@ Supply Chain Management

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Charting through the snow…

It is that time of the year where we chart through the snow… No, we never do that. But these are extraordinary times. So I share a couple of charts with you minus the commentary. The lack of commentary is part amazement and part “What the heck does this mean going forward?” – I

Finally… Another experiment in liberty is revisited!!

A news item today points to the return of an experiment in liberty – Milwaukee neighborhoods could print own money. I love it, absolutely love it.

Residents from the Milwaukee neighborhoods of Riverwest and East Side are scheduled to meet Wednesday to discuss printing their own money.The idea is that the local cash could be used at neighborhood stores and businesses, thus encouraging local spending. The result, supporters hope, would be a bustling local economy, even as the rest of the nation deals with a recession.

If it

When that last terrorist is killed…

What has been unfolding over the last two days in Mumbai has been shocking to say the least – I’ve been glued to CNN practically non-stop. My prayers are with those killed and wounded by the terrorists, with the families who wait outside to know the fate of their loved ones and for India’s bravest who took the fight to the terrorists to the bitter end. The time for questions and blame is after.

When that last terrorist is killed, I wait to see my Tricolor fly on the dome of the Taj and Trident hotels…

Tags: Terror in Mumbai

For this Thanksgiving day…

For this Thanksgiving day, I have but two posts to share:

The Pilgrims’ Financial Crisis

First they [Pilgrims] migrated to the Netherlands, which practiced religious tolerance of alternative religions. But the English Puritans wanted their children to grow up in an English culture, not as Dutchimen. That is why after a few years they sought to establish their own colony in the New World, where they could control their own government, religion and culture.

In these precarious conditions, it was natural for them to work together and share their food and shelter. Even so, 45 of the original 102 died that first winter, including 13 of the original adult women, with one more passing away in May.

….

But as the colony grew, this initial quasi-socialist community of share and share alike was not working to produce enough for essential basic needs, let alone the prosperity that was expected in the new world. Available wild supplies of food, in particular, were no longer enough.

All this while no supply [of wild corn] was heard of, neither knew they when they might expect any. So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chiefist amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other things go on in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number, for that end

Whammy and Double Whammy…

A little while ago, I blogged about the very real threat of supply chain shocks primarily originating from the drama in the credit markets – Are you ready for the Supply Chain Shock?. While those risks remain, there is a lot more to think about now – It’s time for the next whammy – Demand shock. This article reported in the International Herald Tribune – A sea of unwanted auto imports is symptomatic of the problem. What is recounted in the article,

In the 150-acre terminal where Toyotas are unloaded, there is a sea of Corollas, Camrys and RAV4s. The mere presence of so many cars is not unusual, given that Toyota brings in 250,000 cars a year in biweekly shipments. But in a sign that something is amiss, dozens of tractor-trailers that transport new cars to dealers sat empty last week amid the rows of Toyotas.
Kurt Golledge, 48, was one of just two truckers loading his green, 75-foot-long hauler with cars lastweek. Golledge said eight of his colleagues were laid off this month because Toyota dealers did not want more deliveries.
"I was dropping cars in Henderson, Nevada, about a month ago and the dealer told me: ’Take ’em somewhere else and dump ’em,’ " said Golledge, who works for a company called Allied Systems. "All the dealers are telling us the same thing."

and,

It is more unusual to see a lot at the California port filled with thousands of unsold Mercedeses, most of them gathering dirt on the plastic white film that protects their hoods and trunks. Some appeared to have been stashed at the port for several months.

smacks of demand shock. This glut of cars which is but one product attests to the emptying of the pipeline inventory and WIP that existed as most of these firms have cut back their production. Multiply this picture across the spectrum of imported goods and you begin to see the scale of the problem. Now, not only is it difficult to fund operations for a factory/firm, there is less demand for those products as well as consumers cut back. That points to the obvious, as there is less need for production – more layoffs to come. And this downward spiral reinforces itself.

I leave you with a question of the times – Do you really think that the Keynsians of the incoming administration are about to do any better than the departing one? And, if so, Why?

It is as they say of second marriages – "The triumph of hope over experience."

Update: Some more evidence of Demand shock rippling through the Supply Chain: Workers riot at Chinese toy factory

Tags: Demand Shock, Toyotas at Ports, Pipeline Inventory

An Oracle speaks – Dr. Doom!!

From time to time, I check out Dr. Doom himself – Marc Faber

POWER GRAB in lieu for stability – Deal or No deal?

Breaking News on the wire about what is about to take place, or at least, what our wise leaders have in store for us – we can thank the Italian PM for at least letting the cat out of the bag – Berlusconi Says Leaders May Close World’s Markets. We all hate big mouths until we really need them to open just a teeny-weeny bit to let us – the people – know what’s going on…

Where are we at: The credit markets are frozen up and therefore there is very little if any lending (interbank or otherwise) going on. So much so that the Fed itself came out earlier this week with a lot of dough intending to "unclog" the credit market – Fed Tries to Unclog Credit Markets With $900 Billion.

The lending lockup is a key reason why the U.S. economy is faltering. Unable to borrow money freely or forced to pay a high cost to borrow, employers are cutting jobs and reducing capital investments. Consumers have retrenched.

To better open the lending spigots, the Fed said 28-day and 84-day cash loans being made available to banks will be boosted to $150 billion apiece, effective Monday. Those increases will eventually bring the amounts outstanding under the program to $600 billion.

Loans that will be made available in November to banks also will be increased to $150 billion each. That makes a total of $900 billion in credit potentially outstanding over year end, the Fed said.

The Fed also said it will begin paying interest on commercial banks’ reserves, another way to expand the central bank’s resources to battle the credit crisis.

I think the Fed created this current round of turmoil and panic – first by bailing out Bear Stearns and then letting Lehman go bust. When they "facilitated" the sale of Bear Stearns, they created a hazard by signalling to many that they were in the business of stemming this tide come hell or high water. The financial markets and super-intelligent and certifiably insane high-finance honchos heaved a sigh of relief as they found out that their shenanigans would be absorbed by – who else – us. When the Fed realized that many of these honchos were counting on such "facilitation", they had to let one fail. And in that game of musical chairs – Lehman came out the cropper.

Now, we’re experiencing the swing to the other side – relief transforms into fear that seems to have taken root not only within the credit markets but also the stock markets – for no good reason, you’d think. But what a tangled web we have woven – I’m guessing that numerous margin calls are being made to institutions and clients unable to unwind their positions in time, as the share prices plummet and no financing to be had to cover the calls, liquidate at all costs will kick in or has already kicked in. If these institutions and brokers have not already shut down their automated trading systems, or have these home-grown (rushed to market without proper testing) systems hiccup, falter and seize up – they’re probably finding out – at their peril, no less.

And so what is the solution – Close the markets -close everything down?

What happened to the bailout plan that had to be passed? It Passed – but is it Passe? Already?

"We need another bailout," says one.

I’m sure that we will hear that, "Capitalism has finally failed." And that "The third way is the only way."

"We need to close the markets down, if only for a day or two," says another.

And before I finish the post, the White House responds – White House dismisses idea of market suspension. It almost makes me believe that this wealth destruction is intentional – not in a conspiracy minded fashion, mind you. Here’s the basic scenario that I’m thinking off –

1. Begins with liquidity (you know, to solve the previous crisis) – all those dollars that went abroad in exchange for the productive capacity of the world – be it IT help desks, computer code or Walmart trinkets and what have you

2. Part of that liquidity went into inflating the real-estate bubble of the last few years. The other part was Fed policy of lowering interest rates post 9/11.

3. A large chunk of those dollars – spent and borrowed, came back into the US as "strategic" investments fuelling the bubble even further.

4. What complicates things further is that oil prices (and other commodities are sent soaring) increase because of greater demand (caused by the increased productive capacity around the world itself), devalued dollars and the disruptions of the Iraq war.

5. A number of investment banks leverage themselves several times over any sensible (What is sensible btw?) limit as they are being flooded with overseas cash – petrodollars as well as other sources. The flow of petrodollars is starting off booms in the middle-east as well.

6. Then the real-estate bubble shows signs of popping. And so does the commodities bubble. It’s crunch time. Highly levered banks are toast. Mortgage players are indeed mortified and subsequently mummified.

7. Wealth destruction takes places because of the crunch, not only stateside (i.e. retirement accounts and home values) but also overseas "strategic" investments are not that strategic anymore.

But my question is – Has the Fed closed the cycle/loop?

8. The Fed takes over all these toasted crisp banks and alleged investment securities for the worthless junk that they represent and burn up all those dollars that they printed in the first place.

And they’re already setting the next inflationary cycle in motion…

Too fanciful – I know!

And who do we have for presidential candidates this cycle – A change empty suit whose ideas of change were discredited in the last century and a doddering gramps whose notion of governance are well notions whose true meaning might unfold somewhere down the line. Pardon my snarkiness but we are not well served by either gentlemen. Nay, we are ill-served by the notions of leadership that abound.

Meanwhile, sleep easy, eat better – Value is value. It just takes a little time for it to shine through. As long as you’ve been chipping away at real value, the artificial wealth creation and destruction matters little. Run with the herd or use the herd to determine true value and you may not be able to stop at the precipice.

Shut the markets?, Credit Markets, A fanciful history!

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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