On a More Personal Note...

I have two things on my mind today. Two things that are personal, not business.

First, I opened the mail one day last week at home in San Francisco, and found a bill. Not just a bill, but a traffic ticket. A traffic ticket fine worth $125, for failure to stop at a stop sign in a municipal park in Los Angeles.

It unnerved me. I was totally blanked out on being stopped by a policeman and being given a citation. I simply could not in my mind conjure up this scene. Had I spent some "blackout" time? Do I have a mental thing going on? Are all the synapses not firing?

Actually, turns out I'm fine. There was no policeman, there was no traffic stop. Just a ticket in the mail for $125. And a link to a video.

I ran to my computer, accessed the link, and watched a short video of a car with my license plate fail to make a dead stop at a corner stop sign, then turn right. A short video taken by a fixed-in-place video camera, mounted somewhere near an intersection in a municipal park in Los Angeles, that I happened to drive through on my way to somewhere else.

The mailed citation was signed by a park ranger (a park ranger!), attesting to the fact that he had viewed the video, and deemed it an accurate portrayal of me committing a moving violation. And thus the citation, totally impersonal, in the mail.

Am I guilty? Apparently I am! It's on video!

But this bothers me - a lot. It's way too sneaky. Way too "Big Brother is watching." If I am to be arrested, I want to be arrested in person, by a real law enforcement officer. An officer who is charged with public safety, and who has observed me recklessly endangering public safety, and who is justified in arresting me. Not by a park ranger sitting in a darkened, windowless room watching videos of cars going around a corner and cranking out $125 demand letters.

Creepy.

What's even more creepy is that this citation is not an infraction of Santa Monica statute, or California law, but rather is just between me and the Mountains Recreation and Conservation Authority. No record will be sent to the California DMV, or my insurance company. Seemingly, my fine derives from my infraction of a private traffic law.

Should I pay this? Looks official. But the fine print makes it seem off-the-books. Hmmm...

By the way, the monitored address is 15601 Sunset Blvd., in Temescal Canyon Park. Watch out, all you citizen suspects. There's a park ranger's video camera watching you drive by, every day, hoping to collect another $125 by demonstrating that you eased around that corner!

Just creepy.

........

Item Two:

Our son Colby, 25, was recently accepted into the graduate Master of Fine Arts program at the American Film Institute Conservatory in Los Angeles, in the discipline of cinematography. The Conservatory accepts each year 28 new fellows worldwide in each of a handful of disciplines(producing, directing, set design, etc.). The Institute sponsors the well-known AFI annual achievement awards in filmmaking, and boasts all the Hollywood names you ever heard of.

Colby's Conservatory program is the filmmaker's equivalent of, in my world, Harvard Business School on steroids. We have many friends in and around the movie business, and they say this acceptance is HUGE! Congratulations to Colby, who did this without insider connections, or committing to building a new wing; he did it on raw and unadulterated talent, coupled with his fierce determination to succeed.

I and his mother are simply falling-down proud of our son.

What the Heck is Going On Over There?

My prime business associate in Malaysia recently asked me the pertinent business questions to which everyone in the world wants to know the answers: What the Heck is Going On Over There?

Here's what I told him:

Hello Chew,

The questions you ask about the US economy are difficult to answer clearly. The missing buyer demand is not returning quickly, so business cannot grow until the demand increases.

The companies that make consumable products, or that make the goods that carry and package the consumable products, have been liquidating their raw stock inventory for many months whenever any buyer appears. The liquidated raw inventories are not being replaced with new raw inventory, so the demand for industrial goods has been missing also.

This cycle of liquidation is nearly ended, as manufacturers' inventories are very low now, and any new demand cannot be met from inventory - but will require new investment.

Will substantial new demand reappear? This is the major question of 2009 and 2010.

There are two types of US demand - private consumers, and government ("public") demand. Examples of public demand are military orders (guns), public works orders (highways), and public construction orders (courthouse buildings). Private consumer demand covers every conceivable product used by people, and is potentially much larger than government demand. Statistically, consumer demand makes up about 70% of US economic activity.

Government demand would seem to be more secure and predictable, but in fact is the opposite. Regardless of published intent to spend, government contracting is slow, and often payments for goods and services is even slower. Even now, last year's highly publicized government emergency economic support for "shovel-ready" contracts are mostly still tangled up in government bureaucracy.

Consumer demand is different, and better. We have a well-founded belief that the US consumers have lots of pent-up demand, because we see the singular success of the new US government program for trading old cars for new ones with a sizeable government rebate (the program called "cash for clunkers" - funny name, eh?). For the first time since the recession began, the US government has put significant sums of money directly available to consumer buyers - and the consumers have spent the money immediately. The car industry is suddenly very busy, and very happy.

In contrast, the US government program for putting monies into banks to give them lendable funds has been almost totally unsuccessful, because the banks are simply keeping the money in the vaults, and not lending it to the consumers who will buy the goods that run the factories, truckers, packagers, and retailers. One could argue that the banks are the wrong parties to recapitalize the economy because the banks are now overly risk-averse, when the economy needs some element of risk-taking to return to overall health.

So, the current state of the US economy seems to be
- slowing or stopped inventory liquidation
- cautious but still interested consumers
- widespread pent-up demand by consumers
- lack of urgency to buy (prices aren't going up, and might still go down)
- lack of confidence by buyers to make large financial commitments
- unwillingness of the prime sources of consumer liquidity, the banks, to participate in recovery

The return of consumer demand will be influenced heavily by the length of time that goes by while no new economic shocks hit the fragile consumer. Barring any such new economic shocks, we think consumers will come out of their bunkers with purses and wallets open within a matter of three-six months.

When the consumers return, they will discover an inventory outage, with resulting longer wait times than expected. This outage won't last long, as the capacity to fill the inventory pipeline is waiting in the wings to swing into action. One interesting side effect is likely to be the resurgence of domestic US production, rather than overseas production, due to the need for very fast turnaround of orders.

The requirement for producers and their suppliers, then, is to hang on for another six months while demand builds. The requirements for economic facilitators, like banks and government entities, is to keep a steady hand on the wheel - no changing the rules in the middle of the game - in order to inspire a growing confidence in all parties.

The bottom line is that the future must be a foreseeable future, and not simply a throw of the dice. We're getting there, slowly. This is what the stock market tells us by bouncing nicely from the lows of this year to today's much improved values.

Regards/Jim