THE ENTERPRISE
It's interesting how different sets of information lead to conclusions you neither expect nor find logical based on earlier beliefs. Just as we think we know something for a certainly--new information shakes our intellectual confidence.
---Cognitive Dissonance No. 1: Consider the following statements about two major countries:
Country A
1) The world's worst performing stock market--hitting an 8 year low, but the world's best performing bond market with 10 year bonds moving from 5.25% to 3.7%
2) Industrial production "rolling over" with weaker iron ore imports, weaker steel prices, weaker industrial production numbers...
3) Real estate activity declining (prime evidence is a major supplier of chiller tubes for air conditioners for apartments and office buildings reporting 25% drop in 2Q '05 orders and other suppliers doing worse than that.)..
4) Inflation has fallen from 5.3% to 1.8% in ten months, and the M1 money supply growth has dropped from +20% to +10% in the past year.
(Source: GaveKal Research Limited)
Country B
1) Personal consumption spending, which is 2/3 of GDP rose at annual rate of 3.6% in 1Q '05.
2) Consumer confidence jumped to 3 yr. high in May
3) Unemployment rate has declined steadily to a 4 yr. low.
4) Housing construction is booming, with another major increase in May.
5) The major index of manufacturing activity rose again, marking the 25th consecutive monthly increase
(Source US Commerce Dept. and Forecasts & Trends, Gary Halbert's Weekly E-Letter)
So who do you think the two countries are? I'll give you a clue. One of the countries is leaning on the other one to let its currency float, instead of being pegged. That's right. You guessed it. Country A is China. Country B is the USA. China is "eating the USA's lunch" industrially according to anyone you might ask. How can I reconcile these seemingly conflicting pieces of information?
---Cognitive Dissonance No. 2: Consider the following statements about the world's oil supply.
1) Four giant fields, operated by BP PLC, located under water off the coast of Louisiana are just beginning to pump oil, but are predicted to be able to produce 500,000 bbl. per day at peak output which is like moving a small Middle Eastern country like Yemen over here.
2) Thanks to the combination of higher prices, increased exploration and production spending, oil supplies are poised to grow at a much faster rate than they have in recent years, thus supply should exceed demand by 7 million bbl/day up from today's cushion of 1 million bbl/day..
3) New software running on super-computers could vastly boost recovery from known fields of oil.
4) Added new fields in Nigeria could produce 16 million bbs/day more oil by 2010.
(Source: Business Week "Is There Plenty of Oil?" July 11, 2005
As I filled up the car with $2.39 gas, and read how oil continues to flirt with $60/bbl. and the supply is strained, I wonder what to believe? How can I reconcile these seemingly conflicting pieces of information?
---Cognitive Dissonance No. 3: SAP is unbundling and increasing the modularity and flexibility of its software. Will wonders never cease? The German giant whose mantra was "achtung, you will do it the way we designed it--or else" is showing signs of "getting real" about the fact that one size does NOT fit all situations.
Cognitive Dissonance No. 4: the cover story for the July 11, 2004 Business Week screams "Too Much Money." I agree. There is too much money looking for places to be invested on a global basis. I haven't heard the term "frothy" used so often since I used to work at a soda fountain. (But then why can't I get my hands on more of it?)
OK, by now I hope I have scrambled your beliefs enough to get the message across. We must all do our own "due diligence" about what is true and what is not. My grandmother always said, "believe none of what you read and half of what you see." Perhaps in today's age of visual news media, she was wise before her time. And research has proven that instead of "believing what we see," we are also guilty of "seeing what we believe,"
Remember Will Rogers famous line: "It ain't what you don't know that gets you; it's what you thought you knew that ain't so." Maybe we all need to step back and reassess what we know--and what we know that ain't so.
Best, John
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