while broadening the tax base. This could be accomplished by using the "Trojan horse" of the alternative minimum tax. The AMT could be used as a framework for tax reform by allowing fewer deductions (or capping them), while at the same time keeping marginal tax rates low. This would simplify the tax code and raise revenues (but not marginal tax rates) at the same time. The 1986 tax reform under President Reagan also succeeded in achieving both these goals, even though it was designed to be "revenue neutral."

Will a Growing Current Account Deficit Crash Land the Dollar? After a brief hiatus, the dollar is falling again, largely because foreign investors are worried that a ballooning budget deficit will push the current account deficit far beyond current record levels. Since the beginning of 2002, the greenback has dropped roughly 20% against a basket of currencies. So far, the impact of this depreciation has been quite benign; neither inflation nor interest rates have risen. But there is no room for complacency. In the late 1990s, the capital spending boom—financed by foreign private investors—was the root cause of a rising current account deficit. Today, the culprit is Americans' insatiable appetite for imported goods, encouraged by foreign governments willing to buy virtually unlimited amounts of U.S. Treasury securities to keep their currencies cheap and their factories humming. For the year ended in the second quarter, foreign official institutions had financed two-thirds of the federal deficit, with private foreign investors financing most of the remainder. Thus, the current situation is much more risky than in the 1990s. Should there be a loss of confidence in the ability of the second Bush administration to get its fiscal house in order, a capital flight out of the United States could push down the dollar and push up interest rates.

The president can, briefly, bask in the glory of his hard-won re-election. But the honeymoon may not last long, and the financial market watchdogs may start barking soon.

globalinsight.com